Mistake under Indian Contract Act, 1872

Mistake in general means something that does not work out in search of a solution. In law, misunderstanding about a material fact prevents the formation of a valid contract. Mistakes can play a big role in the construction of the legal landscape, which is a complex domain that encompasses the world of contracts. It is possible to make use of the Indian Contract Act 1872, which provides a comprehensive framework that may be used to study and deal with several aspects of contracts, including shortcomings. As per Section 10 of the Indian Contract Act 1872, the Free consent of parties is an essential element of any contract. Section 14 of the act states that ‘Free consent means consent not caused by coercion, undue influence, fraud, misrepresentation and mistake.’

Geeky Takeaways:

• Fraud involves intentionally misleading someone; whereas, Misrepresentation involves making mistakes in either knowledge or perception.
• Revocation is an important remedy that is accessible to parties who have been impacted by mistakes. It gives them the ability to terminate the contract and return to the position they were in before the contract was signed.
• If a mistake has been made, the courts have the authority to cancel contracts, which highlights the significance of legal involvement in the process of resolving contractual disputes.
• To avoid making mistakes and improve the legally binding nature of contracts, the parties involved should participate in due diligence, seek the opinion of legal professionals, and ensure that they communicate clearly.

Mistake under Indian Contract Act, 1872

In the framework of contracts, the word ‘Mistake’ refers to an inaccuracy or misunderstanding that has an impact on the conditions of an agreement. It is possible for errors to occur unintentionally and may be caused by a variety of circumstances, including misunderstandings of information, oversights, etc. Mistakes are recognized as a legitimate reason for disputing the validity of a contract under the Indian Contract Act, provided that certain requirements are satisfied. A Mistake is said to have occurred where the parties intending to do one thing by error do something else.

In the case of Phillips v. Brooks Ltd, it was held that a person is deemed to contract with a person in front of him, unless he can substantially prove that he, instead of the other person, intended to deal with another person.

A mistake can be defined as an erroneous belief concerning something. It may be of two kinds; Mistake of Law and Mistake of Fact.

I. Mistake of Law

The Indian Contract Act, in contrast to many other legal systems, does not commonly acknowledge a mistake of law as a viable cause for avoiding a contract. Ignorance of the law is not seen as a valid justification among legal professionals. On the other hand, if a mistake of law is joined with an error of fact, it may affect the contract’s capacity to become legally binding. Mistake of Law may be of two types:

1. Mistake of Law of the Country: Mistakes of law, in contrast to mistakes of fact, do not often provide a solid basis for the nullification of a contract. The idea is reflected in Section 21 of the act, which provides that a contract is not voidable just because one of the parties was misinformed regarding the legislation of the nation. This provision is particularly relevant to the principle. Therefore, it is expected of the parties that they are aware of the legal consequences of their contracts, and ignorance of the law is often not regarded to be a viable justification for seeking relief from the duties that are imposed by the contract.

2. Mistake of Foreign Law: If a person takes part in a contract without being aware of any specific provisions of foreign law that are essential for that contract, then that mistake is treated as a mistake of fact. In simple terms, it means the contract becomes void if both parties are under a mistake as to foreign law because one cannot be expected to know the laws of foreign countries.

II. Mistake of Fact

If one or both of the parties to a contract are subject to a misunderstanding about an essential component of an agreement, this is known as a Mistake of Fact. There must be a connection between this misunderstanding and a significant truth that is fundamental to the contract. Section 20 of the Indian Contract Act states that “a contract is null and unenforceable if both parties are under the impression that they are in possession of a mistake of fact.” The contract might be null and invalid.

For example, party A agrees to sell an automobile to party B, but both parties are misinformed about the real damaged state of the car. So this is a case of a Mistake of Fact.

Mistake of Fact may be of two types:

1. Unilateral Mistake: In the event when just one of the parties to the contract is in error, this is known as a Unilateral Mistake. The contract may still be enforceable in such circumstances, provided that the other party is aware of the mistake and that it would be inexcusable for them to take advantage of the mistake. Section 22 of the Indian Contract Act addresses circumstances in which one party makes a mistake that is not shared by the other party, rendering the contract null and void since the other party is aware of the error.

For example, if party A makes a mistake and quotes a cheaper price for a product, and party B is aware of this error but still goes forward with the contract, this might be called a unilateral mistake on the part of party B. However, the contract would still be valid.

2. Bilateral Mistake: Following Section 20 of the Indian Contract Act, “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.” Whenever this occurs, the contract might be deemed null and void if the parties were aware of the faults that each other had made.

Below are the essential elements of Bilateral mistakes:

• Both parties must be under a mistake.
• The mistake must be of fact, not of law.
• The mistake must be related to an essential fact.

Conclusion

When navigating the complicated world of business agreements, it is essential to have a solid understanding of faults that may be found in contracts. A systematic framework for correcting various sorts of errors is provided by the Indian Contract Act, which emphasizes justice and equality in the context of contractual interactions. To ensure that their agreements are legally sound and enforceable, parties who engage in contracts should be alert about the possibility of making mistakes and seek the assistance of legal counsel.

Frequently Asked Questions (FAQs)

1. Following the Indian Contract Act, what exactly is a mistake?

Answer:

The term ‘Mistake’ is used under the Indian Contract Act to describe mistakes or misunderstandings that have the potential to affect the legality of a contract. Either a mistake of fact or a mistake of law might be used to describe this situation.

2. What is the concept of ‘ignorantia juris non-excusat’?

Answer:

The given maxim is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law, merely by being unaware of its content.

3. Under the Indian Contract Act, is it possible for a contract to be null and invalid if there is a mistake in the law?

Answer:

The Indian Contract Act does not recognize mistakes of law as a viable basis for nullifying a contract. It happens in most cases. Under the provisions of Section 21, a contract cannot be null and void only on the grounds that one of the parties was misinformed about the legal system of any foreign country, which is the case of a ‘mistake of foreign law’.

4. According to the Indian Contract Act, what are the procedures for correcting mistakes that have been made in a contract?

Answer:

One of the most common ways to correct mistakes is by revocation or termination, which involves the contract being null and void and the parties being put back in the positions they were in before the contract was signed. Due to this, the party who was negatively impacted by the mistake can prevent the contract.

5. Does the presence of mistakes in contracts have the potential to result in legal repercussions for both parties involved?

Answer:

Yes, mistakes in contracts may have legal repercussions, and the party that is harmed by the mistake may pursue remedies such as rescission in order to fix the situation and defend their interests.