Contract Law: Free Consent: Mistake
MISTAKE
When the consent of the
parties to the contract is caused by mistake, it is not free consent which is
needed for the validity of a contract. One, or both, of the parties may be
working under some misunderstanding or misapprehension of some fact relating to
the agreement. If such a misunderstanding or misapprehension had not been
there, probably they would not have entered into the Agreement. Such contracts
are said to have been caused by mistake. Mistake work in two ways:
1. Mistake
in the mind of the parties is such that there is no genuine agreement at all.
There may be no consensus ad den, ie, the meeting of the two minds, ie, there
may be absence of "consent" as defined in Section 13. The offer made and
acceptance do not coincide and thus no genuine agreement is constituted between
the parties.
2. There
may be a genuine agreement, but there may be mistake as to a matter of fact
relating to that agreement.
1.
Mistake, when there is no consensus
ad idem or there is absence of consent
For a valid contract both
the parties should have given their consent and the consent should also be
free. According to Section 13:
"Two
or more persons do not agree to the same thing in the same sense, there is
deemed to be no consent on their part. In other words, there may be absence of
meeting of minds of the parties, or there may be no consensus ad idem. In such
cases there arises no contract which can be enforced."
In Raffles v.
Wichelhaus, (1864) 2 H & C. 906 the buyer and the seller entered into
an agreement under which the seller was to supply a cargo of cotton to arrive
"ex Peerless from Bombay". There were two ships of the same name,
i.e., Peerless and both were to sail from Bombay, one in October and the other
in December. The buyer had in mind Peerless sailing in October, whereas the
seller thought of the ship sailing in December. The seller dispatched cotton by
December ship but the buyer refused to accept the same. In this case, the offer
and acceptance did not coincide and there was no contract and, therefore, it
was held that the buyer was entitled to refuse to take delivery.
Tarsem Singh v.
Sukhminder Singh AIR. 1998 S.C. 1400
Dularia Devi v. Janardan Singh . AIR. 1990 S.C. 1173
2.
Mistake as to a matter of fact
essential to the agreement
Section 20 deals with
such mistake. It provides:
20. Agreement void where
both parties are under mistake as to the matter of fact. Where both the parties
to an agreement are under mistake as to a matter of fact essential to the
agreement, the agreement is void.
Explanation An erroneous
opinion as to the value of the thing which forms the subject-matter of the
agreement is not to be deemed a mistake as to a matter of fact.
Illustrations
(a) A agrees to sell to B
a specific cargo of goods supposed to be on its way from England to Bombay. It
turns out that, before the day of the bargain, the ship conveying the cargo had
been cast away, and the goods lost. Neither party was aware of these facts. The
agreement is void.
(b) A agrees to buy from
B a certain horse. It turns out that be horse was dead at the time of the
bargain, though neither party was aware of the fact. The agreement is void.
(c) A being entitled to
an estate for the life of B, agrees to sell it to C. B was dead at the time of
the agreement, but both parties were ignorant of the fact. The agreement is
void."
When the type of mistake
contemplated in Section 20 is present in agreement, the agreement is void. Section
20 requires that:
(1) Both the parties to
the contract should be under a mistake, and
(2) Mistake should be as
regards a matter of fact,
(3) The fact regarding
which the mistake is made should be essential to the agreement.
(1) Mistake of both the
parties
Section 20 makes the
agreement void if there is mistake on the part of both the parties. For
example, A and B make an agreement for the sale and purchase of a particular
horse. Unknown to both the parties, the horse was dead at the time of the
agreement. Since both the parties are under a mistake, the agreement is void.
If the mistake is a unilateral one, ie, only one of the parties is having some
mis-impression, the validity of the agreement is not affected thereby. This is
made clear by Section 22, which reads as under
"22. Contract caused
by mistake of one party as to matter of fact. A contract is not voidable merely
because it was caused of fact."
Ayekam Angahal Singh v.
The Union of India, AIR. 1970 Manipur 1
Haji Abdul Rehman
Allarakhia v. Bombay and Persia Steam Navigation Co. (1892) 16 Bom. 561
(2) Mistake of fact
There should be mistake
of fact and not of law. The validity of the contract is not affected by mistake
of law. Regarding mistake of the provision contained in Section 21 is as
follows:
21. Effect of mistake as
to law. A contract is not voidable because it was caused by a mistake as to any
law in force in India; but a mistake as to a law in force in India has the same
effect as a mistake of fact."
Illustration
“A and B make a contract
grounded on the erroneous belief that a particular debt is barred by the Indian
Law of Limitation; the contract is not voidable."
Everyone is supposed to
know the law of the land. Ignorance of law is no excuse. If a person wants to
avoid the contract on the pround that there was a mistaken impression in his
mind as to the existence of some law while he entered into the contract, he
will get to relief. For instance, A owes B Rs. 1,000/-. Both A and B mistakenly
think that the debt is time barred and agree that A may pay only Rs. 500/- to
clear the debt. It is a mistake of law and the contract to pay Rs. 500/- is
valid.
(3) Mistake essential to
the agreement
It is also necessary that
the fact regarding which the mistake is made should be essential to the
agreement. Whether the mistake is regarding a fact essential to the agreement
or not depends on a particular contract. The effect of mistake in various situations
is being discussed below.
I.
Mistake as to the existence of the
subject-matter
If both the parties to a
contract believe in the existence of the subject-matter, which in fact does not
exist, the agreement would be void. The reason is that if the subject-matter of
the contract has already perished, there is nothing regarding which the
contract is being made. For example, in a contract for the sale of specific
cargo, the ship carrying the same has been cast away and the goods lost
(Illustration (a) to Section 20), the sale is of a specific horse, which has
already died Illustration (b) to Section 20) the agreement is void, if neither
of the parties was aware of the actual facts.
II.
Mistake as to the possibility of
performance of the contract
It has already been
noticed that if contrary to the belief of the parties the subject-matter of the
contract is not in existence, the agreement is void. If, for example, there is
a contract for the sale of i horse, which has already died, the agreement is
void. One of the reasons for such an agreement being void is that it is not
possible to deliver and transfer a thing which is not in existence.
III.
Mistake as to title
Sometimes the parties may
be labouring under a mutual mistake as to the title to the goods sold. The
buyer may already be the owner of what the seller purports to sell. In fact,
there is which the seller has to transfer. The transfer of ownership is
intended but the same is impossible as the buyer is already the owner. Such an
agreement is void due to mutual mistake.
IV.
Mistake as to promise
If there is a mistake
because of which the promise does not reflect the real intention which was
there in the proposed agreement, such an agreement would be void.
V.
Mistake as to the identity of the
parties
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