CHANAKYA NATIONAL LAW

UNIVERSITY

A PROJECT ON THE TOPIC OF

“MISTAKE AS TO SUBJECT MATTER”

SUBMITTED TO: SUBMITTED BY:

Mrs. Sushmita Singh, Pratik Raj,

Faculty of Law of Contract, Roll No. : 1951

Chanakya National law university, Semester- 1st(first)

Patna Session : 2018-2023

Page | 1
 ACKNOWLEDGEMENT

I place on my record my sincere thanks to all who helped me in making this project a reality.
This project could not have been completed without the sincere efforts of my kith and kin. They
supported me in every possible way and helped me not only by providing me information but
also in the making of this project. They provided me with all the emotion and support that I
needed and they proved to be a source of my constant extrinsic motivation. This project would
have become a futile effort in their absence.

Another name that I would like to mention is that of my teacher of Law of Contract, Mrs.
Sushmita Singh who provided me not only with technical know how of the project but also got
me through the struggles of making a project in such a burning issue. The topic has many
criticisms associated with it but it was only because of the guidance of a real teacher which
helped me in completion of this project.

A very special thanks to my friends who were there to support me in every possible way, ranging
from aiding me in finding the relevant materials to helping me in cracking the trick of
formatting. There help was such that it would always be remembered by me.

At last I would like to thanks each and everyone who were there with me during the making of
this project and who helped me either directly or indirectly. Their immense contribution means a
lot to me and this journey would not have been possible in the absence of their tireless efforts.

THANK YOU

Page | 2
 HYPOTHESIS

In the course of making of this project the researcher has come across in detail the topic of
mistake of subject matter. Details regarding types of mistakes and effect of mistake as to subject
matter have been compiled in the project. Research has been done leading to the conclusion that
mistake as to subject matter renders a contract void. Contract forms the basic of not only law but
also the daily life where contract occurs all the time.

RESEARCH METHODOLOGY

The research methodology adopted in the project is mainly focused on doctrinal way of research.
References in the project have been taken from web journals, articles, newspaper, websites and
books. However every reference has been taken in an unplagiarised manner and due credit has
been given to each source in the bibliography section. Views have been presented on each topic
with no outsourcing of facts. Every view presented is completely original.

The reason for choosing doctrinal way of research is because this is such a topic on which facts
and data is already available and it depends on an individual that how he interprets such facts. No
discovery or invention of facts is required for this topic of project.

Page | 3
 TABLE OF CONTENTS
SL. Topic Page
1. Introduction to the topic 5
2. Definition of mistake in a contract 6
3. Types of mistakes: Unilateral and Bilateral 11
4. Section 20 of Indian Contract Act, 1872 13
5. Section 22 of Indian Contract Act, 1872 13
6. Effect of mistake as to subject matter on a contract 14
7. Conclusion 15

Page | 4
 INTRODUCTION

Contract is that topic of law which forms basic laws for governance of human conduct and
behavior in fiduciary system of the world. Contract law ensures that a proper system is
maintained in conduct of business and agreements. Contract guides the behavior and also acts
like a savior in cases where misconduct is reported. It is a well established set of codified laws
that tells even who can contract and who cannot. 1

Law of contracts in India defines Contract as an agreement enforceable by law which offers
personal rights, and imposes personal obligations, which the law protects and enforces against
the parties to the agreement. The general law of contract is based on the conception, which the
parties have, by an agreement, created legal rights and obligations, which are purely personal in
their nature and are only enforceable by action against the party in default. Section 2(h) of the
Indian Contract Act, 1872 defines a contract as "An agreement enforceable by law". The word
'agreement' has been defined in Section 2(e) of the Act as ‘every promise and every set of
promises, forming consideration for each other’. Lord Denning was perhaps the greatest law-
making judge of the century and the most controversial. His achievement was to shape the
common law according to his own highly individual vision of society. Lord Denning was one of
the most celebrated judges of his time. He is popular as a dissenting judge. Lord Alfred
Thompson Denning (1899-1999) was a Populist English judge whose career spanned 37 years.
He was known as a fighter for the underdog and a protector of the little man's rights against big
business. He served for 20 years as the head of the Court of Appeals, one of the most influential
positions in the English legal system. Denning was a controversial judge who was often the
dissenting voice on the bench. His decisions were based more on his religious and moral beliefs
than the letter of the law and he was often criticized for his subjectivity. Denning retired from the
bench in 1982 under a cloud of controversy regarding some racially insensitive views that he
published. Denning continued to publish books during his retirement and died at the age of 100.

1
En.wikipedia.org/mistakes-in-contract

Page | 5
 DEFINITION OF MISTAKE AND MISTAKE AS TO SUBJECT
MATTER

In contract law, a mistake is an erroneous belief, at contracting, that certain facts are true. It can
be argued as a defense, and if raised successfully can lead to the agreement in question being
found void ab initio or voidable, or alternatively an equitable remedy may be provided by the
courts. Common law has identified three different types of mistake in contract: the 'unilateral
mistake', the 'mutual mistake' and the 'common mistake'. The distinction between the 'common
mistake' and the 'mutual mistake' is important. An agreement may be void where there is a
mistake as to the identity of the subject-matter; as, for instance, where the contract is in reference
to a thing- of a certain name, and one of the parties thinks he is contracting for one thing that
answers the description, while the other party thinks it is something else which also answers the
description. Thus, where a person agreed to buy a cargo "to arrive ex Peerless from Bombay,"
and there were two ships of that name, and the buyer meant one, and the seller the other, it was
held that there was no contract. The things meant by the parties must have fitted the description,
or there is no mistake. If, in the case above mentioned, the buyer had meant a ship of a different
name, he would have been bound by the terms of his contract. Unless the description admits of
more meanings than one, the party setting up mistake can only do so by showing that he meant
something different from what he said, and, as we have seen, he cannot do this. Nor will a mere
misnomer of the subject-matter of a contract entitle either party to avoid it if the contract itself
contains such a description of its subject-matter as practically identifies it.

Mistake of Fact: Where both the parties enter into an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void.

Explanation: An erroneous opinion as to the value of the thing which forms the subject-matter
of the agreement is not to be deemed a mistake as to a matter of fact.

Illustration: A sells a cow to B for $80 because it is an infertile cow. The cow is actually
pregnant and worth $1000. The contract is void.2

2
www.lawteacher.net/mistake-facts-contract

Page | 6
When mistake is a mistake of law:

Mistake of law is a defense that the criminal defendant misunderstood or was ignorant of the law
as it existed at the time. The onus is generally placed on individuals to be aware of the laws of
their state or community, and thus this defense only applies in very limited circumstances. For
example, while a defendant will not be able to claim that he was not aware that murder was a
crime, he may be able to argue that he was not aware of some obscure traffic law. Specifically,
mistake of law can be used as a defense in four limited circumstances:

1. When the law has not been published;

2. When the defendant relied upon a law or statute that was later overturned or deemed
unconstitutional;
3. When the defendant relied upon a judicial decision that was later overruled; or
4. When the defendant relied upon an interpretation by an applicable official.

Additionally, the defendant’s reliance on any of these sources must have been reasonable, much
like mistake of fact. Thus, a defendant cannot claim that he was relying on a case from 200 years
ago when it is apparent that there have been subsequent developments in the law. It is also
important to note that, while reliance on an interpretation of an official may include judges or
federal or state agencies, it does not include reliance on the statements of a private attorney. It is
therefore important to ensure that any attorney from whom you obtain advice is knowledgeable
and trustworthy.3

Mistake of Subject Matter:

Mistake as to subject matter can be classified into six classes.

1. Existence
2. Quality
3
Indian Contract Act by Dr. R.K. Bangia( page 257 para. 3)

Page | 7
 3. Quantity
4. Identity
5. Title
6. Price

Mistake as to Existence: Lord Atkin observed in Bell v Lever Ltd. Where the parties have
contracted under a mistake as to the existence of the subject matter, and subsequently discover
that, unknown to either of them, the subject matter had ceased to exist at the time of contracting,
the contract becomes void. In Couturier v Hastie, the contract was to purchase Indian corn
described as shipped from Salonica on board a vessel chartered to England. But a fortnight
previous to the contract, the cargo had become damaged owing to heat and had to be discharged
at an intermediate port and sold at the best price available. Neither of the parties are aware of this
fact at the time of the contract. The court held that the subject matter is destroyed therefore the
contract is void. In Nursingdass Kothari v Chutto Lal4, where a contract to sell a plot of land had
been made, but unknown to the vendor and the vendee, the plot of land had been notified as land
to be acquired under City Improvements Act. It was held that the contract was void on the
ground of mistake. There was no belonging to the vendor for the vendee to purchase.

Mistake as to Quality: Lord Atkin observed in Bell v Lever Bros5. “Mistake as to the quality of
the thing contracted for raises more difficult questions. In such a case a mistake will not affect
assent unless it is the mistake of both parties, and is as to the existence of some quality
essentially different from the thing as it was believed to be.” In Nicholson and Venn v. Smith
Marriot a seller describes the details of a particular good to the buyer but later the buyer finds
that it was not same as the seller described to him and the quality of the good differs. Therefore
the contract is void.6

4
Nursingdass Kothari vs. Chutto Lal (74 Ind cas 996 (26 february 1923))
5
Bell vs. Lever bros( [1931] UKHL 2)
6
www.nolo.com/legal>encyclopedia

Page | 8
Mistake as to Quantity: In Charlesworth v Jennings, The mistake may also be as regarded the
quantity or extent of the subject matter contracted for. Thus, where a broker delivered a bought
note and a sold note to the seller and purchaser respectively in relation to an identical contract,
but the two notes differed in quantity sold and brought, the contract was held unenforceable. In
Henkel v Pape7, the defendant wrote to plaintiff enquiring the prices of rifles and suggesting that
he might take as many as fifty rifles. On receipt of a reply he gave a telegraphic order “Send
three rifles” which owing to the mistake of the telegraph office was transmitted as “Send the
rifles”. The plaintiff, in accordance with the tenor of the defendant’s letter of inquiry sent fifty
rifles. The defendant accepted three and returned rest. In a suit for the price of fifty rifles, the
court held that there was no contract between the parties and the buyer was liable to pay, as on an
implied contract, only the value of the three rifles retained by him.

Mistake as to Identity: Where the parties are agreed as to the identity of the subject matter of
the contract, the contract is vitiated on the ground of mistake, and is void. The case of Raffles v
Wichehaus is in point. The contract was for purchase of 125 bales of Surat cotton to arrive ‘Ex
Peerless’ from Bombay. There were two ships of the same name sailing from Bombay to
England one in October and the other in December. Plaintiff sued for breach of contract as the
defendant refused to take delivery. The defendant pleaded that he had meant the “Peerless”
sailing from Bombay in October and not that sailing in December. Pollock, C.B said that it
appeared that both parties did not mean the same thing. If the defendant meant one “Peerless”
and the plaintiff another, there is no consensus ad idem and therefore no binding contract. In
Cundy v Lindsay a fraudulent person Blenkarn forged the name of a company and delivered
goods to Cundy through Lindsay. There is a mistake as to the identity of the subject matter
therefore the contract is void.

Mistake as to Title: Corresponding to the mistake as to the existence of the subject matter is
mistake as to title in cases where unknown to the parties, the buyer is already the owner of that
which the seller purports to sell him. The parties intended to effectuate a transfer of ownership:

7
Henkel vs. Pape[(1870) 6 Ex. 7]

Page | 9
such a transfer is impossible: the stipulation is naturaliratione inutilis. This is the case of Cooper
v Phibbs where A to take a lease of fishery from B, though contrary to the belief of both parties
at the time A was tenant for life of the fishery and B appears to have had no title at all. To such a
case Lord Westbury applied and misapprehension as to their relative and respective rights, the
result is that the agreement is liable to be set aside as having proceeded upon a common
mistake.8

Mistake as to Price: In Webster v Cecil9, already referred to the defendant who offered to sell
his property, while he intended to write £2250 wrote £1250 instead and the buyer immediately
accepted the offer but the Court declined to enforce the contract, as it stood and refused a decree
for specific performance. Similarly in Garrarad v Frankel, where a contract of lease of a house
was agreed to at a rent of £ 230 but in the written contract the figure £ 130 was inserted by
inadvertence, the Court held that the contract could not be enforced without amending the
figure.10

8
www.legalmatch.com/article/mistake-contracts
9
Webster vs. Cecil (9 UK Ds. 67)
10
Indian Contract Act by Dr. R.K. Bangia (page 286 para 4)

Page | 10
 UNILATERAL AND BILATERAL MISTAKES:

UNILATERAL MISTAKE:
A unilateral mistake as to matter of fact is one where only one of the two contracting parties
make an erroneous interpretation as to matter of the contract Contract caused by mistake of one
party as to matter of fact.—A contract is not voidable merely because it was caused by one of the
parties to it being under a mistake as to a matter of fact. —A contract is not voidable merely
because it was caused by one of the parties to it being under a mistake as to a matter of fact."
Unilateral mistakes can occur with regards to any of the terms and provisions contained in a
contract. Most unilateral mistakes involve the definition of a phrase or word. For example, in a
contract for the sale of screws, one party may incorrectly believe that the word “screw” refers to
Phillips-head screws, when in fact the term refers to standard-type screws. If only one party
holds this mistaken belief, but the other is clear on the meaning of “screw”, then this could be
called a unilateral mistake. On the other hand, if both parties believed that the word “screw”
referred to nails, then this is an example of a mutual mistake. Unilateral mistakes also frequently
involve prices, quantities, dates, and the description of goods or services. A unilateral mistake
occurs during the contracting process, it could affect the outcome of the contract. It is unfair if
one party understands the contract while the other party does not- therefore a court will usually
issue one of two remedies to correct the unilateral mistake:

1. Rescission: Contract rescission is where the contract is completely cancelled and the
parties restored to their position before the contract was entered into. Rescission is only
available if the non-mistaken party knows or should have known about the unilateral
mistake.
2. Reformation: Contract reformation is where the written agreement is changed to reflect
the parties’ original understanding. Reformation is granted only if one party was not
aware that the writing does not conform to the actual agreement.

In other words, it makes a significant difference whether the non-mistaken party is aware that the
other party does not understand a term in the contract. If the non-mistaken party knows that the
other party has made a unilateral mistake, the result is usually contract rescission (cancellation).

Page | 11
On the other hand, if the other party was not aware of the mistake, the contract can usually be
reformed (rewritten).

BILATERAL MISTAKE:
A bilateral mistake example includes instances when both parties to a contract are mistaken or
misinformed as to the specific terms. A bilateral mistake example includes instances when both
parties to a contract are mistaken or misinformed as to the specific terms. Bilateral mistakes, in
comparison to unilateral mistakes, involve both parties of the contract. A unilateral mistake
involves just one party to the contract acting under false misconceptions. Bilateral mistake is
defined as an error that involves both parties of the contract having an understanding that is not
what the contract terms actually state

Bilateral mistakes can include two different types of mistakes:

1. Subject matter mistakes: Both parties are misinformed about the overall subject matter of
the contract. This often leads to a void of the contract. Subject matter mistakes can
include title, quantity, quality, price, and identity mistakes.

2. Possibility of performance mistakes: Both parties are mistaken as to the ability of

performance capability. This will usually lead to a voided contract since it is impossible
for at least one party to complete the terms of the contract. Impossibility of performance
can be due to either physical or legal reasons.

There are many different types of contracts that can involve bilateral mistakes. A bilateral
mistake can occur when one party becomes unexpectedly ill, when an expected product
inventory does not make it to its intended location, or when parties are misinformed as to legal
ownership of a property or item.11

11
www.wikipedia.org/unilateral-bilateral-mistakes

Page | 12
 SECTION 20 OF INDIAN CONTRACT ACT, 1872

An agreement is void where both parties are under mistake as to matter of fact. Where both the
parties to an agreement are under a mistake as to a matter of fact essential to the agreement the
agreement is void. An erroneous opinion as to the value of the thing which forms the subject-
matter of the agreement, is not to be deemed a mistake as to a matter of fact. 12

An illustration to this would be, A agrees to sell to B a specific cargo of goods supposed to be on
its way from England to Bombay. It turns out that, before the day of the bargain the ship
conveying the cargo had been cast away and the goods lost. Neither party was aware of these
facts. The agreement is void. A agrees to sell to B a specific cargo of goods supposed to be on
its way from England to Bombay. It turns out that, before the day of the bargain the ship
conveying the cargo had been cast away and the goods lost. Neither party was aware of these
facts. The agreement is void."

SECTION 22 OF INDIAN CONTRACT ACT, 1872

Section 22 in The Indian Contract Act, 1872 states that Contract caused by mistake of one party
as to matter of fact. A contract is not voidable merely because it was caused by one of the parties
to it being under a mistake as to a matter of fact. A contract is not voidable merely because it was
caused by one of the parties to it being under a mistake as to a matter of fact.13

12
Professional’s Indian Contract Act, 1872 Bare Act (page 11)
13
Professional’s Indian Contract Act, 1872 Bare Act (page 12)

Page | 13
 EFFECT OF MISTAKE AS TO SUBJECT MATTER:

A contract where both the parties are mistaken as to a fundamental fact related to the contract is
void. Such a contract being void is so because consensus ad idem which forms basic of a contract
is missing. However in cases where only one of the two parties are under a mistake of fact or has
made an erroneous interpretation of the facts, such a contract is not void.

Illustrations to define effect of mutual mistake of facts on a contract can be:

1. A agrees to sell to B a specific cargo of goods supposed to be on its way from

England to Bombay. It turns out that, before the day of the bargain in the ship
conveying the cargo had been cast away and the goods lost. Neither party was aware
of these facts. The agreement is void.
2. A agrees to buy from B a certain horse. It turns out that the horse was dead at the
time of bargain, though neither party was aware of the fact. The agreement is void.
3. A, being entitled to an estate of the life of B, agrees to sell it to C, B was dead at the
time of the agreement, but both parties were ignorant of the fact. The agreement is
void.

Page | 14
 CONCLUSION

Once again I would like to thank each and everyone who helped me in the making of this project
in some way or the other. A special thanks to my teacher of legal methods and research
methodology because it was only because of his help and guidance that I was able to complete
this project in a desirable manner. A special thanks also to my friends and family who provided
me not only with technical support but also provided me motivation when I desperately needed
it.

A special thank you also to my teacher for allowing me to make a project on such a wonderful
topic that helped me not only gather lots of information about this issue but also helped me to
know more about the society that I live in. It made me aware of the evils prevalent in the society
and also gave me a detailed account of atrocities suffered by the people.

At last my special thanks to each and everyone, mentioned or not mentioned whose efforts made
me capable of completing this project

THANK YOU/-

Page | 15
 BIBLIOGRAPHY

For the purpose of making of this project facts and references have been taken from the
following:

BOOKS:

(a) Law of Contract by Dr. R.K. Bangia

(b) Indian Contract Act, 1872 (For references) (Bare Acts)
(c) (for basic understanding purposes)

ARTICLES AND WEB JOURNALS:

(a) Yale Law School Legal Scholarship Repository Types of Mistakes in contract law
(b) Research paper of Dr. G.S. Pande (Prof. of law, L.L.M, Lucknow University)

WEBSITES:

(a) www.en.wikipedia.org/wiki/mutual-mistakes
(b) www.timesofindia.com (for case laws)
(c) www.lawteacher.net/mistakes_types_contracts

Page | 16