Mistake Sec.20

Mistake : an erroneous belief about something  - may be mistake of law or a mistake of fact.

Sec.20 – where both parties are under mistake as to matter of fact essential to the agreement – the agreement is void.

Sec.20 will come into play when –

(1)   both the parties to an agreement are mistaken;

(2)   their mistake is as to a matter of fact;

(3)   the fact about which they are mistaken is essential to the agreement.

Sec.21 – a contract is not voidable because it was caused by mistake of law of the country.  However, mistake as to law of a foreign country is treated as mistake of fact and makes the contract void.

Sec.22 – a contract is not voidable merely because it was caused by mistake of one party as to matter of fact.

Mistake of law -

a) Mistake of law of the country – (ignorantia juris non excusat , i.e. ignorance of law is not excuse) – contract cannot be avoided. 

Example : A and B enter into a contract - on the erroneous belief that a particular debt is barred by the Indian Law of Limitation – contract is not voidable.

But where person enters into a contract by making a mistake of law through inducement of another (whether innocent or otherwise), the contract is voidable.

(b) Mistake of law of a foreign country -  treated as mistake of fact – contract is void.

Mistake of fact – may be bilateral or unilateral.

Bilateral Mistake – both the parties are mistaken as to a matter of fact essential to the agreement – agreement is void.

1. The mistake must be mutual. 

Example – A agreed to purchase B’s motor car lying in B’s garage – Unknown to both, the garage and car destroyed by fire a day earlier – void agreement.

2. Mistake must relate to matter of fact essential to the agreement – as to what facts are essential to the agreement depends upon the nature of the promise in each case. 

Galloway Vs. Galloway  - man and woman entered into  separation agreement under which man to pay weekly allowance to woman – both mistakenly believe themselves to the lawfully married – Held, mutual mistake on a point of fact which was material to the existence of agreement – void agreement.

However, an erroneous view as to value of a thing which forms the subject matter of agreement is not deemed as mistake of fact 

Example – A buys an old painting for Rs.5000 – mistakenly assumed it to be an antique – actually it was new one and worth only Rs.500 – Mistake as to value of the subject matter – not voidable. 

Bilateral mistakes can be of following types –

1. Mistake as to the subject matter – agreement is void

Example – A agreed to buy B’s horse – unknown to both, the horse was dead at the time of bargain – agreement is void.

Couturier Vs. Hastie – H employed by C as del credere agent  to sell C’s cargo of corn which was in transit – H sold the cargo to a third person - Unknown to both,  the corn became fermented in transit and already sold by the master of the ship at an intermediate port – buyer repudiated the contract and H was sued for the price (being del credere agent) – Held, as goods had already been totally lost before the contract was made, the contract void ab initio - H not liable. 

2. Mistake as to identity of subject-matter – happens when one party intends to deal in one thing and the other intends to deal in another.

Raffles Vs. Wichelhaus – W agreed to buy a cargo of Surat Cotton from R ‘to arrive ex-Peerless from Bombay’  - actually two ships by that name sailing from Bombay, one in October and another in December – W meant the former while R meant the latter – Held, mutual mistake and hence no contract. 

Even if mistake caused by negligence of third party – contract void.

Henkel Vs. Pape – A inspected fifty rifles in B’s shop – Later, wired to B “send three rifles” – by mistake of telegraph office, the message transmitted as “send the rifles” – B sent fifty rifles – A accepted three rifles and sent back the rest – Held, there was no contract on account of mutual mistake as to identity of subject matter – however, A liable to pay for three rifles on basis of an implied contract. 

3. Mistake as to quality of subject matter – if the subject matter is qualitatively different from what the parties thought it to be – agreement is void.

Nicholson & Venn Vs. Smith Marriot  - table napkins sold at auction - by description “with the crest of Charles I and authentic property of that monarch” – actually napkins belonged to King George – Held, mistake as to quality of the subject matter – agreement void.

4. Mistake as to quantity of subject matter – if mutual mistake as to quantity of subject matter – agreement void.

Cox Vs. Prentice – Silver bar sold under a mistake as to its weight – Held agreement is void

5. Mistake as to title of subject matter – if seller intends to sell something which he is not entitled to sell – agreement is void.

Cooper Vs. Phibbs   - uncle had told his nephew, not intending to misrepresent anything but being in fact in error, that he (uncle) was entitled to a fishery – after uncle’s death, nephew entered into agreement with uncle’s daughter to rent the fishery – actually fishery belonged to nephew himself – Held the lease was void.

6. Mistake as to price of subject matter – where mutual mistake as to price – agreement is void.

Webster Vs. Cecil – W offered to buy C’s property for £2000 – C declined – thereafter C offered to sell the same property for £1250 -  W accepted the offer, knowing that this offer price was a mistake which should have been for £2250 – Held, W knew that offer was a mistake – contract void.

7. Mistake as to possibility of performance -  impossibility may be due to

a)Physical impossibility

Griffith Vs. Brymer  - contract for hiring of a room for witnessing the coronation procession of King Edward VII – unknown to the parties, the procession had already been cancelled – Held, the agreement void for impossibility of performance.

b) Legal impossibility – if subject matter of contract cannot be done as per law – agreement is void.

Unilateral Mistake  - Sec.22 – agreement not voidable merely because it was caused by unilateral mistake as to matter of fact – however, it can be allowed as defence where mistake brought about by other party’s misrepresentation or fraud.

Smith Vs. Hughes – H wanted to buy old oats for his horses – S showed him sample of oats which he had – W mistakenly thought that oats were old when they were actually new – Held, though two minds were not ad idem as to age of the oats, they certainly were ad idem as to the sale and purchase of them – H cannot avoid the contract.

Exceptions – In certain cases, when unilateral mistake goes to the root of the agreement, agreement is void.

1. Mistake as to identity of person contracted with – if one party represents himself to be some other person, there is mistake as to the identity of the person contracted with.

Example – A intends to contract with B – mistakes C to be B and enters into contract with him (C) – no agreement if B was a material element of contract.  Even in cases where A makes an offer to B, C cannot give get any rights under the contract by accepting the offer – if he does so, contract is void.

Boulton Vs. Jones – B purchased goods from H – H owed debt to J – J placed order on H – J accepted goods from B thinking that they were supplied by H – B had supplied the same intending to set off his debt against H – Mistaken identity of the acceptor – no contract.  However, B can recover the goods from J under quasi-contract. 

Cundy Vs. Lindsay  - Blenkarn ordered goods from Lindsay – signed the offer letter in such a way that L believed it came from well-known firm of Blenkiron & Co. – Held, L never intended to deal with Blenkarn, having heard of him – no contract.

This exception holds good only when identity of contracting party is important.

Said Vs. Butt – S wanted to go to first night of play – B, the managing director of theatre, gave instructions that ticket be not sold to S – because in past S had published virulent (strong) criticism of its production – S got his friend to buy a ticket – theatre manager refused admission to S – Held, no contract as theatre never intended to contract with S.

Where the identity of a party is immaterial to the contract – contract is not void – attribute of a party does not affect the contract. 

Philips Vs. Brooks – N bought jewellery from a jeweller’s shop – presented himself as Sir George Bullough – gave a cheque which bounced – jeweller sued for annulment (cancellation) of contract - Held, jeweller contracted to sell and deliver jewellery to person who came to his shop – here mistake not as to identity but to attribute of the buyer – valid contract.

2. Mistake as to nature of contract  - if document signed under mistaken belief that they are of different class and character altogether - void contract.

Foster Vs. Mackinnon – M, an old man of poor sight, endorsed a bill of exchange – had mistakenly thought it to be a guarantee – Held, the mind of the signer did not accompany the signature – no contract.