Effects of Mistake of Fact and Mistake of Law on Contract

EFFECTS OF MISTAKE OF FACT AND MISTAKE OF LAW ON CONTRACT

Introduction

A mistake alludes to an inaccurate conviction that is innocent in nature which leads one party to misjudge the other. It ordinarily happens when the party to the contract are not totally mindful of the particulars of the agreement and comprehends the terms from an alternate point of view. Hence there is no consensus ad–idem i.e., meeting of minds between the parties and consequently don’t comprehend something very similar in a similar sense.

Mistake of Law

The Latin maxim ignorantia juris non excusat implies that ignorance of the law is no reason. Subsequently under section 21 of the Indian Contract Act, 1872, a contract can’t be supposed to be voidable because of the mistake of the parties in seeing any laws that are in power in India. Henceforth the parties to the contract can’t guarantee alleviation in light of the fact that they were uninformed of the Indian law.

For Example- A man was caught by a ticket conductor for travelling on a train without a ticket. The man can’t guarantee that he didn’t know that a ticket is required while travelling and will be rebuffed under Section 138 of The Indian Railways Act, 1989.

Exceptions to Mistake of Law

1) Mistake with respect to a Foreign Law

Section 21 likewise indicates that a mistake with respect to an foreign law will be treated as a mistake of fact. This is on the grounds that the parties to the contract are not expected to know all the provisions of the foreign law and their importance. Consequently if there should be an occurrence of a mistake of the foreign law by both the parties, the contract will be viewed as void.

For Example- An Indian Company consents to sell an American Company 200 jars of a specific combination containing 45% Sulphuric acid. The law of the nation had restricted the buy and offer of blends containing over 30% Sulphuric acid. This is viewed as a mistake of foreign law and accordingly the contract is said to void.

2) Mistake concerning a Private Right

The presence of any private right is a matter of fact that relying upon the principles of law since it isn’t workable for a party to completely know the private privileges of another party.

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In the case of Cooper v Phibbs(1867), The plaintiff took a lease of fishery right from the defendant unaware of the fact that he already had a life interest in the fishery right. The plaintiff, therefore, brought a suit for the cancellation of the lease and the defendant argued that this was a mistake of law. It was held that a mistake as to the general ownership or right stands on the same footing as a mistake of law and therefore was declared void.

Mistake of Fact

The maxim Ignorantia Facti Excusat which implies that the Ignorance of fact pardons. Along these lines under Section 20 of the Indian Contract Act, 1872, a contract is supposed to be void when both the parties to the agreement are under a mistake as to a matter of fact.

A mistake of fact can be of 2 types-

1) Bilateral Mistake – Section 20

Section 20 will possibly apply when the accompanying three conditions are satisfied:

  1. The mistake should be committed by both the parties i.e., should be common
  2. The mistake should respect some fact.
  3. It should identify with a fact which is fundamental to the contract.

Accordingly if the mistake is made with respect to the presence of the topic or a fact essential to the contract, it would be a void contract since there is no consensus ad idem.

However, an incorrect assessment with respect to the estimation of the thing which forms the topic of the agreement isn’t supposed to be a mistake of fact and is viewed as insignificant to the agreement.

Types of Bilateral Mistakes

1) Mistake with respect to the presence of the topic

Here and there the presence of the topic of the contract stops to exist before the agreement was made and the parties to the contract may not know about this fact. On the off chance that the topic on which the contract exists is absent, it is viewed as that the agreement has perished and subsequently the agreement would be viewed as void.

In the case of Galloway versus Galloway(1914), A man and lady accepted that they were married and along these lines settled on a partition agreement yet it was later found that the man’s first spouse was alive. It was held that the partition agreement was void as it had been gone into based on the normal presumption that the parties were married to one another.

2) Mistake with respect to the nature of the topic

In the event that the parties to the contract are not mistaken with respect to the topic of the contract however in regards to its quality, the contract would be supposed to be valid.

In case of Smith versus Hughes(1870), The plaintiff consented to purchase certain Oats from the defendant accepting that they were old when actually they were new. It was held that the defendant can’t keep away from the contract on the ground that he was mistaken regarding the oldness of the oats.

3) Mistake with respect to the amount of the topic

On the off chance that both the parties to the contract are under a mistake with respect to the amount of the topic, the agreement is supposed to be void.

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For Example, Ankita consented to purchase a vehicle from Prankur dependent on his letter where the cost referenced was 50000 rather than 5 lakhs because of a composing blunder. The said agreement is viewed as void because of a mistake regarding the amount of the topic or the subject matter.

4) Mistake with respect to the title of the topic

Now and again the buyer of said property or great may effectively be the proprietor of what the vender wishes to sell. Both the parties here may be under a mutual mistake with regards to the title of the said great or property. Since in such a case there isn’t anything that the dealer can move, there is no contract which in this manner gets void. This can be clarified on account of Cooper v Phibbs(1867).

2) Unilateral Mistake – section 21

Section 21 of the act says that a contract can’t be supposed to be voidable on the grounds that one of the parties to the contract was under a mistake as to a matter of fact concerned to the contract. Along these lines a unilateral mistake doesn’t influence the legitimacy of the contract and can’t be a ground for putting aside the contract in the official courtroom.

In the case of Tapline Vs Jainee(1880), The purchaser at an auction carried a property portrayed concerning an agreement. The buyer was under the suspicion that he was knowledgeable with the property and in this manner didn’t allude to the agreement. Later he found that a nursery plot which he thought was a piece of the property was not indeed remembered for the agreement. It was held that the purchaser can’t deny the contract on the grounds of the unilateral mistake made by him and was limited by the contract.

Exceptions for a Unilateral Mistake

If there should be an occurrence of a unilateral mistake, the contract must be kept away from in the event that it is demonstrated that the agreement was caused because of fraud or misrepresentation with respect to one of the parties to the contract.

1) Mistake by one party with respect to the nature of the contract

At the point when a mistake is made by one of the parties with respect to the very nature of the contract being gone into and such a mistake is known to the other party, such a contract is supposed to be void.

This may happen on the grounds that while executing a contract, a party may not comprehend the nature of the contract he is going into one or the other because of fraud or misrepresentation by the other party or because of the mature age or chronic sickness of the individual consenting to such a contract.

In case of Dularia Devi v. Janardan Singh(1990), An illiterate lady put her thumb impact on two documents believing that the two of them were to gift some property to her girls. Later she found that the subsequent report was to cheat her out of a greater amount of her property. In spite of the fact that this was a unilateral mistake with respect to the ignorant lady yet since the consent for the said agreement was picked up by misrepresentation and the lady didn’t know about the idea of the exchange, the contract was held void by the courts.

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2) Mistake by one party with respect to the personality of the parties to the agreement

Generally, the identity of the parties going into an agreement isn’t essential to an contract. Yet, in specific cases, when a unilateral mistake is made with respect to the personality of the parties to the agreement because of misrepresentation by one party who claims himself to be somebody who he truly isn’t, In such cases the agreement is supposed to be void

On account of Cundy v Lindsay (1878), Lindsay and Co were makers of cloth hankies in addition to other things who got a request for 250 Dozen tissues from a man named Blenkarn, who imitated the marks of “Blenkiron and Co.” a presumed firm situated at “123, Wood Street”. The man additionally referenced his location to be at 37, Wood Street, Cheapside. Lindsay and Co expected that the request was from the rumored firm situated at Wood-road and consequently conveyed the request. Later the man offered the products to a guiltless party, Cundy.

At the point when Blenkarn neglected to pay for the said request Lindsay and Co sued Cundy for the merchandise. Lindsay and Co guaranteed that since they offered the products to Blenkarn under the mistaken suspicion that they were offering it to Blenkiron and Co, there was no genuine agree to the contract of offer.

It was held that there was a unilateral mistake by the inquirers with respect to the character of the other party making the contract void and consequently the title of the goods didn’t pass to Blenkarn, and along these lines couldn’t have passed to Cundy who was at risk to restore the products back to Lindsay and Co.

Conclusion

The legitimacy of a contract is prevented when consent is picked up because of a mistake by the parties. As examined, a mistake can be of two sorts, Mistake of fact and Mistake of law. At the point when agree to a contract is picked up because of a reciprocal mistake of fact, the contract is supposed to be void however when the mistake happens because of a unilateral mistake of fact, the agreement is substantial besides in the instances of mistake with respect to the idea of the contract or character of the parties to the contract.

Essentially, when agree to a contract is picked up because of a mistake of the Indian law it is a legitimate contract yet on the off chance that it is expected an foreign law by both the parties, the contract is said  to be void.

Author: Ritesh Panigrahi,
KIIT School Of Law, 2nd year

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