Erroneous belief about something or having wrong opinion about something is called mistake. While entering into Contract parties think that a particular thing with regard to their Contract is in a particular way. But that particular thing will not be in that way as they think. Mistakes in contract law are of two types, namely;
- Mistake of Law and
- Mistake of Fact.
Mistake of Law
If parties are under confusion with regard to legal provisions. It is called Mistake of law. Again mistake of law is of two types. Namely;
- Mistake of Home Law and
- Mistake of Foreign Law.
- For example: A has given a loan of Rs. 10000/- to B. It has become time barred. A has no awareness with regard to limitation act and therefore he has filed suit for recovery after becoming time barred. Now Court will not excuse him. His Suit will not be taken into consideration.
Mistake of Fact
If parties are under confusion with regard to terms of Contract, It is called Mistake of Fact. Mistake of Fact is of two types, namely;
- Bilateral Mistake and
- Unilateral Mistake.
If both parties are under Confusion, it is called Bilateral Mistake. In case of, contract can be avoided. Again Bilateral Mistake is of two types, namely;
- Mistake as to Subject Matter
- Mistake as to Possibility of performance.
It is of six types, namely;
- Mistake as to Existence of Subject Matter.
- Mistake as to Identity of Subject Matter.
- Mistake as to Quality of Subject Matter.
- Mistake as to Quantity of Subject Matter.
- Mistake as to Title of Subject Matter.
- Mistake as to Price of Subject Matter.
- A case on this point is Couterior Vs Hastie. In this case, there is Contract between A and B according to which A has to sell his corn to B which is coming in a ship. They think that the corn is in existence. But before their Contract an incident has taken place. The Corn has got spoiled and to get rid of the unbearable smell, Captain of the ship has thrown away the parcels into the sea. Court decides that it is bilateral mistake and parties can avoid the Contract. There is no question of Compensation.
- A case on this point is Raffles Vs Wichelhaus. In this case a contract gets formed between A and B according to which A has to send his raw cotton to B in Peerless Ship. While entering into the Contract A thinks about 2nd Peerless and B thinks about 1st Peerless. Here mistake as to Identity of Subject Matter from both sides can be seen. Court decides that Contract can be avoided and Compensation need not be paid.
- Related case is Nicholson Vs Smith. In this case a Contract gets formed between A and B according to which A has to sell Charles I Napkins to B. A gathers some napkins and sells them to B. At that time both parties think that those Napkins belong to Charles but actually it is not so. They belong to King George. Court decides that reversal of Considerations can be made. (i.e. avoiding the Contract.)
Quantity of Subject Matter: At times both parties may get confused with regard to quantity of Subject matter.
- Related case is Cox Vs Prentice. In this case there is a Contract between A and B according to which A has to sell a Silver bar to B weight of which is to be X gms. A collects Silver bar and both of them think that its weight will be X gms. But actually the weight is Y gms. It is decided that Contract can be avoided.
- Related case is Cooper Vs Phybbs. In this case a lease agreement gets formed between A and B. Where A has to provide his fish pond to B on lease. Both of them think that it is A`s pond. But actually it belong to B. Court decides that lease agreement does not operate.
- Related case is Webster Vs Dessil. In this case A Contract gets formed between A and B according to which A has to sell his property to B, At a price of $2250/-. But in the document price is written as $1250/- by mistake. While signing on the deed A and B think that the drafted price is $2250/- Court decides that Contract can be avoided.
- Example : A has to pay Rs. 100000 to B and for that B has to marry C. While entering into the Contract A and B think that C is alive. But actually C was dead five years ago. Here mistake as to possibility of performance can be seen soon after formation, the Contract gets discharged due to Pro-Contractual impossibility.
If only one party is under Confusion, it is called Unilateral Mistake. In case of Unilateral Mistake Contract cannot be avoided.
- For example: A wants to sell away his house at a price of $6000. He makes an offer to B and by mistake he quotes a price of $5000 to which B gives his acceptance. Here only A is under mistake. It is Unilateral mistake and Contract cannot be avoided.
The following are the exceptions where contract can be avoided though there is Unilateral Mistake.
Mistake as to identity of Parties: If only one party is under Confusion with regard to identification of party, Contract can be avoided.
- A case on this point is “Lake Vs Simons. In this case A is a gold merchant and B is a dacoit woman. She convinces A that she is wife of Charles and thus obtains some Ornaments on Credit basis. Here only A is under mistake. There after B sells away those ornaments to C and goes out of which. Afterwards A comes to know that his Ornaments are at C. He Sues C to get them back. Court decides that Contract can be avoided and hence C is under obligation to return these Ornaments to A. Sale of goods Act says that seller cannot pass on a better title that what he himself has.
- A case on this point is Faster Vs Machillon. In this case A is a gentleman and he is not good at sight. B is A`s relative. On one day B brings a bond to A and asks him to sign, saying that it is Surety form. But it is actually bill of exchange. Believing that it is Surety bond, A signs. Here mistake can be seen only from the side of A only. Under this exception Court decides that A can avoid payment of the bill.