Mistake in Contract Section 20, 21, 22

Introduction

In contracts, a mistake is when one party has an incorrect belief about something, leading to misunderstandings. This often happens when the parties don’t fully understand the agreement, resulting in no “meeting of the minds” or consensus ad idem.

The Indian Contract Act, of 1872 talks about two main types of mistakes:

1. Mistake of Law (Section 21)
2. Mistake of Fact (Sections 20 and 22)

Mistake of Law: Section 21

The rule here is simple: ignorance of the law is no excuse (ignorantia juris non excusat). Under Section 21, you can’t void a contract just because you didn’t understand the laws in India.

Example: If you’re caught travelling on a train without a ticket, you can’t argue that you didn’t know you needed a ticket. You’ll still be fined under Section 138 of The Indian Railways Act, 1989.

Exceptions to Mistake of Law

1. Mistake Regarding Foreign Law: Section 21 says that a mistake about foreign law is treated like a mistake of fact. This is because you’re not expected to know all foreign laws. If both parties are mistaken about a foreign law, the contract is void. Example: An Indian company sells a chemical mix to an American company, not knowing that American law bans it. This mistake makes the contract void.
2. Mistake Regarding Private Rights: This is about knowing who owns what. In the case Cooper v Phibbs (1867), the plaintiff leased fishery rights from the defendant, not knowing he already had them. The court treated this as a mistake of law and voided the contract.

Mistake of Fact: Sections 20 and 22

This is simpler: ignorance of fact can excuse you (Ignorantia facti excusat). Under Section 20, if both parties are mistaken about a fact essential to the contract, the contract is void.

Types of Mistakes of Fact

1. Bilateral Mistake (Section 20): This happens when both parties are mistaken about an essential fact. The contract is void if:
   • Both parties are mistaken.
   • The mistake is about a fact.
   • The fact is essential to the contract.
   Example: In Galloway v. Galloway (1914), a couple made a separation agreement thinking they were married, but the man’s first wife was still alive. The agreement was void because they were mistaken about being married.
2. Unilateral Mistake (Section 22): This happens when only one party is mistaken. Generally, this doesn’t void the contract unless the other party knew about the mistake.Example: In Tapline v. Jainee (1880), a buyer thought a garden plot was included in a property sale. He couldn’t void the contract because it was his mistake alone.

Exceptions to Unilateral Mistake

1. Nature of the Contract: If one party is mistaken about the nature of the contract, and the other party knows this, the contract is void.Example: In Dularia Devi v. Janardan Singh (1990), an illiterate woman was tricked into signing documents she didn’t understand. The court voided the contract because of fraud.
2. Identity of Parties: If one party is mistaken about who they are contracting with due to the other party’s misrepresentation, the contract is void.Example: In Cundy v. Lindsay (1878), a man pretended to be a reputable firm and ordered goods. When he didn’t pay, the real firm sued. The court voided the contract because the real firm was mistaken about the buyer’s identity.

Conclusion

Understanding these types of mistakes is crucial for anyone dealing with contracts. Always ensure there’s a clear meeting of minds to avoid costly misunderstandings. If you’re ever in doubt, consulting a legal expert can help clarify any complexities.

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Also Read: Competency to Contract in India

Reference: Wikipedia