Mistake of Fact and Mistake of Law

Mistake of Fact and Mistake of Law
30 September 2020

Mistake of Fact and Mistake of Law

One of the significant factors of a valid contract is free consent. Both the parties involved in the contract must enter the contract with consent and under no force. Various factors damage the free consent of either party. One such factor is "mistake", which involves a mistake of fact and mistake of law.

The Indian Contract Act,1872 states two kinds of mistakes which are the following as under:

  1. Mistake of Law(Section 21)
  2. The mistake of Fact(Section 20 and 22)

Mistake of Law: Law is established on the foundation of various maxims which is like a legal principle or basic moral rule which needs to be taken into consideration to make law. The Latin maxim of "ignorantia juris non excusat" which means that ignorance of the law is no excuse. The Indian Contract Act, 1872 governs contract law in India. The Indian Contract Act, 1872, under section 21 it is specified that the mistake of the parties in understanding and comprehending any laws that are enforceable in India cannot provide a contract to be voidable. So if one party of a contract asserts that they did not know the law, and are asserting relief under the defense of "Mistake of Law" which is that they were not aware of Indian Law, the party will be unsuccessful in claiming relief on such basis.

Exceptions: There are various exceptions under the mistake of law which are the following as under:

  1. 1. Mistake concerning a Foreign Law: Section 21 also mentions that a mistake as regards a foreign law shall be treated as a mistake of fact. This is because it is not expected by the parties to the contract to know all the provisions of the foreign law and their meaning. Thus in case of a mistake of the foreign law by both parties, the contract will be considered as void.
  2. Mistake concerning a Private Right: The existence of any private right is a matter of fact, however, depending on the rules of law because it is impossible for a party to completely know the private rights of another party.

The mistake of Fact: The maxim Ignorantia Facti Excusat by which is meant that the Ignorance of fact excuses. Thus under Section 20 of the Indian Contract Act, 1872, a contract is said to be void when both the parties to the agreement are under a mistake as to a matter of fact.

A mistake of Fact is of two kinds which are the following as under:

  1. Bilateral Mistake: When both parties to a contract are under a mistake of fact that is essential to the agreement, then such a mistake is known as a bilateral mistake. Here both parties have not given consent to a similar thing in the same way, which is the meant consent. Since there is not the presence of consent then completely the agreement is void. The bilateral mistake is four types which are the following as under:
    1. Mistake concerning the existence of the subject matter: Sometimes the existence of the subject matter of the contract terminates before the agreement was made and the parties to the contract may not have the knowledge of this fact. If the subject matter on which the contract exists is absent, it is considered that the contract has expired, and thus the agreement would be considered void.
    2. Mistake concerning the quality of the subject matter: If the parties to the contract are not mistaken about the subject matter of the contract but concerning its quality, the contract would be considered valid.
    3. Mistake concerning the quantity of the subject matter: If both the parties to the contract are under a mistake about the quantity of the subject matter, the agreement is considered void.
    4. Mistake concerning the title of the subject matter: Sometimes the buyer of goods or property may already be the owner of what the seller desires to sell. Both parties here might be under a mutual mistake concerning the title of the said property or goods. So in that case there is nothing that the seller can transfer, there is no contract which thereafter becomes void.
  2. Unilateral Mistake: A unilateral mistake occurs when only one party in the contract is under a mistake. In that case, the contract will not be considered void. Thus the Indian Contract Act, 1872 under section 22 specifies that just because one party was under a mistake of fact, the contract will not be considered voidable or void. So if there is a mistake of fact by only one party, the contract will be considered a valid contract.