A Mistake occurs when parties have a misunderstood belief about a fact or law. It is governed by Sections 20, 21, and 22 of the Indian Contract Act, 1872.
1. Bilateral Mistake of Fact (Section 20) - Void
When both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is completely Void.
💡 Illustration: A agrees to buy B's horse. It turns out that the horse was dead at the time of the bargain, though neither party knew it. The agreement is void because both were mistaken about the existence of the subject matter.
2. Unilateral Mistake of Fact (Section 22) - Valid
A contract is not voidable merely because it was caused by one of the parties being under a mistake as to a matter of fact. A unilateral mistake generally does not protect a party. Exceptions: A unilateral mistake will make a contract void in two extreme cases:
- Mistake as to the identity of the person contracted with.
- Mistake as to the absolute nature of the signed document (doctrine of Non Est Factum—not my deed).
3. Mistake of Law (Section 21)
Under Section 21, the law separates domestic law from foreign law:
- Mistake of Indian Law: A contract is not voidable because it was caused by a mistake as to any law in force in India. "Ignorance of law is no excuse" (Ignorantia juris non excusat).
- Mistake of Foreign Law: Has the same legal effect as a mistake of fact. It makes the contract void if bilateral.