Mistake

In one minute

A mistake is a wrong belief about a fact or about the law. Only one kind spoils the contract completely: both parties are mistaken about a fact that is essential to the agreement. Then the agreement is void.

A mistake by one party alone, or a mistake about Indian law, does not make the contract voidable. In exams, the three sections and their illustrations are the core. In real life the rule tells you that you carry the risk of your own error.

Exam focus

Frequency: Frequently asked
Usually asked as: Long answer (10 to 15 marks)

Legal provision

Section 20: where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Explanation to section 20: an erroneous opinion as to the value of the thing forming the subject matter is not a mistake as to a matter of fact.
Section 21: a contract is not voidable because of a mistake as to any law in force in India. A mistake as to a law not in force in India has the same effect as a mistake of fact.
Section 22: a contract is not voidable merely because one of the parties was under a mistake as to a matter of fact.
Non est factum ("it is not my deed"): the sections do not cover a signature on a document of a fundamentally different nature. Courts apply this doctrine to that case.
Section 14(5): free consent is consent not caused by mistake, subject to sections 20, 21 and 22.

Meaning and definition

Mistake here means a wrong belief held at the time of the agreement. The Act does not define it. It deals with its effect.

The effect depends on three questions: whose mistake, about what, and whether the matter is essential. The sections give different answers because the law protects a person who is helped by the mistake as well as the mistaken one.

Kinds of mistake and their effectHow to read this: start at the top box and follow the lines down. Green boxes are the kinds of mistake and the effect of each.

Mistake sections 20 to 22
- Mistake of fact
  - Both parties, essential fact section 20The agreement is void.
  - One party only section 22The contract is not voidable merely for that reason.
- Mistake of law
  - Law in force in India section 21The contract is not voidable.
  - Law not in force in India section 21Treated as a mistake of fact.

Detailed explanation

Step 1: mistake of both parties (section 20)

Three conditions apply. Both parties must be mistaken. The mistake must be about a fact. And the fact must be essential to the agreement.

The Act gives three illustrations, and in each one the subject matter did not exist.

(a) A agrees to sell a cargo supposed to be on its way from England to Bombay. The ship had been lost before the bargain. Neither knew.
(b) A agrees to buy a certain horse from B. The horse was dead at the time of the bargain. Neither knew.
(c) A, entitled to an estate for the life of B, agrees to sell it to C. B was already dead. Both were ignorant of it.

In each, the agreement is void.

Step 2: a wrong opinion about value is not a mistake of fact

The Explanation separates fact from opinion. A person who pays too much because he misjudged the value cannot say the agreement is void.

Example. Farhan buys a painting for Rs 2 lakh, believing it will fetch Rs 5 lakh. It is worth only Rs 1 lakh. The dealer sold it honestly. Farhan's wrong opinion about value is not a mistake of fact, so the sale stands.

Step 3: mistake of one party (section 22)

A contract is not voidable merely because one party was mistaken. Each party must take reasonable care of his own interests. The position changes if the other party caused the mistake by fraud or misrepresentation. Section 18(3) treats causing a mistake as to the substance of the thing as misrepresentation, even if innocent, and section 19 then makes the contract voidable.

Example. Sheela sells a painting that she knows is a good copy. Ravi thinks it is an original and buys it. Sheela made no statement. She stayed silent about a fact she had no duty to tell. Ravi's mistake alone does not make the contract voidable.

Step 4: mistake of law (section 21)

Everyone is presumed knowing the law in force in India. A mistake about it does not make a contract voidable. A foreign law is treated as a fact, because nobody is expected to know every other country's law.

Example. The Act's illustration: A and B make a contract on the wrong belief that a debt is barred by the Indian law of limitation. The contract is not voidable.

Step 5: a signature on a document of a different nature (non est factum)

Sections 20 to 22 deal with mistakes about facts. A different problem arises when a person signs a document that is radically different from what he believed he was signing. Courts then apply the doctrine of non est factum. In Ramathal v. K. Rajamani (2023), the Supreme Court set three conditions.

The signatory must belong to a class of persons who, through no fault of their own, cannot understand the document because of blindness, illiteracy or another disability.
He must have made a fundamental mistake about the nature of the document, including its practical effects.
The document must have been radically different from the one he meant to sign.

Example. Hari, an old man with poor eyesight, is told by a trader that he is signing a guarantee for a friend. The paper is a bill of exchange, and he endorses it. This is the situation in Foster v. Mackinnon. If Hari was not careless, he is not bound by his signature.

Don't confuse: mistake of fact, mistake of law and a wrong opinion

Three kinds of error are easy to mix up. Only one of them can end the agreement.

Error	Section	Effect on the agreement
Both parties wrong about an essential fact	20	Void
One party wrong about a fact	22	Not voidable merely for that reason
Wrong about Indian law	21	Not voidable
Wrong opinion about value	Explanation to 20	Not a mistake of fact. No relief

Inside the idea. Gopal agrees to buy a buffalo from Hari. Unknown to both, the buffalo died the night before. Both are mistaken about an essential fact. The agreement is void.

Just outside it. Gopal buys a buffalo that is alive, but he believed it would give 20 litres of milk and it gives 10. That is a hope about quality and value. The agreement stands.

Common mistakes

Writing that every mistake makes a contract void. Only a shared mistake of an essential fact does.
Treating a wrong opinion about price or value as a mistake of fact.
Forgetting that a mistake of Indian law has no effect on the contract.
Forgetting that a mistake caused by the other side's fraud or misrepresentation gives relief under section 19.
Treating every mistaken signature as non est factum. The plea needs a radically different document and no carelessness.

Apply it

Problem

Ravi buys a painting from Sheela. Sheela knows it is a good copy of a famous artist's work. Ravi assumes it is the original and pays Rs 5 lakh. Sheela said nothing about it. Can Ravi avoid the contract?

Issue. Does Ravi's mistake make the contract voidable?

Rule. A contract is not voidable merely because one party made a mistake of fact (section 22). Mere silence is not fraud unless there is a duty to speak (explanation to section 17).

Application. Only Ravi was mistaken, so section 20 does not apply. Sheela made no false statement and had no duty to speak. She did not cause the mistake.

Conclusion. The contract is not voidable. Ravi bears the risk of his own assumption.

Leading case laws

Raffles v. Wichelhaus (1864)
Facts. The buyer agreed to buy 125 bales of cotton "to arrive ex Peerless from Bombay". There were two ships called Peerless, one sailing in October and one in December. The buyer meant the October ship. The seller offered cotton from the December ship.

Principle. The report gives no reasons. On the pleaded facts, the plea that each side meant a different ship was a good answer to the claim, and the court gave judgment for the defendants.

Why it matters. It is the standard example of both parties being mistaken about what the agreement is about. Section 20 makes such an agreement void.
Ramathal v. K. Rajamani (2023), Supreme Court, 2023 INSC 737
Facts. Landowners who could not read gave a power of attorney over their land to others who were to develop it. They later said the document was not what they had understood.

Principle. The plea of non est factum needs three things. The signatory must be unable, through no fault of his own, to understand the document. He must have made a fundamental mistake about its nature. And the document must be radically different from the one meant to be signed.

Why it matters. It is the Supreme Court's recent statement of the conditions of the plea.
Foster v. Mackinnon (1869), Court of Common Pleas, England, LR 4 CP 704
Facts. An old man was tricked into endorsing a bill of exchange. He had been told it was a guarantee, and he was shown only the back of it.

Principle. A person fraudulently led to sign a document of a fundamentally different nature is not bound, provided he was not careless.

Why it matters. It is the classic example, and it matches a typical exam question.

How to write this answer in the exam

5-mark answer

State section 20 and its three conditions.
Give one illustration from the Act.
State section 22 for a mistake of one party.
State section 21 for a mistake of law.

10-mark answer

Section 14 and mistake as a spoiling factor.
Section 20 with illustrations (a) to (c) and Raffles v. Wichelhaus.
The Explanation: opinion as to value.
Section 22 and the exception when the other side caused the mistake.
Section 21: Indian law and foreign law.
Non est factum: Ramathal v. K. Rajamani and Foster v. Mackinnon.
A table of the four situations, and a short problem.

Key points to remember

A mistake of both parties on an essential fact makes the agreement void (section 20).
A mistake of one party does not make the contract voidable merely for that reason (section 22).
A mistake of Indian law has no effect. A mistake of foreign law is a mistake of fact (section 21).
A wrong opinion about value is not a mistake of fact.
A mistake caused by the other side's fraud or misrepresentation gives relief under section 19.
A signature on a radically different document may be disowned by non est factum, if the signatory was not careless.

Quick self-test

1. What makes an agreement void for mistake under section 20?

Both parties being under a mistake as to a matter of fact essential to the agreement.

2. Does a mistake of Indian law make a contract voidable?

No (section 21). A mistake as to a law not in force in India is treated like a mistake of fact.

3. Does a wrong opinion about the value of the thing count as a mistake of fact?

No. The explanation to section 20 says it does not.