Question

Apply the given legal principles to the facts provided in the following of the question and select the most appropriate answer.
Principle : In relation to the law of contracts, in instances where both parties to an agreement are under a mistake about a matter of fact essential to the agreement, the agreement is void.
Facts : L agrees to sell to M a consignment of food grains which was supposed to be on a ship on its way from Africa to Mumbai. However, two days before the agreement was reached, the ship carrying the grains met with an accident and all the goods were lost. L’s agent had informed L about this on the day the accident happened. Is the agreement void because of a mistake as to a matter of fact ?

• A. Yes, since both parties committed a mistake by entering into the contract
• B. No, since L had dishonest intentions
• C. No, since L was aware that the goods were lost
• D. None of the above

Answer 1

The Correct Option is C

To determine the validity of the contract between L and M, we need to apply the given legal principle regarding mistakes in contract law. According to this principle, if both parties to an agreement are under a mistake about a matter of fact essential to the agreement, then the agreement is void. Let's analyze the facts:

1. Fact Analysis: L agrees to sell a consignment of food grains to M, which was believed to be on a ship. However, the ship met with an accident, and all goods were lost before the agreement was made.
2. L's Knowledge: L was informed by his agent about the loss of goods on the day of the accident. Therefore, L was not under any mistake regarding the existence of the goods at the time of the agreement.
3. M's Knowledge: M believed, incorrectly, that the goods were still on their way to Mumbai, demonstrating a mistake on M's part.

Conclusion: For the agreement to be void due to a mutual mistake, both parties must be mistaken about a fundamental fact. In this case, only M was under a mistaken belief. L, having known the goods were lost, was not under a mistake. Thus, the correct answer to whether the agreement is void is No, since L was aware that the goods were lost.