MISTAKE OF FACTS IN A CONTRACT

(WITH SPECIAL REFERENCE TO MISTAKE AS TO SUBJECT

MATTER AND MISTAKE AS TO IDENTITY OF A PERSON)
By

SAI NIMISHA C

20191BAL0065

BA.LLB & SECTION-4

SUBMITTED TO

Prof. MULA. SNEHA GOUD and Prof. SANDEEP JAIN

SCHOOL OF LAW, PRESIDENCY UNIVERSITY

BANGALORE

KARNATAKA, INDIA.

November, 2019
TABLE OF CONTENTS

REVIEW OF LITERATURE

INTRODUCTION

RESEARCH QUESTIONS

OBJECTIVES OF STUDY

SIGNIFICANCE OF STUDY

SCOPE OF STUDY

RESEARCH METHODOLOGY

 RESEARCH DESIGN
 SOURCES OF DATA

CHAPTER 1

GENERAL RULES OF CONTRACT

CHAPTER 2

MISTAKE IN A CONTRACT

CHAPTER 3

EXCEPTIONS AND RECTIFICATIONS OF MISTAKES IN A CONTRACT

SUGGESTIONS AND CONCLUSION

BIBLIOGRAPHY

INDEX OF AUTHORITIES

1|Page
REVIEW OF LITERATURE:

Understanding the concept of mistake of facts in a contract is really a matter of significance. It

is very essential to make sure that the contracts made contain no error, as it might sometimes
lead to the contract being void. Below are some relevant studies that have been taken up for
the purpose of literature review;

Srishti Chawla (2019) in her article ‘Mistake of Fact and Mistake of Law under The Indian
Contract Act,1872’ states that the validity of a contract is hindered when consent is gained
due to a mistake by the parties, and that mistake can be of two types, Mistake of fact and
Mistake of law. She states that when consent to a contract is gained due to a bilateral mistake
of fact, the contract is said to be void but when the mistake occurs due to a unilateral mistake
of fact, the agreement is valid except in the cases of mistake regarding the nature of the contract
or identity of the parties to the contract. Similarly, when consent to a contract is gained due to
a mistake of the Indian law it is a valid contract but if it is due a foreign law by both the parties,
the contract is said to be void.

Muhammad ul Haq (2010) in his research paper ‘Mistake’ talks about the contract being void
if both the parties are mistaken as to the facts of the contract. He also talks about consent being
the most important thing, and also divides mistake into mistake of fact and mistake of law, and
states the difference between them.

Aparna Tiwari (2016) in her research paper ‘Mistake as to subject matter of fact’
emphasizes on consent and also states that ‘consent’ is very necessary for a contract according
to Indian Contract Act, 1872. She states that there should be consensus ad idem in an agreement
for a valid contract to exist.

2|Page
INTRODUCTION:

A contract is considered as a legally binding agreement or a relationship that exists between

two or more persons to do or abstain from doing an act. Both parties to a contract must intend
to create some legal relation upon each other. And, there are certain elements that are very
essential in a contract; Offer, Acceptance, Meeting of the Minds (Consensus ad idem), Free
consent, Consideration, Capacity to contract, Legality of the object.

Sometimes, there are also mistakes present in a contract, which are broadly classified into two
kinds, mistake of law and mistake of fact. A mistake in law refers to an incorrect belief that is
innocent in nature which leads one party to misunderstand the other, and mistake of facts refers
to either or both the parties having a wrong understanding as to the subject matter of the
contract. Mistake of facts are of two kinds, unilateral and bilateral. There are also certain
exceptions to these mistakes.

RESEARCH QUESTIONS:

 Will a contract be void in case of a mistake?

 Can a contract with mistake be rectified?

OBJECTIVES OF STUDY:

 to find out the magnitude of problem created due to mistake in a contract

 to find out various types of mistakes in a contract

 to find out the liabilities of the respective parties

 to know the role played by law

 to suggest ways to ensure that a contract has no mistakes

SIGNIFICANCE OF STUDY:

• clarity with regard to the general principles of contract

• identification of various mistakes in a contract

• having an idea as to how to ensure that the contract is mistake-free

3|Page
SCOPE OF STUDY:

This study is limited to mistake as to subject-matter and mistake as to identity of a person,

and does not emphasize on mistake as to nature of promise, and does not give a detailed study
on mistake of law.

RESEARCH METHODOLOGY:

 RESEARCH DESIGN

The following study is done in an analytical and descriptive way, so as to provide a clarity with
each topic mentioned and discussed.

 SOURCES OF DATA

The study was done with the help of secondary sources. The collection of data will be from
published papers, relevant articles, case laws. Legislations, internet sources, secondary sources
were referred to. Various texts were also used.

4|Page
CHAPTER 1

GENERAL RULES OF A CONTRACT

What is a contract?
A contract is basically an agreement between two parties, creating a legal obligation for both
of them to perform specific acts.1 According to the Indian Contract Act, 1872, an agreement
that is enforceable by law is a contract.2 Thus, an agreement becomes a contract when it is
enforceable by law. It is to be noted that all contracts are agreements, but all agreements are
not contracts.
It is also to be noted that contracts are those agreements that create a legal obligation and those
agreements that do not intend to create legal relationship are not contracts. This was evident in
Balfour v, Balfour3 case, where the husband promised to send his wife a sum of £30 every
month for her stay in England, while he was employed in Ceylon. Later on, when the husband
refused to send the money, the wife sued the husband. The court but dismissed it stating that
the agreement between a husband and wife was not a contract, and in fact is only a moral
obligation, and not a legal obligation.

ESSENTIAL ELEMENTS OF A CONTRACT:

The following are the essential elements for a contract to be valid;

 Offer
 Acceptance
 Meeting of the Minds (Consensus ad idem)
 Free consent
 Consideration
 Capacity to contract
 Legality of the object

1) OFFER (or) PROPOSAL

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

1
Ken LaMance, What is a Contract?, LEGAL MATCH, (June 25, 2018, 08:32 PM),
https://www.legalmatch.com/lawlibrary/article/what-is-a-contract.html.
2
Section 2(h) of the Indian Contract Act, 1872, No. 9, Act of Parliament, 1872.
3
5 KB 571 (1919).
5|Page
proposal.4 In simple terms, when one person conveys to another his willingness to do or to not
do something, it can be called an offer (or) a proposal. The person making the offer is called
‘offeror’ and the person to whom he’s making the offer becomes the ‘offeree’. Most
importantly, an offer given must be with an intention to create a legal relationship.

2) ACCEPTANCE
When the person to whom the proposal is made signifies his assent thereto, the proposal said
to be accepted. A proposal, when accepted, becomes a promise.5 When consent to the offer is
given by the offeree to the offeror, it is called acceptance. An offer, when accepted, becomes
an agreement.

3) MEETING OF THE MINDS (CONSENSUS AD IDEM)

The parties entering into the contract must agree upon the same thing in the same sense and
everyone involved had accepted the legal obligations of each party. Section 13 of the Indian
Contract Act, 1872, states that —Two or more persons are said to consent when they agree
upon the same thing in the same sense.

4) FREE CONSENT
“Free consent” defined- Consent is said to be free when it is not caused by;

(1) coercion, as defined in section 15, 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 of the Indian Contract Act,
1872.
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.6

4
Section 2(a) of The Indian Contract Act, 1872, No. 9, Act of Parliament, 1872.
5
Section 2(b) of The Indian Contract Act, 1872, No. 9, Act of Parliament, 1872.
6
Section 14 of the Indian Contract Act 1872, No. 9, Act of Parliament, 1872.
6|Page
5) LAWFUL CONSIDERATION AND LAWFUL OBJECT

Consideration refers to something of value given to someone in return for goods, services, or
some other promise. A valid contract must include consideration for every party involved.
According to section 23 of the Indian Contract Act, 1872, the following considerations and
objects are not considered as lawful:
 If it is forbidden by law,
 If it is against the provisions of other law,
 If it is fraudulent,
 If it damages somebody’s person or property,
 If it is in the opinion of court, immoral or against public policy.
Thus, any contract that incorporates such unlawful provisions are not considered as a valid
contract.

6) CAPACITY TO CONTRACT

According to section 11 of the Indian Contract Act, 1872, the parties entering into a contract
would be considered competent if he;
 Has attained the age of majority,
 Is of sound mind,
 Is not disqualified to make a contract under a law to which he is subject.

Void, voidable and valid contracts:

Void: Not an actual contract and is unenforceable
Valid: Legally binding and enforceable in the court of law
Voidable: Valid and enforceable, but contains a flaw that may make it void

7|Page
CHAPTER 2

MISTAKE IN A CONTRACT

A mistake in law refers to an incorrect belief that is innocent in nature which leads one party
to misunderstand the other. ‘Mistake may operate upon a 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’.7
Section 13 of the Indian Contract Act, 1872, states that ‘two or more persons are said to consent
when they agree upon the same thing in the same sense’. Thus, consensus ad idem is the root
of every contract. In Raffles v. Wichelhaus8, Raffles and Wichelhaus entered a contract to buy
and sell Surat cotton shipped by a ship called the ‘Peerless’ which was sailing from Bombay,
India. Both of them weren’t aware of the fact that there was a Peerless that sailed from Bombay
in both October and December and the contract did not specify that. Each of them assumed a
ship of their own. The court decided that the contract was invalid because there was no
consensus ad idem.

There are mainly two types of mistakes:

 Mistake of law
 Mistake of fact

MISTAKE OF LAW

Section 21 of the Indian Contract Act, 1872, deals with the effect of mistakes of law. It says,
‘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’.9
The Latin maxim ignorantia juris non excusat means that ignorance of the law is no excuse.
Section 21 of the Indian Contract Act, 1872, clearly states that a contract would not be voidable
simply because the parties to the contract weren’t aware or couldn’t understand a law that is in
force in India. There are exceptions to this law.

7
AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF 226 (12th ed. 2019).
8
2 H&C 906: 159 ER 375 (1864).
9
Section 21 of the Indian Contract Act 1872, No. 9, Act of Parliament, 1872.
8|Page
MISTAKE OF FACT

The maxim Ignorantia Facti Excusat means that the ignorance of fact excuses.
Section 20 and 22 of the Indian Contract Act, 1872, deals with mistake of facts.
Mistake of facts can be of two types;
 Unilateral mistake
 Bilateral mistake
Mistake may be unilateral, i.e., that of one party to the contract; or it may be bilateral, where
both parties are under a mistake. A bilateral mistake may be mutual or common mistake.

UNILATERAL MISTAKE

A mistake would be unilateral when one of the parties to the contract is mistaken. It will make
the contract void, if other party knows or must be taken to know of the mistake of the first
party.10
Section 22 of the Indian Contract Act, 1872 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 a matter of
fact.
Therefore, a unilateral mistake does not affect the validity of the contract and cannot be a
ground for setting aside the contract in the court of law.
For example, X, buys a property, described with a reference plan, under the assumption that he
was well versed with the property and therefore did not refer to the plan. Later he discovers
that a plot which he thought was a part of the property was not in fact included in the plan. In
that case, it would be held that the X cannot revoke the contract on the grounds of the unilateral
mistake made by him and would be bound by the contract. However, there are certain
exceptions to this mistake.

10
K.C. Sethi v. State of Haryana, (2013) 1 ILR 496 (India).
9|Page
BILATERAL MISTAKE

 Mutual mistake- Mutual mistake occurs when the parties misunderstand each other
and are at cross purposes with each other. There is no real corresponding offer and
acceptance. There is no consensus ad idem.11
For ex., X intends to sell his C-Class, but Y believes it to be G-Class. In this situation, there is
a misunderstanding in the communication, hence there would be no agreement.
 Common mistake- When both the parties make the same mistake of fact relating to the
subject matter of facts surrounding the formation of contract, the contract may be
void.12
Common mistake arises when both the parties are mistaken about the same vital fact though
they are ad idem, for ex., the subject matter of contract has already perished. In this case, the
contract would be void. It is a mistake ‘possessed or shared alike by both or all the persons or
things in question’ and mutual means ‘possessed or entertained by each of two persons towards
or with regard to each other’.13
Section 20 of the Indian Contract Act, 1872, deals with common mistake of fact.
‘Agreement void where both parties are under mistake as to matter of fact-Where both
the parties to an agreement are under a mistake as to a matter of fact essential to the agreement,
the agreement is void.’14
Explanation-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.
For ex., S wants to buy a dog from R, and they enter into a contract. Unfortunately, the dog
that S wanted to buy was dead at the time of bargain, and neither of the parties were aware of
the fact. In this case, the agreement would be void.
Therefore, under Section 20 of the Indian Contract Act, 1872, a contract is said to be void when
both the parties to the agreement are under a mistake as to a matter of fact.
There are certain conditions for Section 20 of the Indian Contract Act, 1872 to apply,15
a) when both the parties to an agreement are mistaken,
b) their mistake must be with regard to a matter of fact, and

11
1 FREDERICK POLLOCK & DINSHAW FARDUNJI MULLA, THE INDIAN CONTRACT & SPECIFIC RELIEF ACTS 467
(15th ed. 2017).
12
Id.
13
Supra 11
14
Section 20 of the Indian Contract Act 1872, No. 9, Act of Parliament, 1872.
15
AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF 227 (12th ed. 2019).
10 | P a g e
 c) the fact that is mistaken must be essential to the agreement.
Essential Facts to a Contract:
There are certain facts that are very essential to a contract. These include,16
 identity of the parties,
 identity and nature of the subject-matter of the contract,
 nature and content of the promise itself.

-MISTAKE AS TO SUBJECT MATTER

A fact essential to every agreement is the identity or quality of the subject-matter of the
contract.
Mistake as to subject matter can be classified as:

 Mistake as to title or rights

Sometimes the buyer of a property may already be the owner of what the seller wishes to sell.
In this case, both the parties might be under a ‘mutual mistake’ as to the title of the property.
Since in such a case there would be nothing to sell, the contract subsequently becomes void.

CASE ANALYSIS
In Cooper v. Phibbs17, the plaintiff, Cooper, was the nephew of the owner of the salmon fishery
near Ballysadare, Ireland. He leased this salmon fishery from his uncle. When his uncle died,
the lease came up for the time of renewal, and the plaintiff renewed the lease for the salmon
fishery with his aunt. It was later found out that in his uncle’s will, Cooper, as his nephew, had
been given life tenancy of the salmon fishery.
This meant that there was no need for the lease that existed between him and his aunt, and there
was a dispute when the next rental payment was due.
The issue was if Cooper was the owner of the salmon fishery and whether the lease would be
void.
It was held that the contract and lease that existed between the complainant and the defendant
was voidable, rather than void. This was due to the claim being in equity, as Cooper had
beneficial ownership of the salmon fishery and not legal ownership.

16
AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF 228 (12th ed. 2019).
17
2 LR 149(1869).
11 | P a g e
This case concerned ‘res sua’18 and it was a mistake as to the title of the property; Cooper was
already the beneficial owner of the salmon fishery and there could not be a lease. It was held
that such an agreement would be set aside due to a common mistake by both parties as to
ownership.

 Different subject-matters in mind

When the parties have different subject matters in mind, the agreement would be void as there
would be no consensus ad idem.

CASE ANALYSIS
This principle can be well explained with the case of Raffles v. Wichelhaus.19 Raffles and
Wichelhaus entered a contract to buy and sell Surat cotton shipped by a ship called the
‘Peerless’ which was sailing from Bombay, India. Both of them weren’t aware of the fact that
there was a Peerless that sailed from Bombay in both October and December. One of the ships
was due to leave Bombay in October, which was what the defendant had thought for his Surat
cotton delivery, but the complainant was referring to the ship that was to leave in December.
When the Surat cotton arrived in Liverpool, Wichelhaus, the defendant, refused to pay, as in
his mind, it was months late. The issue in this case was whether there was an enforceable
contract between the parties. It was held that the contract between the complainant and
defendant was not enforceable. When the contract was being discussed, there was ambiguity
with regard to the Peerless ship that was being referred to. There had been no consensus ad
idem or meeting of the minds between the parties to form a binding contract. Hence, the
contract was not enforceable.

 Non-existent subject matter

In this case, the subject matter would have ceased to exist before the contract was made, and
the parties might not know about it. In that case, the contract would be void.

CASE ANALYSIS

18
Mistake as to ownership- This category of fundamental mistake refers to where two parties contract for the
purchase of some kind of property, but unknown to both of these parties, the purchaser of the property already
owns the property.
19
Supra 8.
12 | P a g e
In the case ‘Galloway vs. Galloway (1914)’, a man and woman believed that they were married
and therefore made a separation agreement but it was later discovered that the man’s first wife
was alive.
The issue as to the separation agreement was void came into picture.
In this case, it would be held that the separation agreement was void as it had been entered into
on the basis of the common assumption that the parties were married to each other.

 Mistake as to substance of subject-matter

Another kind of mistake as to subject-matter may relate to its substance, nature or quality. ‘The
parties may be mistaken as to the existence of some fact or facts forming an essential and
integral element of the subject matter. The decision of the Privy Council in Sheikh Bros. v.
Ochsner20 on appeal from Kenya and decided under Section 20 of the Indian Contract Act,
1872.’21

CASE ANALYSIS of Sheikh Bros. v. Ochsner 22

The appellant’s company, a lessor of a forest in Kenya, granted a license to the respondent to
cut and process all sisal growing in the forest, in return for 50 tons of sisal fibre per month from
the respondent. But the leaf potential of the area didn’t suffice for such manufacture. The
respondent was sued for breach.
The agreement was held void. “Their lordships came to the conclusion that having regard to
the nature of the contract, which was kind of a joint adventure, it was the very basis of the
contract that the sisal area should be capable of producing an average of 50 tons a month
throughout the term of the license, and the mistake was as to a matter of fact essential to the
agreement.”23

 Mistake as to quality of subject matter

A mistake as to quality of the subject-matter as distinguished from its substance may not render
the agreement void. If the parties to the contract are not mistaken regarding the subject matter
of the contract but regarding its quality, the contract would be said to be valid.

20
AC 136(1957).
21
AVTAR SINGH, CONTRACT AND SPECIFIC RELIEF 238 (12th ed. 2019).
22
Supra 20.
23
Supra 21.
13 | P a g e
CASE ANALYSIS
In Smith v. Hughes24, the complainant, Smith, was a farmer and the defendant, Hughes, was a
racehorse trainer. Smith brought Hughes a sample of his oats, and as a consequence of what he
had seen, Hughes ordered 40-50 quarters of oats from Smith, at a price of 34 shillings per
quarter. 16 quarters of oats were sent to Hughes initially; when they arrived, he said that the
oats were not what he had thought they were. As he was a racehorse trainer, he needed old oats,
as it was this that the horses consumed. The oats that were sent to Hughes were green oats, like
the sample. Hughes refused to pay Smith for the delivery and remaining order.
The plaintiff argued that there was a breach of contract by the defendant as he did not pay for
the services rendered.
It was held that there was a contract between Smith and Hughes and that it would not be
avoided.
‘An objective test revealed that a reasonable person would expect the sale of good quality oats
in a similar contract, since there was no express discussion of old oats. The sample gave him
the chance to inspect the oats and this was an example of caveat emptor.’25

-MISTAKE AS TO IDENTITY OF A PERSON

Mistake of identity occurs when represents himself as someone else, and gets into an
agreement.

 Assumption of false identity-When one party represents himself as someone else to

get into a contract, mistake of assumption of false identity takes place.

CASE ANALYSIS
In the example of Jaggan Nath v. Secy of State of India26, a person S, brother of the plaintiff
represented himself as the plaintiff and entered into a contract with a Government agent.
The issue was whether the contract created, was valid.

24
6 LR 597 (1870).
25
Smith v Hughes, LAW TEACHER, (July 3, 2018), https://www.lawteacher.net/cases/smith-v-hughes.php.
26
21 Punjab record, 1886, pg. 37 (India).
14 | P a g e
The court held that there was no valid contract as the Government agent was deceived by S. It
held that the defendant’s agent wanted to get into contract only with S’s brother and not S.
Since the real consent factor is missing in this case, the contract was held void.

 Mistake caused by takeover of business

This mistake caused by a company due to a takeover of its business would come under ‘mistake
caused by takeover of businesses’.
This can be well understood with the case of Boulton v. Jones27.

CASE ANALYSIS
The defendant sent a written order for goods to a shop owned by Brocklehurst which was
addressed to him by name. Unknown to the defendant, Brocklehurst had earlier that day sold
and transferred his business to Boulton. Boulton fulfilled the order and delivered the goods to
the defendant without notifying him that he had taken over the business. The defendant
accepted the goods and consumed them in the belief that they had been supplied by
Brocklehurst. When he received Boulton’s invoice he refused to pay it, claiming that he had
intended to deal with Brocklehurst personally, since ‘he had dealt with him previously and had
a set-off on which he had intended to rely.’28
It was held that the defendant was not liable for the price and that there was no contract as there
was a mistake with regard to the identity of the company, because it is the goodwill of the
company that makes a person purchase goods from it.
BRAMWELL B stated that “when any one makes a contract in which the personality, so to
speak, of the particular party contracted with is important, for any reason, whether because it
is to write a book or paint a picture, or do any work of personal skill, or whether because there
is a set-off due from that party, no one else is at liberty to step in and maintain that he is the
party contracted with, that he has written the book or painted the picture, or supplied the goods;
and that he is entitled to sue, although, had the party really contracted with sued, the defendant
would have had the benefit of his personal skill, or of a set-off due from him.”29

27
2 H and N 564 (1857).
28
BOULTON V JONES: CEC 25 NOV 1857, SWARB.CO.UK (Mar. 18, 2019), https://swarb.co.uk/boulton-v-
jones-cec-25-nov-1857/.
29
Id.
15 | P a g e
  Mistake of identity caused by fraud
In this mistake, a person fraudulently represents himself as someone else, and gets into a
contract with other parties.

CASE ANALYSIS
The principle of this case found support in Hardman v. Booth30. The plaintiff was a
manufacturer who wanted to sell goods to Gandell & Co. Edward Gandell was a clerk who
worked there and made the plaintiff believe that he was an owner of the company and was
authorized to contract for the sale of goods. Edward began trading with the plaintiff under the
company name, without the knowledge of his boss, the real company owner. The plaintiff sent
the goods to the address of Gandell & Co and then Edward sold them to the defendant, who
purchased them in good faith, not knowing Edward was not authorized to make any contracts
for the sale of goods.
The defendant then sold the goods to a third party. The issue was whether there was an
enforceable contract of sale between the defendant and the plaintiff.
It was held that even though the plaintiff believed he was contracting with Gandell & Co., he
was contracting with Edward in his individual capacity. He was never authorized to contract
for Gandell & Co. so any contract made in their name was considered void as it was made on
a fraudulent basis.
“As there was no legally enforceable contract, the possessory title never passed from the
plaintiff to Edward. As such, it could not then pass from Edward to the defendants. Thus, the
defendant was liable for the value of the goods, payable to the plaintiff.”31

30
1 H&C 803 (1863).
31
Hardman v Booth – 1863, LAW TEACHER, (July 3, 2018), https://www.lawteacher.net/cases/hardman-v-
booth.php.
16 | P a g e
CHAPTER 3

EXCEPTIONS AND RECTIFICATIONS OF MISTAKES IN A

CONTRACT
EXCEPTIONS:
There are certain exceptions to the general principles of mistakes in a contract. Below,

MISTAKE OF LAW

 Mistake with regard to a foreign law

Section 21 of the Indian Contract Act, 1872, states that ‘a mistake as to a law not in force in
India has the same effect as a mistake of fact’. It basically means that a mistake regarding a
foreign law shall be treated as a mistake of fact. The Indian Law permits this because the parties
are not expected to know the provisions of the laws of other countries. Hence, in case of a
mistake of the foreign law by both of the parties, the contract would be void.
For example, an Indian company agrees to sell an African company 100 bottles of a particular
medicine containing 5% alcohol. Both the parties to the contract weren’t aware of the fact that
the law of the country had banned the purchase and sale of mixtures containing more than 3%
alcohol.
This will be considered a mistake of foreign law and therefore, would be a void contract.
However, if only one party has made a mistake with regard to the foreign law, the contract
would not be voidable.

UNILATERAL MISTAKE

 Mistake by one party regarding the identity of the parties to the agreement
In certain cases, when a unilateral mistake is made regarding the identity of the parties to the
agreement due to misrepresentation by one party, who represents himself as someone who he
is not, the agreement is said to be void.
In the example of Jaggan Nath v. Secy of State of India32, a person S, brother of the plaintiff
represented himself as the plaintiff and entered into a contract with a Government agent. The
court held that there was no valid contract as the Government agent was deceived by S. It held

32
Supra 23.
17 | P a g e
that the defendant’s agent wanted to get into contract only with S’s brother and not S. The
contract was held void.

RECTIFICATION:

Rectification in contract law takes place when a court demands a modification in a contract so
that the contract states what it should have stated originally.33 It takes place when a court
demands a modification in a contract. Rectification refers to changes made in a written contract.
Rectification typically only takes place when there is no other option. Courts will only allow it
in a restricted range of situations. Before assessing whether a rectification is appropriate, the
court will make sure the parties have thought about other possibilities. Hence, it is essential to
consider all other possible solutions the court may use. Rectification may be allowed in the
case of:
A mutual error (when both parties make a mistake).
A unilateral error (a mistake one party makes).
To achieve rectification, it is essential to prove the parties were in full agreement with the
details of their contract, but then they proceeded to write them up incorrectly by mistake.

33
What Is Rectification in Contract Law?, UPCOUNSEL, https://www.upcounsel.com/rectification-in-contract-law.
18 | P a g e
SUGGESTIONS:
To avoid mistakes in a contract, the following suggestions must be remembered;
1. The contract must be written as clearly as possible.
2. During negotiations, the parties should go through the contract thoroughly and re-check the
interpretation of the clauses.
3. Vague or ambiguous language should not be there.
4. Identification numbers are preferred over general descriptions of products.
5. The contract should not be signed if either party is unclear about any terms.

CONCLUSION:
Mistake of facts is a very sensitive topic. A single mistake created, can make an entire contract
void. It is very important to know the significance of consensus ad idem in a contract. Meeting
of minds of the parties, i.e., agreeing to the same thing in the same sense is very crucial, as the
principles (or) laws with regard to mistake of facts is solely, or at least, mostly based on this
principle (consensus ad idem).
The significance of section 20 of the Indian Contract Act, 1872, [Agreement void where both
parties are under mistake as to matter of fact-Where both the parties to an agreement are under
a mistake as to a matter of fact essential to the agreement, the agreement is void] is definitely
to be mentioned. It makes sure that there is no injustice happening to the respective parties of
the contract, as problems like lack of awareness, illiteracy, etc. is quite prevalent in India.
Though rectification is sometimes possible (if the court grants permission), it is always better
to make sure that the contract is mistake and error-free, as we don’t have to face circumstances
like the contract going void (or sometimes voidable). It makes the process of discharge of the
contract easy.

19 | P a g e
BIBLIOGRAPHY:
Websites;
Jose Rivera, Unilateral Mistakes in a Contract, LEGAL MATCH, (Apr. 22, 2018)
https://www.legalmatch.com/law-library/article/unilateral-mistakes-in-a-contract.html.

Raffles v Wichelhaus – 1864, LAW TEACHER, (July 3, 2018)

https://www.lawteacher.net/cases/raffles-v-wichelhaus.php.

Smith v Hughes, LAW TEACHER, (July 3, 2018), https://www.lawteacher.net/cases/smith-

vhughes.php.

BOULTON V JONES: CEC 25 NOV 1857, SWARB.CO.UK (Mar. 18, 2019),

https://swarb.co.uk/boulton-v-jones-cec-25-nov-1857/.

Articles;

What Is Rectification in Contract Law?, UPCOUNSEL,

https://www.upcounsel.com/rectification-incontract-law

Void Valid and Voidable Contracts, UPCOUNSEL, https://www.upcounsel.com/void-valid-

andvoidable-contracts

Consideration, LEGAL DICTIONARY, (Sept. 12, 2015) https://legaldictionary.net/consideration/.

Books;
POLLOCK AND MULLA; INDIAN CONTRACTS AND SPECIAL RELIEF ACT; Vol 1; 15th edition,
LexisNexis.

SINGH, AVTAR; CONTRACT AND SPECIFIC RELIEF; Twelfth edition, Eastern Book Company.

20 | P a g e
 INDEX OF AUTHORITIES

Statutes;

The Indian Contract Act, 1872, No. 9, Act of Parliament, 1872.

Cases Laws;

Foreign cases:
1. Balfour v, Balfour, 5 KB 571 (1919).
2. Raffles v. Wichelhaus, 2 H&C 906: 159 ER 375 (1864).
3. Cooper v. Phibbs, 2 LR 149(1869).
4. Smith v Hughes, 6 LR 597 (1870).
5. Boulton v. Jones, 2 H and N 564 (1857).
6. Hardman v. Booth, 1 H&C 803 (1863).

Indian cases:

1. K.C. Sethi v. State of Haryana, (2013) 1 ILR 496 (India).

2. Sheikh Bros. v. Ochsner, AC 136(1957).
3. Jaggan Nath v. Secy of State of India, 21 Punjab record, 1886, pg. 37 (India).

21 | P a g e