CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

Law of contracts-II

Project on:-

Mistake and contract

Submitted To: Mr. K.K.Dwivedi (Faculty for Law of Contracts)

Submitted By:Vagisha Pragya Vacaknavi Roll No. 374

Semester II, 1st Year.ACKNOWLEDGEMENT

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The present project on the Mistake and Contract has been able to get its final shape

with the support and help of people from various quarters. My sincere thanks go to all

the members without whom the study could not have come to its present state. I am

proud to acknowledge gratitude to the individuals during my study and without whom

the study may not be completed. I have taken this opportunity to thank those who

genuinely helped me.

With immense pleasure, I express my deepest sense of gratitude to Mr. K.K. Dwivedi,

Faculty for Law of Contracts, Chanakya National Law University for helping me in

my project. I am also thankful to the whole Chanakya National Law University family

that provided me all the material I required for the project. I would also like to thank

my parents without whose blessings the completion of this project was not possible.

I have made every effort to acknowledge credits, but I apologies in advance for any

omission that may have inadvertently taken place.

Last but not least I would like to thank Almighty whose blessing helped me to

complete the project.

Case referred A.A.Singh v Union of India

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Ayekam Angahal Singh v. The Union of India

Boulton v. Jones

Cooper v. Phibbs

Courturier v. Hastie

Dularia Devi v. Janardan Singh

Galloway v. Galloway

Haji Abdul Rehman Allarakhia v. Bombay and Persia Steam Navigation Co

Hartog v. Colins & Shields

Kalyanpur lime Works v. State of Bihar

Kochavareed v. Mariappa

Ningawwa v. Byrappa

Raffles v. Wichelhaus

Sheikh Brothers Ltd. v. Ochsner

Tarsem Singh v. Sukhminder Singh

Thomas Bates & Sons Ltd v Wyndham (Lingerie) Ltd

CONTENTS

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Introduction 5-10

Contract 5-6

Free Consent 7

Mistake 8-10

Research Methodology 11

Mistake, when there is no Consensus ad idem 12-13

Mistake as to matter of fact essential to the agreement

14-18

Limitations 19-21

Critical Analysis 22

Bibliography 23

INTRODUCTION Contract

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What is a contract? Section 2(h) of the Indian Contract Act, 1872 (herein to be

referred as the Act) defines the term contract "as an agreement enforceable by law".

Section 2(e) defines agreement as "every promise and every set of promises, forming

the consideration for each other". Again Section 2(b) defines promise in these

words: "when the person to whom the proposal is made signifies his assent thereto,

the proposal is said to be accepted. Proposal when accepted, becomes a promise".

Section 2(j) defines void contract as "a contract which ceases to be enforceable by

law becomes void when it ceases to be enforceable".

To start with, the Oxford Dictionary defines the word “contract” as a written or

spoken agreement, especially one concerning employment, sales or tenancy, that is

intended to be enforceable by law. It is also a branch of law concerned with the

making and observation of contracts.

A Proposal and its Acceptance is the universally acknowledged process for the

making of an agreement. The proposal is the starting point. It the proposal which is

when accepted results in promise. The promise when combines with consideration

forms agreement and the agreements which are enforceable in law are contracts1.

Proposal + Acceptance = Promise

Promise + Consideration = Agreement

Agreement + Enforceability in law = Contract

Proposal is defined under section 2(a) of the Indian contract Act, 1872 as "when one

person signifies to another his willingness to do or to abstain from doing anything

with a view to obtaining the assent of that other to such act or abstinence, he is said

to make a proposal/offer". Thus, for a valid offer, the party making it must express his

willingness to do or not to do something. But mere expression of willingness does not

constitute an offer. An offer should be made to obtain the assent of the other.

The essentials of a contract are that there must be an agreement, free consent,

competent parties, lawful object and consideration as per section 10 of the Act2.

In law, a contract is a binding legal agreement that is enforceable in a court of law or

by binding arbitration. That is to say, a contract is an exchange of promises with a

specific remedy for breach. Agreement is said to be reached when an offer capable of

immediate acceptance is met with a "mirror image" acceptance (i.e., an unqualified

acceptance). The parties must have the necessary capacity to contract and the contract

1 “Law of Contracts” by Avtar Singh2 See Section 10 of the Act

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must not be trifling, indeterminate, impossible, or illegal. Contract law is based on

the principle expressed in the Latin phrase pacta sunt servanda (usually translated

"pact  must be kept", but more literally "agreements are to be kept").  Breach of

contract is recognized by the law and remedies can be provided.

As long as the good or service provided is legal, any oral agreement between two

parties can constitute a binding legal contract. The practical limitation to this,

however, is that only parties to a written agreement have material evidence (the

written contract itself) to prove the actual terms uttered at the time the agreement was

struck. In daily life, most contracts can be and are made orally, such as purchasing a

book or a sandwich. Sometimes written contracts are required by either the parties, or

by statutory law within various jurisdictions for certain types of agreement, for

example when buying a house or land3.

Contract law can be classified, as is habitual in civil law systems, as part of a

general law of obligations (along with tort, unjust enrichment or restitution).

According to legal scholar Sir John William Salmond, a contract is "an agreement

creating and defining the obligations between two or more parties".

Free CONSENT

3 http://en.wikipedia.org/wiki/Contract

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According to Section 10 free consent is an essential requirement of a contract. Section

13 of the Indian Contract Act, 1872 defines “consent”. It states “Two or more persons

are said to consent when they agree upon the same thing in the same sense.”

For a valid contract both the parties should have given their consent and the consent

should also be free. “Two or more persons do not agree to the same thing in the same

sense, there is deemed to be no consent on their part. In other words, there may be

absence of meeting of minds of the parties, or there may be no consensus ad idem. In

such cases there arises no contract which can be enforced.”

Section 14 of the Indian Contract Act, 1872 defines “free consent”. It states “Consent

is said to be free when it is not caused by –

(1)coercion, as defined in section15, or

(2)undue influence, as defined in section 16, or

(3)fraud, as defined in section 17, or

(4)misrepresentation, as defined in section 18, or

(5)mistake, subject to the provisions of sections 20, 21 and 22.

Consent is said to be so caused when it would not have been given but for the

existence of such coercion, undue influence, fraud, misrepresentation or mistake”

An agreement upon the same thing in the same sense is known as true consent or

consensus as idem, and it is the root of every contract.

As stated by Lord Hannen “It is essential to the creation of a contract that both

parties should agree to same thing in the same sense. Thus if two persons enter into

an apparent contract concerning a particular person or ship, and it turns out that

each of them, misled by a similarity of name, had different person or ship in mind, no

contract would exist between them.”

Mistake

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For an agreement to be enforceable by law, it needs to fulfil certain essentials. Section

10 of the Indian Contract Act, 1872 states “What agreements are contracts”. It states

as follows “All agreements are contracts is they are made by the free consent of

parties competent to contract, for lawful consideration and with a lawful object, and

are not hereby expressly declared to be void.”

According to Section 10 of the Act “free consent” is an important essential of a

contract. Meaning thereby, the parties to the agreement must have agreed to the terms

of the agreement freely, then the agreement can be said to be a contract.

As per Section 14 of the Indian Contract Act, 1872 “Mistake, subject to provisions

of Section 20, 21 and 22” affects the “free consent” of the parties to contract.

Consent is said to be so caused when it would have been given but for the existence of

such coercion, undue influence, fraud, misrepresentation or mistake.

An agreement to be a contract, there needs to be consensus or meetings of minds of

the parties to agreement and mistake prevents in happening so.

Mistake may operate upon the contract in two ways. It may, firstly, defeat the consent

altogether that the parties are supposed to have given, that is to say, the consent is

unreal. Secondly, the mistake may mislead the parties as to the purpose which they

contemplated.

In contract law a mistake is an erroneous belief, at contracting, that certain facts are

true. It may be used as grounds to invalidate the agreement. Common law has

identified two different types of mistake in contract: "unilateral mistake" and "mutual

mistake," sometimes called "common mistake."

A unilateral mistake is where only one party to a contract is mistaken as to the terms

or subject-matter contained in a contract. This kind of mistake is more common than

other types of mistake4.

A mutual mistake occurs when the parties to a contract are both mistaken about the

same material fact within their contract. They are at cross-purposes. There is a

meeting of the minds, but the parties are mistaken. Hence the contract is voidable. 

A common mistake is where both parties hold the same mistaken belief of the facts.

When the consent of the parties to the contract is caused by mistake, it is not free

consent which is needed for the validity of a contract. One, or both, of the parties may

be working under some misunderstanding or misapprehension of some fact relating to

the agreement. If such a misunderstanding or misapprehension had not been there, 4 http://en.wikipedia.org/wiki/Mistake_(contract_law)

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probably they would not have entered into the agreement. Such contracts are said to

have been caused by mistake. Mistake may work in two ways:-

1) Mistake in the mind of the parties is such that there is no genuine

agreement at all. There may be no consensus ad idem, i.e., the meeting of

the two minds, i.e, there may be absence of “consent” as defined in Section

13. The offer and acceptance do not coincide and thus no genuine

agreement is constituted between the parties.

2) There may be a genuine agreement, but there may be mistake as to a

matter of fact relating to that agreement5.

When the free consent of the parties to the contract is vitiated by “mistake” it results

in declaring the contract as void.

Section 20 of the Act states, “Agreement void where both parties are under mistake as

to the matter of fact.-Where both the parties are under mistake as to matter of fact

essential to the agreement, the agreement is void.”

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.

Illustrations:-

A) 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.

B) 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.

C) 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.

Section 20 will come into play:

I. When both the parties to an agreement are mistaken;

II. Their mistake is as to a matter of fact, and

III. The fact about which they are mistaken is essential to the agreement.

5 “Contract-1” by R.K.Bangia

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Section 21 of the Act states, “Effect of mistakes as to law-A contract is not voidable

because it was caused by a mistake as to any law in force in India; but a mistake as to

a law not in force in India has the same effect as a mistake of fact.”

Illustrations:

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.

Section 22 states “Contract caused by mistake of one party as to matter of fact-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.”

RESEARCH METHODOLOGY

Method of Research

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The researcher has adopted a purely doctrinal method of research. The researcher has

made extensive use of the library at the Chanakya National Law University and also

the internet sources.

Aims and Objectives:The aim of the project is to present a detailed study of the “Mistake and Contract”.

Scope and Limitations:The project deals with the discussion on the topic of “Mistake and Contract” and the

relation between the two with the help of case laws.

Sources of Data:The following secondary sources of data have been used in the project-

1. Books

2. Websites

Method of Writing:The method of writing followed in the course of this research paper is

primarily analytical.

Mode of Citation:The researcher has followed a uniform mode of citation throughout the course of this

research paper.

Mistake, when there is no Consensus ad idemFor a valid contract both the parties should have given their consent and the consent

should also be free. Two or more persons do not agree to the same thing in the same

sense, there is deemed to be no consent on their part. In other words, there may be

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absence of meeting of minds of the parties, or there may be no consensus ad idem. In

such cases there arises no contract which can be enforced.

In Raffles v. Wichelhaus6, 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 had in mind Peerless

sailing in October, whereas the seller thought of the ship sailing in December. The

seller despatched 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.

In Tarsem Singh v. Sukhminder Singh7, the parties to the agreement for the sale of

land were not ad idem with respect to the unit of measuring land, the case was held to

have been covered by Section 20, making the agreement void.

In this case the seller intended to sell land in terms of “kanals”, whereas the buyer

intended to purchase it in terms of “bighas”. It was held to be mistake relating to a

matter essential to the agreement. The agreement was, therefore, held to be void.

When there is fraudulent misrepresentation not merely as to the contents of the

document but as to its character, and the mind of the signer did not accompany the

signatures, i.e., when the signer did not intend to sign a particular document, it is a

totally void transaction8 .

This may be explained by referring to the decision of the Supreme Court in Dularia

Devi v. Janardan Singh9. The plaintiff, an illiterate woman, wanted to execute a gift

deed in favour of her daughter. Her thumb impression was fraudulently obtained on

two documents, one being gift deed ain favour of her daughter and the other on a sale

deed in respect of her other property in favour of the defendant, who were her

daughter’s husband and his brothers. While putting the thumb impressions, she

honestly believed that she was executing a single document, i.e, a gift deed in favour

of her daughter. It was held that the sale deed executed by her was totally void,

because, “The plaintiff-appellant never intended to sign what she did sign. She never

intended to enter into the contract to which she unknowingly became a party. Her

6 (1864) 2 H & C. 9067 A.I.R. 1998 S.C. 14008 Ningawwa v. Byrappa, A.I.R. 1980 S.C. 9569 A.I.R. 1990 S.C. 1173

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mind did not accompany her thumb impressions...and it was therefore, a totally void

transaction”.

Mistake as to matter of fact essential to the agreement Section 20 deals with such mistake. It states that Section 20 of the Act states,

“Agreement void where both parties are under mistake as to the matter of fact.-Where

both the parties are under mistake as to matter of fact essential to the agreement, the

agreement is void.”

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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.

Illustrations:-

a) 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.

b) 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.

c) 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.

When the type of mistake contemplated in Section 20 is present in an agreement, the

agreement is void. Section 20 requires that:

1) Both the parties to the contract should be under a mistake-Section 20

makes the agreement void if there is mistake on the part of both the parties. For

example, A and B make an agreement for the sale and purchase of a particular horse.

Unknown to both the parties, the horse was dead at the time of the agreement. Since

both the parties are under a mistake, the agreement is void. If the mistake is a

unilateral one, i.e., only one of the parties is having some mis-impression, the validity

of the agreement is not affected thereby. This is made clear by Section 22, which

reads as:- “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.”

In Ayekam Angahal Singh v. The Union of India10, there was an auction for the sale

of fishery rights and the plaintiff was the highest bidder making bid of Rs.40, 000.

The fishery rights had been auctioned for 3 years. The rent, in fact, was Rs.40, 000

per year. The plaintiff sought to avoid the contract on the ground that he was working

under a mistake and he thought that he had made a bid of Rs.40, 000, being the rent

for all the three years. It was held that since the mistake was unilateral, the contract

was not affected thereby and the same could not be avoided.

10 A.I.R. 1970 Manipur 16

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In Haji Abdul Rehman Allarakhia v. Bombay and Persia Steam Navigation

Co.,11also, the validity of the contract was not affected as the mistake in this case was

only a unilateral one. A chartered a steamer from B which, according to the

agreement, was to sail from Jedda on “10th August, 1892 (15 days after the Haj)”. The

object of A was to convey Haj pilgrims from Jedda from Bombay through this

steamer. B had no idea about the date of Haj and for him the date contracted was 10 th

August. In this case, A was working under a mistake in so far as the 15 th day after the

Haj happened to be 19th July, 1892 and not 10th August, 1892. A sued B for

rectification of the charter party on the ground of mistake. It was held that there was

only a unilateral mistake on A’s part only and, therefore, there could be no

rectification of the instrument.

2) Mistake should be as regards a matter of fact-There should be mistake of fact

and not of law. The validity of the contract is not affected by mistake of law.

Regarding mistake of law the provision contained in Section 21 is as follows:-“A

contract is not voidable because it was caused by a mistake as to any law in force in

India; but a mistake as to a law in force in India has the same effect as a mistake of

fact.”

Illustration:-

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.”

Everyone is supposed to know the law of the land. Ignorance of law is no excuse. If a

person wants to avoid the contract on the ground that there was a mistaken impression

in his mind as to the existence of some law while he entered into the contract, he will

get no relief. For instance, A owes B Rs.1, 000/-. Both A and B mistakenly think that

the debt is time barred and agree that A may pay only Rs.500/- to clear debt. It is a

mistake of law and the contract to pay Rs.500/- is valid.

3) The fact regarding which the mistake is made should be essential to the

agreement-It is also necessary that the fact regarding which the mistake is made

should be essential to the agreement. Whether the mistake is regarding a fact essential

to the agreement or not depends on a particular contract. The effect of mistake in

various situations is being discussed below:-

I) Mistake as to the existence of the subject-matter-If both the parties to a

contract believe in the existence of the subject-matter, which in fact does not exist, the 11 (1892) 16 Bom. 561

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agreement would be void. The reason is that if the subject-matter of the contract has

already perished, there is nothing regarding which the contract is being made. For

example, in a contract for the sale of specific cargo, if the ship carrying the same has

been cast away and the goods lost12, or the sale is of a specific horse, which has

already died13 the agreement is void, if neither of the parties was aware of the actual

facts.

In Courturier v. Hastie14, there was a contract for the sale of cargo of corn supposed

to be in transit from Salonica to the United Kingdom. Unknown to the parties to the

contract, the corn had become fermented and then disposed of by the master of the

ship at Tunis, before the above stated contract of its sale was made. It was held that

the agreement was void because of mutual mistake as to the existence of the subject-

matter and, therefore, the buyer was not bound to pay its price.

In Galloway v. Galloway15, a man and a woman executed a separation deed, both of

them working under a common mistaken impression that they were married to each

other. Since the fact of marriage was no-existent, the deed was held void.

II) Mistake as to the possibility of performance of the contract-It has already been

noticed that if contrary to the belief of the parties the subject-matter of the contract is

not in existence, the agreement is void. If, for example, there is a contract for the sale

of a horse, which has already died, the agreement is void. One of the reasons for such

an agreement being void is that it is not possible to deliver and transfer a thing which

is not in existence.

Similar is the position when the performance of the contract is not legally possible.

For instance, A agrees to take a lease of a fishery from B. If it turns out that A is

himself already the tenant for life, and B has no interest which could be transferred to

A, it is not legally possible for B to perform this contract. The agreement having been

entered into under a mistake, is void16.

If, by mistake, the parties incorporate such terms in their contract that the

performance of those terms is not physically possible, the agreement would be void.

In Sheikh Brothers Ltd. v. Ochsner17, A contracted with B to grant him a licence to

cut, process and manufacture sisal growing on A’s land. B agreed that he would

12 Illustration (a) to Section 2013 Illustration (b) to Section 2014 (1856) 5 H.L.C. 67315 (1914) 30 T.L.R. 53116 Cooper v. Phibbs, (1867) L.R. 2 H.L. 14917 (1957) A.C. 136

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process sisal and deliver to A, minimum 50 tons of sisal fibre, manufactured by him,

every month. It was found that the leaf potential of the land was insufficient for

fulfilling contractual requirement, i.e., producing 50 tons of sisal fibre per month. As

such, the performance of promise by B was physically impossible. The Privy Council

decided the case on the basis of the provisions contained in Section 20, Indian

Contract Act and held that the agreement was void because of mutual mistake.

III) Mistake as to title-Sometimes the parties may be labouring under a mutual

mistake as to the title to the goods sold. The buyer may already be the owner of what

the seller purports to sell. In fact, there is nothing which the seller has to transfer. The

transfer of ownership is intended but the same is impossible as the buyer is already

the owner. Such an agreement is void due to mutual mistake. The position in this case

is similar to the one where the subject-matter, unknown to the parties, is not in

existence.

In Cooper v. Phibbs18, A agreed to take a lease of a fishery from B. Unknown to both

the parties, A was already tenant for life of the fishery rights and B had no title to the

same. The agreement was set aside on the ground of common mistake.

IV) Mistake as to promise-If there is a mistake because of which the promise does

not reflect the real intention which was there in the proposed agreement, such an

agreement would be void. In Hartog v. Colins & Shields19, there was a contract for

the sale of 30,000 pieces of Argentina hare-skins. Negotiations as to price were on

“per piece” basis, and that was in accordance with the usual trade practice. The sellers

by mistake in the offer stipulated to supply at a certain rate “per pound” instead of

“per piece”. A pound on an average contained three pieces of such skins. The buyers

sued the sellers for the non-delivery of goods. It was held that there had arisen no

contract in this case, because the buyer could have noticed the mistake by the sellers

contained in their offer, and because of their mistake, the seller’s intention was not

properly reflected in the offer.

V) Mistake as to identity of the parties-If I intend to enter into contract with A for

the purchase of goods from him and I place the order accordingly, B cannot accept

this offer, and if B supplies me the goods, I have no obligation to pay to him because I

never wanted to make any contract with him.

18 (1867) L.R. 2 H.L. 14919 (1939) 3 All E.R. 566

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In Boulton v. Jones20, Jones who used to have business dealings with Brocklehurst,

sent an order to Brocklehurst for the purchase of certain goods. By the time this order

reached, Brocklehurst had sold his business to Boulton. Boulton supplied the goods to

Jones, for which the order had actually been placed with Brocklehurst. Jones refused

to pay price of the goods to Boulton on the ground that he has never placed an order

with Boulton and had never intended to make a contract with him. Under these

circumstances it was held that Jones had never made any contract with Boulton and he

was not bound to pay for the goods.

LIMITATIONSMistake operates to avoid an agreement subject to the following limitations:-

1.Mistake of both parties

Under Section 20 an agreement is void by reason of mistake when both parties are

mistake as to a matter of fact essential to the agreement. This is further supplemented

by the declaration in Section 22 that “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”. Thus,

where the government sold by auction the right of fishery and the plaintiff offered the

highest bid under the impression that the right was sold for three years, when in fact it

20 (1857) 2 H. & N. 564

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was for one year only, he could not avoid the agreement because it was his unilateral

mistake.21 As to what is the nature of a unilateral mistake as provided under Section

22 of the Contract Act, would be best explained by the case of Haji Abdul Rehman

Allarakhia v Bombay and Persia Steam Navigation Co.22 There the plaintiffs

chartered a steamer which was to sail from Jedda on “10th August, 1892 (fifteen days

after the Haj)”. The plaintiffs believed that “10th August, 1892” corresponded with the

fifteenth day after the Haj. The defendant had no such belief and contracted only with

respect to the English date, viz., “10th August, 1892”. The plaintiff’s subsequently

discovered that their belief was mistaken as much as fifteen days after Haj fell on a

different day and on the basis of that they sued the defendants of rectification of the

charter party. The court held that it was a unilateral mistake and the plaintiffs were

not entitled to any relief. Similarly, where a tenderer, in calculating the price which he

wanted to charge, happened, by mistake, to insert wrong figures, and the authority

accepted the tender without knowing the mistake, no rectification was allowed.23 It

should, however, be borne in mind that where the mistake, even if it of one party only,

has the effect of nullifying consent as defined in Section 13, no contract will arise.

There is no real consent where mistake prevents the parties from coming to an

agreement upon the same thing in the same sense. For an agreement to be avoided on

the basis of unilateral mistake, it must be shown: first, that one party erroneously

believed that the document sought to be rectified contained a particular term or

provision, or possibly did not contain; second, that the other party was aware of the

omission or the inclusion and that it was due to a mistake omitted to draw the mistake

to the notice of the other party and there must be a fourth element involved, namely,

that the mistake must be one calculated to benefit one party. Applying these principles

to the facts of the case in Thomas Bates & Sons Ltd v Wyndham (Lingerie) Ltd24

the court came to the conclusion that where a lease deed contained arbitration clause

but the new deed which was prepared by the landlord did not contain that provision

without the knowledge of the landlord and though the lessee was aware of the

omission he did not draw it to the attention of the landlord, the landlord was entitled

to seek rectification of the document for inserting arbitration clause.

21 A.A.Singh v Union of India, AIR 1970 Mani 16.22 (1892) 16 Bom 56123 W.Higgins Ltd v Northampton Corpn. (1927) 136 LT 23524 (1981) 1 All ER 1011 CA

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The mistake of both parties of which Section 20 speaks may be either common or

mutual. The classification of mistakes in terms of “common”, “mutual” and

“unilateral” is adopted by Cheshire and Fifoot, The Law OF Contract. The expression

“common mistake” is thus explained in this learned work:

“In common mistake both parties make the same mistake. Each knows the intention of

the other and accepts, but each is mistaken about some underlying and fundamental

fact. The parties, for example, are unaware that the subject matter of their contract has

already perished.”25

Common mistake will definitely render the agreement void if the parties are mistaken

about the existence of the subject matter.

In mutual mistake, the parties misunderstand each other and are at cross-purposes. A,

for example, intends to offer his Ford Cortina car for sale, but B believes that the offer

relates to the Ford Zephyr also owned by A.”

2.Erroneous opinion

The explanation to Section 20 provides that “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”. In a case before the Cochin High Court, a property

which was subject to a subsisting lease was sold. The lessee had the right to receive

value of the improvements, but the agreement of sale was silent about this. The buyer

wanted to have agreement set aside on the ground of mistake about this right. But the

court held “that there was no mistake and that even if there was a mistake it was not

as to matter of fact essential to the agreement for sale. It could only be an erroneous

opinion which the parties had formed as to the real value of the subject-matter and

would not be deemed to be a mistake vitiating the agreement26.”

3.Mistake of fact and not of law

Mistake should be of fact and not of law, for section 21 declares that “a contract is not

voidable because it is caused by a mistake as to any law in force in India.” The

Section carries an illustration:

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.

25 The Law OF Contract, 202 (8th Edn, 1972)26 Kochavareed v. Mariappa

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A mistake as to effect of registration upon the validity of a document has been

registered by the Supreme Court as a mistake of law27. But a mistake as to a foreign

law will avoid.

CONCLUSIOnI would like to thank my professor for providing me with this topic for project to work

on. It is so because I while working on this project topic became acquainted with

various facts and developed a clear understanding of topics like mistake and relation

of mistake in contract. After the detailed study of the project and research work I was

able to understand the importance played by mistake in affecting the validity of any

contract.

Contract being an agreement enforceable in law has certain important essentials. One

of them being, free consent of the parties. Mistake, is one of the factors which affect

the “free consent” of the parties to contract. Any contract in which the consent of the

parties has been vitiated by mistake, then that contract stands void.

27 Kalyanpur lime Works v. State of Bihar, 1954 SCR 958

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Thus “mistake” forms an important element in contract and has great applicability in

day to day working.

With the help of this project I got clear concept about various types of mistake in the

law of contracts and the limitations thereby where the contract cannot be declared to

void.

It was a nice and knowledgeable experience.

BibliographyBooks referred:-

Bangia, R.K. “Contract-I”: Allahabad Law Agency, Haryana, 2009.

Singh, Avtar. “Law of Contract and Specific Relief”: Eastern Book Company,

New Delhi, 2008.

Kapoor, Dr.S.K. “Law of Contracts-I”: Central Law Agency, New Delhi,

2007.

Internet sources:- http://en.wikipedia.org/wiki/Contract

http://en.wikipedia.org/wiki/Mistake_(contract_law)

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