Question based AU Assignment Solution and other course
Answer:
Mistake means wrong belief concerning something. Free consent is needed for the validity of a contract, but when the consent of the party is caused by mistake, the consent is not said to be free. Either or both the parties are under a misapprehension of some fact relating to the agreement. If there would not have been such misunderstanding, probably they would not have entered into the agreement. Such contracts are said to have been caused by mistake.
Mistake may be of various types as shown by the chart below:
- Mistake of Law Mistake as to Indian Law: When the mistake is made as to the Indian Law, the contract will not be voidable because every citizen or resident of a country is expected and should know the law of the land where he lives. Ignorance of law is no excuse (ignorantia juris nemi nem excusat). Ignorance of law cannot be the basis of relief to any person.
Example : If A and B entered into a contract on a erroneous belief that a particular debt was barred by Indian Law of Limitation, the contract cannot be set aside on the basis of mistake by law.
- Mistake as to Foreign Law: Mistake as to a foreign law has some effect as a mistake of fact, and, therefore, the contract can be avoided.
Example: A and B purchase and sell a plot of land of 200 sq. m. in Dubai believing that a house on be constructed over it. Actually it turns out that in Dubai no house can be constructed on a plot of less than 300 sq. m. The contract can be avoided.
Mistake of Fact (Section 20 and 22)
- Bilateral Mistake: According to Section 20 “where both the parties to a contract are at a mistake about the facts which are essential to the agreement, the agreement shall be void.”
In order to avoid a contract on the grounds of mistake of fact, it is necessary to show:-
- that the mistake was bilateral, and
- the mistake was as to a fact essential to the agreement.
Example: X having cars, blue and red, offers to sell blue car to Y and Y not knowing that X has two cars thinks of red car and agrees to buy it. Here, there is no real consent and therefore, the contract is void on the ground of bilateral mistake of fact.
A bilateral also known as identical bilateral mistake may be either a common mistake or mutual mistake. Where both the parties have made the same mistake it is termed as common mistake. When both the parties make different mistakes it is mutual mistake and may also be called non- identical bilateral mistake. In case of common mistake the contract is void. In case of non identical mistake the contract does not comes into existence at all because there is no consensus ad idem. The parties are never in agreement.
Again, bilateral mistake of fact may be
- Mistake as to Subject Matter: Where both the parties are working under a mistake regarding the subject matter, the agreement is void. It may be of following types :
- Regarding Existence of Subject Matter: It may happen that both the parties are not aware of the fact that at the time of the contract the subject-matter may ceased to exist or it may never have been in existence. It is a common bilateral mistake.
Example: A agrees to purchase a specific article from B. Unknown to both the article has already lost. The contract is void.
- Regarding Identity of the Subject Matter: Example: Satyam transport sales a cargo to W which arriving from Jaipur. There were two companies of the similar name carrying cargo on the same date. Both the parties have different company in mind. The contract was held to be void for mutual bilateral mistake.
- Regarding Title to the Subject Matter: Both the parties are unaware of the fact that the buyer is already the owner of that which the seller claims to sell him. Such agreement of sale is void.
Example: A nephew of B, purchases a house from B. But both are unknown that A’s grandfather has already given this house to A in his will. Held, the agreement is void.
- Regarding Quality of the Subject Matter: Example: A agrees to buy from B a number of sacks which both A and B believes to contain jute. But in fact, the sacks contain cotton. The agreement is void.
- Regarding Quantity of the Subject Matter: Example: ‘P’ wrote to ‘H’ inquiring about the price of guns and suggested that he might buy as many as 70 guns. On receipt of reply, he sent a telegram ‘Send three guns’. Due to mistake of telegraph officer the message was sent ‘Send the guns’. ‘H’ dispatched 70 rifles. Held there was no contract between the parties on a ground of consensus ad idem and mistake of third party. P was not held liable for damages but was required to pay the price of the three guns.
- Regarding Price of the Subject Matter: There may sometimes be a genuine mistake as to the price of an article for sale.
Example: A contract of lease of house was agreed at a rent of Rs. 4500 pm but in the written contract the figure was put as Rs 1500 by mistake. Held, that the contract was enforceable.
- Mistake as to the Possibility of Performance: If the presence of certain set of circumstance is necessary for the performance of the contract and both the parties are unaware about the existence of such circumstance of at the time of the contract. Then the contract will be void on the grounds of mistake.
Example: A hires a Television from B for watching the cricket match between India and Pakistan. Unknown to both the parties the match had already been cancelled due to rain. The contract is void.
- Unilateral Mistake: It is the mistake on the part of one of the parties only as to a matter of fact. Generally, a unilateral mistake does not affect the validity of the contract. Section 22 of the Indian contract Act states in this regard that “a contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact.”
In the words of Anson, “We are not concerned with cases in which a man finds the obligations of a contract more onerous than he intended or is disappointed in the performance which he receives from the other party.” Thus is not mistake, but error of judgement.
Example: A intends to sell his cell phone. B intending to offer Rs. 3000 for it, by mistake offers Rs. 5000. A accepts the offer. The contract cannot be avoided by B on the ground of mistake.
However, a contract can be repudiated in case of unilateral mistake if it is proved that the mistake was a result of fraud or misrepresentation on the part of other party. A unilateral mistake will make an agreement void if (i) it is about a fact which is material to the agreement, and (ii) secondly, the mistake restricts or hinders the consent of the parties.
Contract shall also be void where the offeror makes a material mistake in expressing his intention and the other party knows or is deemed to know the error. But if there is a mistake on the part of one party alone and the other does not, or cannot be deemed to know of the mistake the contract is binding. Mistake caused due to carelessness of the party will not grant any right to such party to avoid the contract. Unilateral mistake may be of two types:-
- Mistake About Identity of Parties: Mistake as to identity occurs when one of the parties represents himself to be someone who he is not then, it is the mistake of identity of parties. In the words of Sir Anson, “if a man accepts an offer which is plainly meant for another or if he becomes party to a contract by falsely representing himself to be another contract in either case is void, or to put in more accurately no contract comes into existence. In the first case one party takes the advantage of the mistake, in the other he creates it”. When the personality of the party contracted with is important in a contract then no one has the power to step in and declare that he is the party contracted with. There is a mistake of identity only when the complaining party wants to deal with a person having a particular identity. If the name is fictitious, there will be no mistake of identity.
Example: [King’s Norton metal Co. V. Edridge, Merrett & co.(1897) 14 LTR 98] Aman named W adopted a name of H and company, a firm not in existence, and by letters placed an order for some goods with K N & Co., who complied with the order. It further sold these goods to E M & Co. who acted in good faith. K N & Co. sued E M & Co. for the value of goods. The contract was held voidable for fraud but not void for mistake as K N & Co. did not make a mistake regarding identity.
Example: X falsely representing herself as the wife of a well-known millionaire takes a ring from the jewellers’ shop for the approval of her husband. She pledges it with a pawnbroker who in good faith and without notice of the first transaction pays her Rs. 10,000. Can the jeweller recover the ring from pawnbroker?
In this case there was no contract between the jeweller and the woman and the pawnbroker does not take good title and must return the ring to the jeweller. Though the woman got possession physically, there was no mental assent as the jewellers intended to deal not with her but quite a different person viz. the wife of the millionaire [Lake v Simmens (1927) ac 487]
- Mistake as to the Nature of the Transaction: When a party with the fault of his own, make a mistake as to the very nature of the contract, than the contract is void. The mistake can be due to blindness, illness, illiteracy or other inabilities of the person signing the contract. It may also be due to tricks or fraud of the other person as to the nature of the contract so that the plaintiff signs the contract. A contract shall be void if a party to the contract without any fault of his own makes a mistake about the very nature of the contract.
Example: (Raja Singh v. Chaichoo Singh [AIR1940 part 201])- Appointed the B to look after his cultivation and his affairs as he had become to old to manage them. B asked him to grant a lease of his land. A agreed to it and placed his thumb impression upon a deed which was in fact a gift of the land.
The court held the deed to be void ab initio.
Usually, such mistakes are result of fraud by one of the parties to the contract who has the obligation to reveal true nature of the document or contract to the other person who is signing it. If it fails to do so intentionally and thus, induces other party to sign the document of different nature. In such a case the agreement is negated by mistake.
Remedies of Mistake
When contract is caused by mistake and is void, the following are the consequences :
- Under Section-65, any person who has received any advantage under such contract is bound to restore it or make compensation for it to the person from whom he received it.
- A person to whom money has been paid, or anything delivered by mistake, must re-pay or return it (Section-72).
