BUSINESS LAW

Misrepresentation & Mistake

 MEMBERS INFORMATION

• Misrepresentation
usman

• mistake
umer
• Bilateral
Hifza mistake

Unilateral
Daniyal mistake
MISREPRESENTATION

Meaning and Definition

Misrepresentation means false statement about the material facts of a
contract made without any intention to deceive the other party which
induces him to enter into the contract.

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 ESSENTIALS OF
MISREPRESENTATION
The following are essentials of misrepresentations:-

1. Positive Assertion
2. Inducing mistake

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 ESSENTIALS OF
MISREPRESENTATION
Positive Assertion
The positive assertion means an absolute and clear statement of a fact.
When a person makes a positive statement of facts about the contract
without any proper source of information, believing it to be true
though it is not, there is a misrepresentation.

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 ESSENTIALS OF
MISREPRESENTATION
Example
A tells B that his land produces 4000 kg of wheat per acre. A believes it
to be true. B buys it. Later B finds out that the land produces 1000 kg of
wheat per acre. It is misrepresentation.

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 ESSENTIALS OF
MISREPRESENTATION
Inducing mistake
All the parties must clearly understands all the facts of a contract. If
one party induces the other party, though innocently, to commit a
mistake regarding the nature of facts of a contract, there is a
misrepresentation.

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 ESSENTIALS OF
MISREPRESENTATION
Example
A tells B that his motorcycle is free from defects. But motorcycle has an
inbuilt defect. B buys the motorcycle. It is a misrepresentation.

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 MISTAKE

Meaning and definition

The term mistake means an incorrect belief about something. Mistake
leads a party to misunderstand the terms of contract. When the parties
give their consent under any mistake, there is no agreement. Mistakes
are of two types:-

1. Mistake of law
2. Mistake of fact

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 MISTAKE
Mistake of fact: OF FACT
U N D E R S E C T I O N76&
under section 7 6 79

Act done by the person bound or mistake of fact believing him self
bound by law (section 76)
Ingredients:
• Mistake of fact and not by reason of mistake of law
• Good faith
aim of section 76 is to provide protection to subordinate who are
compelled to follow the instruction of supervisor
 SECTION 79

Nothing is an offence which is done by any person who is justified by law, or who by reason of
a mistake of fact and not by reason of a mistake of law in good faith, believes himself to be
justified by law, in doing it.
EXAMPLE :
A sees Z commit what appears to A to be a murder A, in the exercise, to the best of his
judgment exerted in good faith, of the power which the law gives to all persons of apprehending
murderers in the fact, seizes Z, in order to bring Z before the proper authorities A has committed
no offence, though it may turn out that Z was acting in self-defense. A sees Z commit what
appears to A to be a murder A, in the exercise, to the best of his judgment exerted in good faith,
of the power which the law gives to all persons of apprehending murderers in the fact, seizes Z,
in order to bring Z before the proper authorities. A has committed no offence, though it may turn
out that Z was acting in self-defense.
 DIFFERENCE B/W SECTION 79&76

• In section 76 person is bound by Law and in Section 79 the

person is justified by Law.
• In Section 76 person is bound by a legal obligation, and in
Section 79 the person is supposed to have legal justification
Bilateral mistake
Where both the parties to an agreement are under a mistake about the
facts essential to the agreement, there is a bilateral mistake and the
agreement is void. However, a wrong opinion about the value of subject
matter of the agreement is not considered a mistake of fact.

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 UNILATERAL MISTAKE.
When one party commits a mistake regarding the terms of the
agreement, it is called unilateral mistake. A contract is not voidable
because one party has committed a mistake about the matter of fact
essential for the agreement. The effect of Unilateral mistake is as
follows:

a. Valid contract
b. Voidable contract

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 UNILATERAL MISTAKE

Valid Contract
If a person makes a wrong contract due to his own negligence or
carelessness, he himself is responsible and cannot avoid the contract. A
unilateral mistake has no effect on the contract and the contract
remains valid.
Example
X buys rice from Y, thinking that the rice is old. However the rice is
new. X cannot avoid the contract

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 UNILATERAL MISTAKE
Voidable contract
If a unilateral mistake is caused by fraud or misrepresentation on the
part of the other party, the contract is voidable and can be avoided by
the aggrieved party.

Example
A sells house to B. The house has cracked walls. A tries to conceal the
defect but B discovers. A is guilty of fraud. B can avoid the contract.

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