Humans are social animals, dependent upon each other for survival. We come in contact with many, buying things from them, providing them with some goods or services. The giving and taking is more common in this modern era when people have a lot of things to do, and they have technological advancements which allow them to do so while sitting at their homes. We make a lot of contracts on a daily basis, which are subject to applicable laws. In context of Contract Law, a contract is an agreement enforceable in legal procedures.
All dealings and services are governed through this Contract law, which came into force September 1, 1872 and same enacted on April 2025, 1872 . A valid contract should be following these ingredients which are :-
- Valid offer and acceptance
- Free consent
- Lawful consideration
- capacity of the parties
- Intention to create legal relation
- It should not be made with minors
- And there must be possibility to perform it
That’s all about the ideal scenario. But what happens when there is a gap in communication, which leads to mistake? What does the Law of Contract lay in this regard? Let’s explore the possibilities.
Mistake in Contract Law
- ‘Mistake’ can be understood as any action, decision or judgement that produced an unwanted and unintentional result. A Mistake is said to have occurred where parties intending to do one thing by error do something else.
- Thus, it can be summed up that a valid contract needs to satisfy certain legal conditions to be enforceable. These essentials elements firmed clarity fairness and mutual agreement between the parties.
Mistake of Law in Contract
“IgnorantiaJuris non excusat” is a Latin maxim which means “Ignorance of the law is not excused”. If a person takes part in a contract without knowing any specific provisions of Indian Law (which is essential for that contract), then Contract is not voidable because everyone is supposed to know the law of his country.
For example, A and B make a contract grounded on the erroneous belief that a specific debt is barred by the Indian Law of Limitation, then the contract is not voidable. A murdered B, A cannot apply for the defence of mistake of law that he was not aware of law related to murder.
Grant v. Borg (1982)
In this case, the person was unaware of certain clauses of the Immigration Act 1971, for staying beyond the time limit by the leave. Here, he cannot apply for defence under the mistake of law.
Void contracts – A void contract is one which can not be enforce legally from the very first stage of the contact as it lacks fundamentals of a valid contract & becomes non-binding in nature , void contracts are null and void from its very beginning. So it has no legal implication and it is void-ab-initio.
Mistake of Fact in Contract
Section 20 of the Indian Contract Act lays that an agreement shall be void if both parties are under a mistake of fact. It reflects when the terms agreed upon, which are essential for the agreement are mistaken by both the parties, then the said agreement is void. However, when there is a mistake of fact on part of one, and not the other party, the contract is not voidable in such a case as laid under Section 22 of Contract Act.
Some contracts are voidable in nature which are valid from initial stage and later on can be declared void at the option of either of the parties , such a conrtact may be made voidable by the party having such power to fulfil any condition like fraud , mis representation , coercion or undue influence, thus remains valid and binding at the option of the parties to exercise his rights to made contract void.
- The clear distinction between the Void and voidable contracts can be understood as void contract are not capable by law. As they are not consistent with the law of the land. But voidable contacts have the option of making it void at the option of the parties .
- No compensation can be availed for void contracts. Voidable contracts have relief and remedies as compensation of damages. Attributable to the other party on account of wrongful conduct and can be rectified and rescinded whereas void contracts cannot.
Examples of Mistake of Fact
- 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.
- 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.
- In the case of Smith v. Hughes (1870), The plaintiff agreed to buy certain Oats from the defendant believing that they were old when in reality they were new. It was held that the defendant cannot avoid the contract on the ground that he was mistaken as to the oldness of the oats.
The explanation to mistake of fact and mistake of law is brought in by our intern, Mr. Shasyesh Tiwari. He has been assisting the team in bringing informational legal blogs.
