(FREE CONSENT)

MISTAKE

SUBMITTED BYSHUBHAM DHIMAN (2038)

SUBMITTED TOMISS RITU GUPTA

One of the essentials of a valid contract mentioned in Section 10 is that the parties should enter into contract with free consent. According to Section 14, Consent is said to be free when it is not caused by 1. Coercion (Sec-15)or 2. Undue influence (sect-16)or 3. Fraud (Sec-17)or 4. Misrepresentation (Sec-18)or 5. Mistake (provisions of Section 20, 21 and 22).

If the consent of one of the parties is not free consent, i.e., it has been caused by one or other of the above stated factors the contract is not a valid one.

If, however, the consent is caused by mistake the agreement is void.

Mistake
Mistake may be defined as an error in consensus.
In other words, An agreement is valid as a contract only when the parties agree upon the same thing in the same sense. Consent cannot be said to be "free" when an agreement is entered into under a mistake.

One, or both, of the parties may be working under some misunderstanding or misapprehension of some fact relating to the agreement. Such contracts are said to be have been caused by mistake.
Example: A has two cars - an Ambassador and a Fiat. He agrees to sell one of them to B. It is not clear as to which of the two cars he is selling. A might be thinking to sell the ambassador car while B might be thinking to buy the Fiat car. Hence, there is no identity of mind on the subject-matter of the agreement. Therefore, there is no sale in this case.

Mistake is of two kinds:

I) Mistake of law and II) Mistake of fact.

MISTAKE

MISTAKE OF LAW

MISTAKE OF FACT

MISTAKE WITH REGARD TO ORDINARY LAW

MISTAKE WITH REGARD TO FOREIGN LAW

MISTAKE WITH REGARD TO PRIVATE RIGHT

BILATERAL MISTAKE

UNILATERAL MISTAKE

Mistake on a point of law does not affect the contract; Mistake on a point of law in force in a foreign country is to be treated as mistake of fact. Example: A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian law of limitation. This is a valid contract. The reason is that every man is presumed to know the law of his own country and if he does not he must suffer the consequences of such lack of knowledge ,But if in the above case, the mistake is related to the law of a limitation of a foreign country, the agreement could have been avoided

Mistake of law may be of following types:

MISTAKE WITH REGARD TO ORDINARY LAW MISTAKE WITH REGARD TO FOREIGN LAW MISTAKE WITH REGARD TO PRIVATE RIGHT

The contract is binding because everybody is supposed to know the law of country. According to this: ignorance of law is no excuse and party cannot be allowed any relief on that ignorance. According to section 21, a contract is not voidable because it was caused by a mistake as to any law in force in India.

Hence mistake of law does not give right to the parties to avoid the contract.

Example: A and B make a contract under a mistaken belief that a particular debt is barred by the Indian Law of Limitation, the contract is not voidable. However, if one of the parties makes a 'mistake of law' through the inducement, whether innocent or otherwise, of the other party, the contract may be avoided.

2. Mistake With Regard To Foreign Law

One is supposed to know the law of the land i.e., his own country but one is not expected to know the law of the whole world.
Thus if an Indian commits a mistake of English Law while in India, he is not punishable.
Mistake of foreign law is excusable. It is treated as a mistake of fact. Parties can avoid the contract on the ground of mistake of foreign law.

3. Mistake With Regard To Private Right

Mistake of private law of the parties is also excusable. A person cannot know the private law of other parties, hence he is given the benefit of such ignorance.
Thus mistake of private law is treated at par with that of mistake of foreign law. Hence, parties can avoid the contract on the ground of mistake of private law of parties.

It may be of two types: (a) Bilateral mistake (b) Unilateral mistake.

MISTAKE OF FACT
BILATERAL MISTAKE UNILATERAL MISTAKE

(A) Bilateral Mistake

According to section-20 of the act.-

where

both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, there is a bilateral mistake and the agreement is void.
Here there is no real correspondence of offer and acceptance, each party understanding the contract in a different way. In reality there is no agreement at all, there being total absence of consent.

(A) Bilateral Mistake

An agreement will be void on the ground of mistake if: 1. There must be a mistake relating to the formation of contract. 2. The mistake must be mutual. 3. The mistake must relate to a fact. 4. The mistake is about a fact essential to law.

(A) Bilateral Mistake

Bilateral mistake may be (1) Mistake as to the subject-matter. (2) Mistake as to the possibility of performance.

(1) Mistake as to the subject-matter

Mistake as to the subject-matter of contract means Where both the parties to an agreement are under a mistake relating to the subject-matter of the contract, the agreement is void.

Mistake as to the subject-matter covers the following cases-

1. Mistake as to the subject-matter

a) Mistake regarding the existence of the subject-matter b) Mistake regarding the identity of the subject-matter c) Mistake regarding the title of the subject-matter, i.e., its ownership d) Mistake regarding the price of the subject-matter e) Mistake regarding the quantity of the subject-matter f) Mistake regarding the quality of the subject-matter

(a) Mistake regarding the existence of the subject-matter

Where both the parties believe that the subject-matter is in existence, but in fact the subject-matter was not in existence at the time of contract, the agreement is void.

Example: A agreed to sell to B his car parked in his garage. The car had already been destroyed by fire before the date of contract. Both A and B did not know this fact. The agreement is void.

(B) Mistake regarding the identity of the subject-matter

Where both the parties are under a mistake as to the identity of the subject-matter, i.e., one party thinks to deal with one thing and the other with something else, the agreement will be void. Example: A has two scooters - a Lambretta and a Vespa. A agreed to sell one of them to B. It is not clear which of the two scooters he is selling. A might be thinking to sell Lambretta while B might thinking to purchase Vespa. There is no agreement.

Case 2: Raffles Vs. Wichelhaus (1864)

In Raffles Vs. Wichelhaus (1864) 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 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

(C) Mistake regarding the title of the subject-matter, i.e., its ownership
Where the seller and buyer believe that the seller has title to the property, but in fact it is discovered that the property belongs to a third party, the agreement is void. Example: A agreed to take a fishery on lease from B. Both of them believed that B was the owner. But later on it was discovered that fishery in fact belonged to A. It was held that the agreement was void [Cooper v. Phibbs]

(D) Mistake regarding the price of the subject-matter

Where both the parties are under a mistake as to the price of the subject-matter, the agreement is void.
Example: A agreed to hire B's auditorium (Hall) at Rs. 800. But while writing the agreement, the figure was written as Rs. 1,800 by mistake. The agreement is void. However, the Court can also rectify this mistake, [Dagadu v. Bhana]

(E) Mistake regarding the quantity of the subject-matter

Where both the parties are under a mistake regarding the quantity of the subject-matter, the agreement is void.
Example: A enquired about the price of rifle from B informing that he may buy as many as 50 rifles. On receiving a reply from B, he sent a telegram 'send three rifles'. By mistake of the telegraph office, the message transmitted to B was "send the rifles." So B dispatched 50 rifles. A accepted only three rifles and returned the rest. It was held that there was no contract. The buyer was, however, liable to pay only for three rifles on the basis of an implied contract. [Hankel v. Pope].

(F) Mistake regarding the quality of the subjectmatter

Where both the parties are under a mistake as to the quality of the subject matter, the agreements is void.
Example:
A agreed to sell to B a piece of Mona Lisa painting in his gallery. A very high price was paid for the painting. But unknown to both of them, a thief had stolen the genuine Mona Lisa painting and substituted a copy. After taking the delivery, B came to know that it was not the genuine Mona Lisa painting. The agreement is void as both the parties are under a mistake regarding the quality of the subject-matter i.e., painting.

2. Mistake as to possibility of
performance
If both the parties believe that the contract is capable of performance, but due to impossibility it cannot to performed, the agreement is void
The performance of agreement may not be possible because of1. Physical Impossibility 2. Legal Impossibility

1. Physical Impossibility
The act may be physically impossible to perform and hence void. The law does not compel any person to do something which is impossible.
Example: A agreed to hire 'B's room to witness Corporation Procession. Unknown to both of them, the procession had already been cancelled. The agreement is void. [Griffith v. Brymer]

2. Legal Impossibility
Legal Impossibility means when an agreement requires to do that which cannot be done legally. The act may be legally impossible to perform and hence void. Example: A agreed to sell 100 kg of rice. The Government ban the sale of rice by introducing rationing. The contract is void.

(B) Unilateral Mistake

(B) Unilateral Mistake

According to section 22 of the contract act-

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.
Where one of the parties to the contract is under a mistake it is called unilateral mistake. Thus as a general rule, unilateral mistake will not render a contract void.

(B) Unilateral Mistake

A party cannot be allowed to avoid a contract on the ground of its own mistake which may be due to its carelessness or negligence.

Example: A buys rice from B thinking that it is old Basmati rice, but in fact, it is new Basmati rice. A cannot avoid the contract. However, where mistake was caused by fraud or misrepresentation of the other party, a contract will be voidable on that ground.

(B) Unilateral Mistake

However, where consent given by a party under a mistake is so fundamental that it goes to the root of the contract, the agreement becomes void. Thus the exceptions where the Unilateral Mistake renders the contract void are as follows-

1. Mistake as to the identity of the person 2. Mistake as to the nature of transaction

1. Mistake as to the identity of the person

When the identity of the person is fundamental to the contract and a mistake is committed regarding that, the contract may be avoided.
It is a fundamental rule of law that if I intend to contract with Hari, Ram cannot contract with me. If I make an offer to Hari, can Ram accept it? Obviously, not. If he accepts it, then there will be no contract.

ExampleA women fraudulently represented to a firm of jewellers that she was the wife of a certain baron (zamindar). She obtained two pearl necklaces under the pretext of getting the jewellery with a pawn broker. The Court held that there was no contract between the jeweller and the woman as the jeweller wanted to deal with the wife of the baron which she was not. .Hence the pledge had to return the jewellery. [Lake v. Simons]

2. Mistake as to the nature of contract

Another case in which unilateral mistake renders a contract void is mistake as to the nature of contract. Where a person enters into a contract of different nature, which he never intended without his own mistake but due to the mistake or fraud of the other party, the contract is void. In such a case when he signs the document his mind does not go with his signature, i.e., he does not intend to sign the document at all. There is absence of consent and the contract is, therefore, void.

2. Mistake as to the nature of contract

Such instances are very common in case of illiterate persons or persons having poor eye-sight due to old age or other reasons.

Example: A induced an old man of feeble sight to sign a promissory note by telling him "Baba ye power of attorney hai. " (It is a power of attorney*). Promissory note is void as there is a mistake as to the nature of contract. The mind of the old man did not go with his signature

*Power of attorney: it is a formal, legally valid document that authorizes one person or party to act on the behalf of another

MISTAKE

Mistake of law

Mistake of fact

Of the country

Of the foreign country

Bilateral mistake

Unilateral mistake

Mistake as to subject matter

Mistake as to possibility

As to person

As to nature

Physical impossibility

Legal impossibility

existence

identity

quality

quantity

title

price