MISTAKE

Mistake may be defined as an erroneous belief concerning something. Mistake is of two kinds:

(1) Mistake of fact, and (2) Mistake of law.

MISTAKE OF FACT

A mistake of fact may either be: (a) bilateral or (b) unilateral.

Bilateral Mistake

When both the parties to the agreement are under a mistake of fact essential to the agreement, the mistake is called a
bilateral mistake of fact and the agreement is void.

Examples

(1) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though
neither party was aware of the fact. The agreement is void.

(2) 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 the facts. The agreement is void.

Mistake, so as to render the agreement void, must relate to some essential matter. Some typical cases of mistake
invalidating the agreement are given below.

(A) Mistake as to the existence of subject-matter

Examples

(1) 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.

(2) A agreed to assign to B a policy of assurance upon the life of X. X had died before the contract was made.

Held : There was no contract [Scott v. Coulson (1903) 2 Ch. 249].

(3) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though
neither party was aware of the fact. The agreement is void.

(4) A and B entered into a contract for the sale and purchase of Indian corn supposed to be on board a particular ship
bound for England. Unknown to both parties the corn was damaged and discharged at an intermediate port, some days
prior to the contract.

Held : The contract was void on the ground of mistake [Courturier v. Hastic (1856) 10 E.R. 1065].

(B) Mistake as to identity of the subject-matter

Where the parties agree upon different things, i.e., one meaning one thing and the other meaning another, the contract
is void.

Examples

1. A contract was entered into for the purchase of certain bales of cotton to arrive by a ship called “Peerless” from
Bombay. Two ships of the same name (Peerless) were to sail from Bombay. The buyer intended to buy the cargo of
one ship but the seller was selling the cargo of the other. The contract was held to be void.

2. A, who owns four Fiat cars, offers to sell his ‘car x’ for Rs. 80,000. B accepts the offer thinking A is selling his
‘car y’. There is a mistake as to the identity of the subject-matter and hence no contract.

(C) Mistake as to title to the subject-matter

Where the parties believe that the seller is the owner of the thing which he purports to sell, but in fact, he has no title
to it, the contract is void on the ground of mistake.
Example

A agreed to take a lease of a fishery from B though contrary to the belief of both parties at the time A was tenant of
the fishery and B never had any title to it. The contract was void [Cooper v. Phibbs (1867) 159 E.R. 375].

(D) Mistake as to quantity of subject-matter

Example

P wrote to H inquiring the price of rifles and suggested that he might buy as many as 50. On receipt of the
information, he telegraphed “Send three rifles.” But because of the mistake of the telegraph authorities, the message
transmitted was “Send the rifles.” H despatched 50 rifles.

Held : There was no contract between the parties. However, P could be held liable to pay for three rifles on the basis
of an implied contract [Henkel v. Pape (1870) 6 Ex. 7].

(E) Mistake as to price of the subject-matter

Where a contract of lease of a house was agreed to at a lease of £230 but in the written agreement, the figure £130 was
inserted by mistake, the contract was held to be void. However, 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 [Explanation to
Section 20].

Example

A buys an article thinking it is worth Rs. 10,000 while it is actually worth Rs. 5,000 only. The agreement cannot be
avoided on the ground of mistake.

Unilateral Mistake

In the case of unilateral mistake, i.e., where only one party to a contract is under a mistake, the contract, generally
speaking is not invalid. Section 22 reads, ‘‘A contact is not voidable merely because it was caused by one of the
parties to it being under a mistake as to a matter of fact.’’

Exceptions. To the above rule, however, there are the following exceptions:

(A) Where the unilateral mistake is as to the nature of the contract

A contract is void when one of the parties to it does not intend to enter into it, but through the fault of another and
without any fault of his own, makes a mistake as to the nature of the contract. Thus, in Foster v. Mackinnon (1869)
L.R. 4 C.P. 704, an old illiterate man was made to sign a bill of exchange, by means of a false representation that it
was a guarantee.

Held : The contract was void.

It should be noted that the plea of mistake will be available only when it relates to the nature of the contract, and not to
the terms of the contract [Bay v. Polla and Morris (1930) 1 K.B. 628].

(B) Mistake as to quality of the promise

In Scriven v. Hindley (1913) 3 K.B. 564, A held an auction for the sale of some lots of hemp and some lots of tow.
‘B’ thinking that hemp was being sold, bid for a lot of tow for an amount which was out of proportion to it, and was
only a fair price for hemp.

Held : The contract could be avoided.

(C) Mistake as to the identity of the person contracted with Where A intends to contract with B but by mistake enters
into a contract with C believing him to be B, the contract is void on the ground of mistake. The following cases are
important illustrations of the point:

1. In Cundy v. Lindsay & Co., (1878) 3 App. Cas. 459., one Blenkarn, knowing that Blenkiron & Co., were the
reputed customers of Lindsay & Co., ordered some goods from Lindsay & Co., by imitating the signature of
Blenkiron. These goods were then sold to Cundy, an innocent purchaser. In a suit by Lindsay against Cundy for
recovery of goods, it was held that as Lindsay never intended to contract with Blenkarn, there was no contract
between them and as such even an innocent purchaser of the goods from Blenkarn did not get a good title, and must
return them or pay their price.

2. Similarly, in Lake v. Simmons (1927) A.C. 487, a lady X induced Y to deliver possession of two pearl
necklaces falsely representing that she was the wife of baron Z and that she wanted them for showing them to her
husband for his approval.

Held : Y intended to contract only with the wife of the baron, and not with X herself. Hence, the contract was void
and X could not convey any title even to bonafide buyers.

3. Philips v. Brooks (1919) 2 K.B. 243. The facts of this case should, however, be contrasted with Lake v.
Simmons. In this case a man, N, called in person at a jeweller’s shop and chose some jewels, which the jeweller was
prepared to sell him as a casual customer. He tendered in payment a cheque which he signed in the name G, a person
with credit. Thereupon N was allowed to take away the jewels which N pledged with B who took them in good faith.

Held : The pledgee, B, had a good title since the contract between N and the jeweller could not be declared void on
the ground of mistake but was only voidable on the ground of fraud. Horridge, J. held that although the jeweller
believed the person to whom he was handing the jewels was G, he in fact contracted to sell and deliver to the person
who came into his shop. The contract, therefore, was not void on the ground of mistake but only voidable on the
ground of fraud. The Learned Judge cited with approval an American case of Edmunds v. Merchant Despatch Co.,

135 Mass. 283 in which Moorton, C.J. said,’ ‘The minds of the parties met and agreed upon all the terms of the sale,
the thing sold, the price and terms of payment, the person selling and the person buying..... The plaintiff could not
have supposed that he was selling to another person: his intention was to sell to the person present and identified by
sight and hearing, it does not affect the sale because the buyer assumed a false name and practised any other deceit to
induce the vendor to sell.”

MISTAKE OF LAW (Section 21)

Mistake of law may be (a) Mistake of Law of the Land, and (b) Mistake of Foreign Law.

Mistake of Law of the Land

In this regard, the rule is “Ignorantia juris non excusat,” i.e., ignorance of law is no excuse. Following this principle,
Section 21 declares that “A contract is not voidable because it was caused by a mistake as to any law in force in
India.”

Thus, where, ‘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.

Mistake of Foreign Law

The above maxim that ‘ignorance of law is no excuse’ applies only to the law of the country and not to foreign law.
The mistake of foreign law is to be treated as a mistake of fact. Section 21 reads, ‘‘A mistake as to a law not in force
in India has the same effect as a mistake of fact.”

Consequences of Mistake

Mistake renders a contract void and as such in case of a contract which is yet to be performed the party complaining of
the mistake may repudiate it, i.e., need not perform it. If the contract is executed, the party who received any
advantage must restore it or make compensation for it, as soon as the contract is discovered to be void.