Mistake

Definition: In contract law, a mistake refers to the innocent belief about something by one or both parties at the time of entering into a contract that certain facts are true, resulting in a misunderstanding in the parties. It is an unintentional act resulting from ignorance, forgetfulness or inattentiveness.

It is among the five elements that vitiate free consent, the others being coercion, undue influence, fraud, and misrepresentation. Therefore, when the consent of the parties to the contract is a mistake, there is no free consent.

Further, there are instances when both parties to the contract have different misapprehensions concerning any fact with regard to the agreement. In such kind of misapprehension, parties would not have entered into a contract, as the consent is received out of the mistake, and the contract is considered void.

Kinds

Consensus ad idem, i.e. meeting of minds, is very important in a contract. The absence of it means that the parties are not agreeing to the same thing in the same sense and they are in a mistake. There are two kinds of mistake:

1. Mistake of Law: When the parties to the contract have misunderstood the law, or they are ignorant about it with respect to its legal effect, it is referred to as a mistake of law.Further, it is assumed that ignorance of the law of one’s own country is no excuse, and that is why the mistake of law does not make a contract void. However, it may be avoided if it is found that the mistake of law is due to the inducement of another. Nevertheless, the mistake of foreign law and the mistake of private rights is also void.
2. Mistake of Fact: As the name itself signifies, the mistake of fact is when the parties to a contract are in erroneous belief or they have misunderstood some fact that is material to the agreement and are at cross purposes. Such a mistake is called a bilateral or mutual mistake, and the contract is void. The mistake of fact can be:
   • Unilateral Mistake: Unilateral Mistake is when either of the two parties has misunderstood the terms and is under a mistake. Such mistakes are generally of no effect except:
     • It is about some fundamental fact.
     • The other party to the contract has the knowledge of the mistake.
   • Bilateral Mistake: Bilateral Mistake is when both the contracting parties are in some kind of mistake of fact.
     • Mistake as to Subject Matter: The parties to the contract are mistaken about the subject matter, i.e. the parties are of the belief that a particular state of things exists, no such thing exists in reality. Consequently, due to their ignorance, both the parties assume it differently and enter into a contract without knowing the facts.
       • Mistake relating to the existence: When the parties to the contract assume that the subject matter is in existence, while the fact is, it does not exist when the contract came into being.
       • Mistake relating to identity: There are instances when the contracting parties are not in agreement as to the identity of the subject matter, i.e. both have different subject matter in their minds; one party believes one thing, while another party believes it to be another thing.
       • Mistake relating to the quantity: A mistake relating to the quantity or extent of the subject matter is also void, irrespective of the fact that the negligence of the third party causes the mistake.
       • Mistake relating to the quality: When both parties are in a mistake as to the quality of the subject matter, the contract is considered void.
       • Mistake relating to title: When the buyer already owns the asset (subject matter), that another person is selling to him. But the parties are unaware of the fact.
       • Mistake relating to the Price: If the parties to the contract are mistaken about the price of the subject matter, then also the contract is void.
     • Mistake as to possibility of performance: A contract came into existence between the parties assuming that it can be carried out. However, it is not so.

Effect of Mistake

When the mistake is caused by a miscalculation or error of judgment by either or both the parties concerned, then there will not be any effect on the validity of the contract. However, if the mistake is a vital operative mistake, then the contract will be regarded as void. So, in order to be a vital operative mistake, it must be:

1. A mistake of fact, and it must not be a mistake of law.
2. The fact must be material to the agreement.
3. The mistake of fact must be from both sides.

Therefore, when the consent of both parties is caused by a mistake concerning a matter of fact that is relevant to the contract, then the contract is declared void by the Court, and neither of the parties can enforce it.