Question

An agreement shall be void for _________:

• A. Mistake of fact by one party;
• B. Mistake of fact by both the parties;
• C. Mistake of foreign law;
• D. All the above;

Hint:

Only a mutual mistake of fact (not of law) makes an agreement void under Section 20 of the Indian Contract Act.

Answer 1

The Correct Option is B

Step 1: Legal Principle – Section 20 of the Indian Contract Act:
According to Section 20, an agreement is void when both the parties to the agreement are under a mistake as to a matter of fact essential to the agreement. The law recognizes that if both parties misunderstand a fundamental fact, there is no true consent, and hence no valid contract.
Step 2: Distinction Between Types of Mistake:
- Mistake of Fact by One Party: If only one party is mistaken, the contract is not void, but valid, unless it involves fraud or misrepresentation.
- Mistake of Fact by Both Parties: When both parties are mistaken about a fact essential to the contract (e.g., existence of subject matter), the contract is void.
- Mistake of Law: A mistake of Indian law is no excuse; however, a mistake of foreign law is treated as a mistake of fact under Section 21.
Step 3: Example for Clarity:
If A agrees to sell B a horse, but unknown to both, the horse had already died, the agreement is void because both parties were mistaken about an essential fact — the existence of the horse.
Step 4: Final Conclusion:
Hence, the correct answer is (B) Mistake of fact by both the parties, as such agreements lack mutual consent and are void under Section 20.