MISTAKE (FREE CONSENT)

7/28/2019 MISTAKE (FREE CONSENT)

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MISTAKE(FREE CONSENT)

SUBMITTED BY-SHUBHAM DHIMAN(2038)

SUBMITTED TO-MISS RITU GUPTA


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One of the essentials of a valid contract mentioned in Section 10 is

that the parties should enter into contract with free consent.According to Section 14, Consent is said to be free when it is notcaused by

1. Coercion (Sec-15)or

2. Undue influence (sect-16)or

3. Fraud (Sec-17)or4. Misrepresentation (Sec-18)or

5. Mistake(provisions of Section 20, 21 and 22).

If the consent of one of the parties is not freeconsent, i.e., it has been caused by one or other ofthe above stated factors the contract is not a validone. If, however, the consent is caused by mistake the agreement is void.


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MistakeMistake may be defined as an error in consensus.In other words,An agreement is valid as a contract only when the parties agree upon thesame thing in the same sense.

Consent cannot be said to be "free" when an agreement is entered into under amistake.

One, or both, of the parties may be working under some misunderstandingor misapprehension of some fact relating to the agreement. Such contractsare said to be have been caused by mistake.

Example:A has two cars - an Ambassador and a Fiat. He agrees to sell one of them to B.It is not clear as to which of the two cars he is selling. A might be thinking to sellthe ambassador car while B might be thinking to buy the Fiat car.Hence, there is no identity of mind on the subject-matter of the agreement.

Therefore, there is no sale in this case.


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Mistake is of two kinds:I) Mistake of law and

II) Mistake of fact.

MISTAKE

MISTAKE OFLAW

MISTAKE WITHREGARD TOORDINARY

LAW

MISTAKE WITHREGARD TO

FOREIGN LAW

MISTAKE WITHREGARD TO

PRIVATERIGHT

MISTAKE OFFACT

BILATERALMISTAKE

UNILATERALMISTAKE


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Mistake on a point of law does not affect thecontract; Mistake on a point of law in force in aforeign country is to be treated as mistake of fact.

Example:A and B make a contract grounded on the erroneous belief that aparticular debt is barred by the Indian law of limitation. This is a validcontract. The reason is that every man is presumed to know the law ofhis own country and if he does not he must suffer the consequences ofsuch lack of knowledge ,But if in the above case, the mistake is relatedto the law of a limitation of a foreign country, the agreement could havebeen avoided


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MISTAKE WITH REGARD TO ORDINARY LAW

MISTAKE WITH REGARD TO FOREIGN LAW

MISTAKE WITH REGARD TO PRIVATE RIGHT

Mistake of law may be of following types:


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The contract is binding because everybody is supposed to know

the law of country.

According to this: ignorance of law is no excuse and party

cannot be allowed any relief on that ignorance.According to section 21, a contract is not voidablebecause it was caused by a mistake as to any law in

force in India.


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Hence mistake of law does not give right to the

parties to avoid the contract.

Example:A and B make a contract under a mistaken belief that aparticular debt is barred by the Indian Law of Limitation, thecontract is not voidable. However, if one of the parties makes a'mistake of law' through the inducement, whether innocent orotherwise, of the other party, the contract may be avoided.


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2. Mistake With Regard ToForeign LawOne is supposed to know the law of the land i.e., his owncountry but one is not expected to know the law of the wholeworld.Thus if an Indian commits a mistake of English Law

while in India, he is not punishable.

Mistake of foreign law is excusable.It is treated as a mistake of fact. Parties can avoid the

contract on the ground of mistake of foreign law.


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3. Mistake With Regard ToPrivate RightMistake of private law of the parties is also excusable. Aperson cannot know the private law of other parties, hence he is

given the benefit of such ignorance.Thus mistake of private law is treated at par with that ofmistake of foreign law. Hence, parties can avoid the contract onthe ground of mistake of private law of parties.


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It may be of two types:(a) Bilateral mistake(b) Unilateral mistake.

MISTAKE OF FACT

BILATERAL

MISTAKE

UNILATERAL

MISTAKE


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(A) Bilateral Mistake

According to section-20 of the act.-

where both the parties to an agreement are under a

mistake as to a matter of fact essential to the agreement,

there is a bilateral mistake and the agreement is void.

Here there is no real correspondence of offer and

acceptance, each party understanding the contract in a

different way. In reality there is no agreement at all, there

being total absence of consent.


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An agreement will be void on the ground ofmistake if:1. There must be a mistake relating to the

formation of contract.

2. The mistake must be mutual.

3. The mistake must relate to a fact.

4. The mistake is about a fact essential to

law.



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Bilateral mistake may be

(1) Mistake as to the subject-matter.(2) Mistake as to the possibility of performance.



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(1) Mistake as to the

subject-matterMistake as to the subject-matter of

contract means Where both the parties to anagreement are under a mistake relating to the

subject-matter of the contract, the agreement

is void.


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Mistake as to the subject-matter covers the following

cases-

a) Mistake regarding the existence of the subject-matterb) Mistake regarding the identity of the subject-matterc) Mistake regarding the title of the subject-matter, i.e., itsownershipd) Mistake regarding the price of the subject-mattere) Mistake regarding the quantity of the subject-matterf) Mistake regarding the quality of the subject-matter

1. Mistake as to the

subject-matter


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(a) Mistake regarding the existenceof the subject-matterWhere both the parties believe that the subject-matter is in

existence, but in fact the subject-matter was not in existence at the

time of contract, the agreement is void.

Example:A agreed to sell to B his car parked in his

garage. The car had already been destroyedby fire before the date of contract. Both A

and B did not know this fact. The agreement

is void.


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(B) Mistake regarding the identityof the subject-matterWhere both the parties are under a mistake as to the

identity of the subject-matter, i.e., one party thinks to deal

with one thing and the other with something else, the

agreement will be void.

Example:A has two scooters - a Lambretta and

a Vespa. A agreed to sell one of them

to B. It is not clear which of the two

scooters he is selling. A might be

thinking to sell Lambretta while B

might thinking to purchase Vespa.

There is no agreement.


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In Raffles Vs. Wichelhaus (1864) the buyer and

the seller entered into an agreement under which theseller was to supply a cargo of cotton to arrive expeerless from Bombay. There were two ships ofthe same name. i.e., Peerless, and both were to sail

from Bombay, one in October and the other inDecember. The buyer in mind Peerless sailing inOctober, whereas the seller thought of the ship sailingin December. The seller dispatched cotton byDecember ship but the buyer refused to accept thesame.

In this case the offer and acceptance did not coincideand there was no contract and, therefore, it was heldthat the buyer was entitled to refuse to take delivery

Case 2: Raffles Vs. Wichelhaus (1864)


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(C) Mistake regarding the title of thesubject-matter, i.e., its ownershipWhere the seller and buyer believe that the seller has title

to the property, but in fact it is discovered that the

property belongs to a third party, the agreement is void.

Example:A agreed to take a fishery on leasefrom B. Both of them believed thatB was the owner. But later on itwas discovered that fishery in factbelonged to A. It was held that theagreement was void [Cooper v.Phibbs]


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(D) Mistake regarding the price ofthe subject-matterWhere both the parties are under a mistake as tothe price of the subject-matter, the agreement is

void.

xample:A agreed to hire B's auditorium(Hall) at Rs. 800. But whilewriting the agreement, the figure

was written as Rs. 1,800 bymistake. The agreement is void.However, the Court can alsorectify this mistake, [Dagadu v.Bhana]


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(E) Mistake regarding the quantityof the subject-matterWhere both the parties are under a mistake regardingthe quantity of the subject-matter, the agreement is void.

Example:A enquired about the price of rifle from B informing that hemay buy as many as 50 rifles. On receiving a reply from B, hesent a telegram 'send three rifles'. By mistake of the telegraphoffice, the message transmitted to B was "send the rifles." So Bdispatched 50 rifles. A accepted only three rifles andreturned the rest. It was held that there was no contract. Thebuyer was, however, liable to pay only for three rifles on the

basis of an implied contract. [Hankel v. Pope].


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(F) Mistake regarding thequality of the subject-matter

Where both the parties are under a mistake as to

the quality of the subject matter, the agreements is

void.Example:A agreed to sell to B a piece of Mona Lisa painting in his gallery. Avery high price was paid for the painting. But unknown to both of

them, a thief had stolen the genuine Mona Lisa painting andsubstituted a copy. After taking the delivery, B came to know thatit was not the genuine Mona Lisa painting. The agreement is voidas both the parties are under a mistake regarding the quality of

the subject-matter i.e., painting.


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2. Mistake as to possibility ofperformanceIf both the parties believe that the

contract is capable of performance, but due

to impossibility it cannot to performed, theagreement is void

The performance of agreement may not be possible because of-1. Physical Impossibility2. Legal Impossibility


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1. Physical ImpossibilityThe act may be physically impossible to

perform and hence void. The law does not

compel any person to do something which is

impossible.

Example:A agreed to hire 'B's room to witness Corporation

Procession. Unknown to both of them, the processionhad already been cancelled. The agreement is void.[Griffith v. Brymer]


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2. Legal Impossibility

Legal Impossibility means when an agreement requires to

do that which cannot be done legally.

The act may be legally impossible to perform and hence

void.Example:A agreed to sell 100 kg of rice. The

Government ban the sale of rice byintroducing rationing. The contract

is void.


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(B) Unilateral Mistake


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(B) Unilateral MistakeAccording to section 22 of the contract act-a contract is not voidable merely because itwas caused by one of the parties to it beingunder a mistake as to matter of fact.

Where one of the parties to the contract is under a

mistake it is called unilateral mistake. Thus as ageneral rule, unilateral mistake will not render acontract void.


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(B) Unilateral MistakeA party cannot be allowed to avoid a contract on

the ground of its own mistake which may be due to

its carelessness or negligence.

Example:A buys rice from B thinking that it is old Basmati rice, but in fact, it is

new Basmati rice. A cannot avoid the contract. However, where mistakewas caused by fraud or misrepresentation of the other party, a contract

will be voidable on that ground.


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(B) Unilateral Mistake

However, where consent given by a party under a mistakeis so fundamental that it goes to the root of the contract,

the agreement becomes void.

Thus the exceptions where the Unilateral Mistake rendersthe contract void are as follows-

1. Mistake as to the identity of the person2. Mistake as to the nature of transaction


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1. Mistake as to the identityof the personWhen the identity of the person is fundamental to the contract and a

mistake is committed regarding that, the contract may be avoided.

It is a fundamental rule of law that if I intend to contract with Hari, Ram cannot contract withme. If I make an offer to Hari, can Ram accept it? Obviously, not. If he accepts it, then there will beno contract.Example-A women fraudulently represented to a firm of jewellers that she was the wife of acertain baron (zamindar). She obtained two pearl necklaces under the pretext ofgetting the jewellery with a pawn broker. The Court held that there was no contractbetween the jeweller and the woman as the jeweller wanted to deal with the wife ofthe baron which she was not. .Hence the pledge had to return the jewellery. [Lake v.Simons]


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2. Mistake as to the nature ofcontractAnother case in which unilateral mistake renders a

contract void is mistake as to the nature of

contract.

Where a person enters into a contract of different nature,

which he never intended without his own mistake but due to the

mistake or fraud of the other party, the contract is void.

In such a case when he signs the document his mind does not go

with his signature, i.e., he does not intend to sign the document

at all. There is absence of consent and the contract is, therefore,

void.


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2. Mistake as to the nature ofcontractSuch instances are very common in case of illiterate persons orpersons having poor eye-sight due to old age or other reasons.

Example:A induced an old man of feeble sight to sign a promissory note by telling him"Baba ye power of attorney hai. " (It is a power of attorney*).Promissory note is void as there is a mistake as to the nature of contract. The mindof the old man did not go with his signature

*Power of attorney: it is a formal, legally valid document that authorizes one person or

party to act on the behalf of another


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MISTAKE

Mistake of fact

Of the

countryOf the foreign

country Bilateral mistake Unilateral mistake

Mistake as to subject matter Mistake as to

possibilityAs to

person

As to

nature

Physical impossibility Legal impossibility

existence identity quality quantity title price

Mistake of law


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MISTAKE (FREE CONSENT)