MISTAKE OF FACTS AND LAW
Under the Indian Contract Act, there are provisions that deal with mistakes as to facts and mistakes as to law. According to the Indian Contract Act, there are provisions related to mistakes of law and facts.
MISTAKE OF FACTS –
Mistakes of fact can have different implications on the validity of a contract. There are two types of mistakes of fact :
BILATERAL MISTAKE : This type of mistake occurs when both parties are mistaken about a crucial fact related to the contract’s subject matter. If the mistake significantly affects the understanding or basis of the agreement, the contract becomes voidable. In such cases, either party can choose to avoid the contract.
FOR EXAMPLE, suppose two parties enter into a contract for the purchase of a specific painting, believing it to be an original work by a renowned artist. Later, they discover that the painting is a forgery. In such a situation, both parties can agree to void the contract since the fundamental premise of the agreement was based on a mistake of fact.
UNILATERAL MISTAKE : This type of mistake occurs when only one party is mistaken about a fact, while the other party is aware of the mistake or takes advantage of it. In general, a unilateral mistake does not render the contract void.
EXCEPTION – If the non-mistaken party knew about the mistake and deliberately misled the mistaken party, or if the contract is so one-sided that it becomes unconscionable to enforce it, the mistaken party may have the right to avoid the contract.
FOR EXAMPLE, if a seller erroneously states the age of a product in a contract, and the buyer is aware of this mistake but proceeds with the transaction without correcting it, the seller may have grounds to avoid the contract later on.
MISTAKE OF LAW –
Under this provision, if both parties make a mistake regarding the legal aspects or provisions of a particular law, it generally does not render the contract void. The rationale behind this is that individuals are expected to know the law, and their ignorance of it does not invalidate the contract.
FOR EXAMPLE, if two parties enter into a contract without realising that a certain provision of the law has changed, their contract would still be legally binding. They cannot use their lack of knowledge as a reason to escape the obligations of the contract.
RELEVANT PROVISIONS –
SECTION 20 – If both parties in an agreement make a mistake about an important fact, the agreement becomes void. However, if the mistake is related to the value of something in the agreement, it is not considered a mistake of fact.
EXAMPLE – A and B made a deal for A to buy a horse from B. However, it later turned out that the horse was actually already deceased at the time they made the agreement, and neither A nor B knew about it. In this situation, the agreement becomes invalid or void.
SECTION 21 – if a mistake is made regarding a law that is applicable in India, it does not make the contract voidable. However, if the mistake is regarding a law that is not applicable in India, it is treated in the same way as a mistake of fact.
EXAMPLE – A and B entered into a contract, thinking that a certain debt was no longer valid according to the Indian Law of Limitation. However, it turns out that their belief was wrong. Despite this mistake, the contract cannot be invalidated.
SECTION 22 -If one party in a contract makes a mistake about a fact, it doesn’t automatically mean that the contract can be cancelled. In other words, just because someone misunderstands or has incorrect information about something, it doesn’t invalidate the entire contract.
It’s important to note that each case is unique, and legal advice should be sought for specific situations. The Indian Contract Act provides a framework to address mistakes and their effects, ensuring fairness and protection for all parties involved.
REFERENCES :
https://indiankanoon.org/docfragment/157255863/formInput=mistake%20of%20fact%20%20doctypes%3A%20judgments – INDIAN KANOON
