Dr.

KUMUDHA RATHNA
MISTAKE:

Operates upon a contract in 2 ways:-

1) Defeat the consent completely-ie-consent is unreal;

2) Mislead the parties as to the purpose which they contemplated.

S.13: Def-Consent: 2 or more persons are said to consent-when they

agree upon the same thing in the same sense (Consensus ad idem).

Where mistake doesn’t defeat consent-only misleads parties (2nd

above)-below section applies:-

S.20: If both parties to ag are under a mistake as to a matter of fact

essential to the ag-ag is void.

Expln: Erroneous opinion as to value of things that forms the subject-

matter of ag-is not deemed to be mistake as to matter of facts.

Illus: A agrees to sell to B a cargo of goods on its way from England to

Mumbai-unknown to parties-day before ag-ship met with a an accident-
goods lost-ag void

S.20-Applies if the following conditions fulfilled:-

a) When both parties to ag-are under a mistake;

b) Mistake is relating to a ag.-matter of fact;

c) Fact-relating to mistake is-essential to ag.

S.21: Effect of mistake as to Law: (i)A contract is not voidable coz it was
caused by mistake as to a Law in force in India;

(ii) Mistake as to a Law not in force in India has same effect as to

mistake of fact.
Dr. KUMUDHA RATHNA
Illus: A & B contract-based on an erroneous belief that a debt is barred
by Indian Law of Limitations contract voidable.

S.22: 1 party mistake-contract not voidable-merely coz by 1 of the

parties to contract-being under a mistake as to mistake as to matter of
fact.

FACTS ESSENTIAL TO AGREEMENTS:-

a) Identity of parties;

b) Identity & nature of subject-matter of contract;

c) Nature & content of promise itself.

MISTAKE AS TO IDENTITY:

CASE: JAGGAN NATH v. SECRETARY OF STATE FOR INDIA –S-

Brother of Plntf-represented himself to be the plntf & induced a Govt
agent to contract with him –HELD-No valid agreement-REASON-Govt
agent was deceived by conduct of plntf-agent (deft) intended to contract
ONLY with S’s Brother-not with S & S knew this.

WHO MAY ACCEPT AN OFFER:

Offer-can/shd be accepted only by the person for whom it is/was meant.

CASES:

• BOULTON v. JONES –Plntf took over business of 1 person called

Brocklehurst-deft who used to deal with Brocklehurst-unaware of the
change, placed an Order for some goods-plntf sent the goods-deft
came to know of the change only when he recd invoice-deft had a set-
off against B & hence refused to pay the sum-plntf sued him –HELD-
Not liable-REASON-If a contract is proposed with B-A can’t substitute
Dr. KUMUDHA RATHNA
himself in place of B without consent of the offeror (esp to offeror’s
disadvantage).

• HARDMAN v. BOOTH –Plntf intending to deal with Thomas Gandell &

Sons-went to their office-took Order from a person who represented
to be a partner in the firm-he instructed that goods be sent in the
name of Edward Gandell & Sons-recd goods & sold them to defts (a
bona fide buyer)-plntf sued deft to recover goods –HELD-Not liable-
REASON-Contract was intended to be made with Gandell & Co-
person had no authority to act as their agent as he wasn’t member of
the firm-consequently there wasn’t a contract at any time.

• CUNDY v. LINDSAY –Plntf recd an Order (in writing) from a

fraudulent man called Blenkarn-Order paper had a printed head as
‘Blenkarn & Co, 37, Wood Street’-there was a well known firm named
‘Blenkiron & Co’ in the same street-plntf thinking it was the latter-sent
a large quantity of kerchiefs-Blenkarn recd them & sold off to deft
acting bonafide-plntf sued defts for the goods –HELD-No contract
between plntfs & Blenkarn-they intended to contract with Blenkiron &
Co.

If the person assumes fictitious name-no mistake as to identity-below

case-

• KING’S NORTAN METAL CO v. EDRIDGE, MERRETT & CO –A man

by name Wallis adopted a name ‘Hallam & Co’ (no firm existed in that
name) & placed Orders with plntf-who sent them-man sold them to
deft (bona fide-acting in good faith)-plntf sued deft for value of goods
–HELD-Contract voidable for fraud-but-can’t be disaffirmed after
defts’d acquired pty in good faith-REASON-There was no entity by
name Hallam & Co-so no mistake as to identity.
Dr. KUMUDHA RATHNA
If parties are in each other’s presence-scope of operative mistake
reduced-

• PHILLIPS v. BROOKS LTD –A man North-went to plntf’s shop &

selected some pearls+rings worth 3,000p-he took out a cheque book
& wrote on it & signed & stated-‘You see who I’am, I’am Sir George
Bullough’-plntf on reference found such name in directory & the place
mentioned by him-so he allowed him to take a ring-North promised to
return for the other selected articles after the cheque was honoured-
before this fraud could be detected-North pledged it with defts who
acting bona fide (without notice) advanced money on it-plntf sued
deft fo the ring or its value –HELD-Not liable-REASON-Plntf intended
to contract with person present before him.

When parties present face to face-presumption is-contract is made with

person actually present-even if there is a fraudulent impersonation by
buyer representing himself as a different person than he is.

CASE: INGRAM v. LITTLE (Contrasting decision) -3 ladies (joint)

owners of a car-adverted for sale. A person called at their house-
offered an acceptable price-took out a check book-ladies objected to
check-he persuaded them to take cheque, saying that, he is
‘Hutchinson’ a leading businessman. Ladies referred to phone book-the
address/phone number he gave were matching. They allowed him to
take the car. He resoled to deft & absconded-check dishonoured-plntfs
sued deft for car or value –HELD-Deft liable-REASON-Ladies intended to
contract soley only with the real Hutchinson.

WHERE IDENTITY IS SPECIALLY IMPORTANT: to the offeror-mistake as

to identity will prevent an ag from arising.

CASES:
Dr. KUMUDHA RATHNA
• SAID v. BUTT –Plntf knowing he won’t be admitted to view the 1st
performance of a play at a theater-owning to his adverse criticism of
some members of the theatre-got tickets through his friend who
didn’t disclose it was for plntf-MD of theater refused to admit him on
night of the play-plntf sued him for breach of contract –HELD-Not
liable-REASON-no contract between plntf & theater-identity of plntf
being material (in this case) for formation of contract-ticket having
been obtd without disclosing that it was for plntf.

• SOWLER v. POTTER –Deft had been convicted for permitting

disorderly conduct in a café-so she assumed a false name & obtd
from plntf a lease of premises in the same neighbourhood conducting
a restaurant-plntf contended that had he known her true identity-he
wouldn’t have granted the lease & so it was void for mistake –HELD-
Lease void ab initio REASON-Person’s identity was a vital element in
the ag-plntf had been mistaken in this regard.

MISTAKE AS TO SUBJECT MATTER:

Various forms:

i. NON-EXISTENT SUBJECT-MATTER: ie-subject-matter ceased to

exist before contract was made.

CASE: COUTURIER v. HASTIE –Deft (del credere agent) was employed

to sell plntf’s cargo-which was in transit (ship)-after deft had sold it-
discovered that cargo had got damaged by bad weather & so had to be
sold at intermediate port-buyer repudiated contract-deft sued for price –
HELD-Not liable-REASON-There was nothing to be sold under the
contract-goods totally lost before contract was made-thus-contract void
ab initio.
Dr. KUMUDHA RATHNA
ii. MISTAKE AS TO TITLE OR RIGHTS: Unknown to parties-buyer is
already owner of that which the seller purports to sell to him-in
such case-equity allows (only) contract to be set aside.

CASE: COOPER v. PHIBBS –A person told his Nephew (with no

defrauding intention-but in fact being in error) that he (Uncle) was
entitled to a fishery-after Uncle’s death-the Nephew (believing the truth
of the statement made by his Uncle to him) made a contract with Uncle’s
daughter to rent the fishery-it actually belonged to the plntf –HELD-
Mistake made the contract voidable-liable to be set aside by Court-on
such terms as it thinks fit -REASON-Mistake as to existence.

iii. DIFFERENT SUBJECT-MATTER IN MIND: of parties-due to a

reasonable mistake of fact-ag void-for want of true consent.

CASE: RAFFLES v. WICHELHAUS –Deft bot from plntf Surat cotton-‘to

arrive ex Peerless from Mumbai-there were 2 ships by that name sailing
from Mumbai-1 in Oct (which deft had in mind) the other in Dec (which
plntf thot of most) -HELD-No contract-REASON-No consensus ad idem.

iv. MISTAKE AS TO SUBSTANCE OF SUBJECT-MATTER: Mistake

may relate to Substance/Nature/Quality-parties maybe mistaken
as to existence of some fact/s forming-essential/integral element
of subject-matter.

CASES:

• SEIKH BROS LTD v. OCHENER –Lessor (appellant Co) of a forest in

Kenya-granted license to respdt to cut-process-manufacture all sisal
(Mexican/West Indian plant with large fleshy leaves yielding a stiff
fiber used in making rope) growing in the forest-in return respondent
agreed to manufacture & deliver to appellant 50 tons of sisal fiber
per month-it turned out that the leaf potential of the sisal area wasn’t
suff to manufacture the stipulated quantity of fiber-appellant sued
Dr. KUMUDHA RATHNA
for breach –HELD-Ag void-REASON-Very basis of contract is-sisal
area should be capable of producing an average of 50 tons of fiber
per month through out the period of license-mistake was as to
matter essential to ag.

v. MISTAKE AS TO-QUALITY OF SUBJECT MATTER: May not render

ag void.

CASES:

• SMITH v. HUGHES –Deft wanted old oats for his horses-plntf

showed him the oats he had-deft kept the sample with him for 24
hrs-then placed an order for them-a portion was delivered-deft found
them to be new-so sought to reject them-on ground of mistake as to
quality –HELD-Not entitled to reject-REASON-COCKBURN CJ-
summed it in the following words-‘All that can be said is that-the 2
minds were not ad idem as to age of oats; they were ad idem as to
sale & purchase of them.”

• BELL v. LEVER BROS –Bell was appointed as M.D. of Co for 5 yrs-

with a sallery of £8,000 per annum-before expiry of the term-service
terminated cuz of merger-Bell given compensation of £30,000-later
found out that he had made secret profit-so breach of duty & co
could have dismissed him sans compensation-co sued to recover –
HELD-Not allowed-REASON-Mistake as to quality of service.

Mistake cozed by Fraudulent misrep of 1 of the parties to the contract-

Consequences:

➢ Fraudulent misrep-as to-Contents of docs-Contract Voidable;

➢ Fraduluent misrep-as to Character of docs-Contract Void (ab

initio). MISTAKE AS TO NATURE OF PROMISE:
Dr. KUMUDHA RATHNA
When deed of 1 character (type) executed under the mistaken
impression that it’s of a diff character-it’s wholly void (inoperative).
(Eg: A gift deed-signed-under the impression that it’s a power of
attorney).

WHERE CONTRACT FAILS TO EXPRESS PARTIES’ INTENTION:

Can be RECTIFIED to bring it in accord with intention of parties.

CASE: HARTOG v. COLIN & SHEILDS –Defts contracted to sell to

plntf-3,000 Argentine hare skins-by mistake they offered as-per pound
instead of per piece-price per piece was approximately 1/3rd of a
pound-negotiations preceeding ag took place on the basis of price per
piece which was the usual practice in that trade-buyers sued for goods
–HELD-Not allowed-REASON-Offer was wrongly expressed-plntf
couldn’t have reasonably supposed that offer contained offeror’s real
intention.

DOCUMENTS MISTAKENLY SIGNED OR NOT EST FACTUM:

Defence of-non est factum-enables a person who had signed a contract

to say that it’s not his document cuz he signed it under some mistake.

Object: Evolved by Courts to-relieve illiterate/blind ppl from effect of

contract which they couldn’t read & which wasn’t properly explained to
them-later extended to others too.

CASES:

• FOSTER v. MACKINNON – A person induced to sign on the back of a

paper-front of which wasn’t shown to him-he was told it was an
ordinary guarantee (like of which he’d signed before) & under which
he’d incur no liability-paper was in reality a bill of exchange-he was
sued (as indorser) on it-by a holder in due course –HELD-Not liable-
REASON-Deft never intended to sign that contract-he was deceived-
Dr. KUMUDHA RATHNA
as to legal effect & actual contents of doc-it’s as if he wrote his name
on a piece of paper just like that & already without his knowledge
there was a bill of exchange or a pro-note payable to order inscribed
on the other side of the paper.

• GALLIE v. LEE –Mrs. G (78 yrs old) wanted to help her nephew &
intended to transfer to him her house on condition that he’d permit
her to reside there for her life time-she handed the title deeds to him-
nephew came to her with a person (Lee & Lee)-told her to sign a
document saying it was a gift in his favour-she’d broken her
spectacles-so she couldn’t read-she put her signature which was
witnessed by her nephew-the doc was infact an assignment in
favour of Lee-he mortgaged it to the building society & later
defaulted in payment-society claimed possession-she pleaded non
est factum –HELD-She was bound by the contract-REASON-It was
only voidable contract due to misstatements made by Lee-but
became too late to avoid once building society-bona fide in good
faith-advancead money on the house.

Plea of non est factum-requires-clear & +ve evidence to be established.

• FINANCE LTD. v. HOWARD –DENOVAN LJ-“The plea of non est

factum is a plea which must necessarily be kept within narrow
limits.”

Eg: A man in the course of his business-signs a load of docs without

checking them-he takes responsibility for them by appending his
signature-he shouldn’t be allowed to repudiate 1 of those docs on
ground of non est factum-person signing has to take care.

Rules pertaining to Non-est –factum:

➢ In case of fraud-principle in Foster V. Mackinnon-will apply-

transaction void;
Dr. KUMUDHA RATHNA
➢ A person can’t escape from conseq-as to innocent 3rd parties-for
signing docs-if he is a man of ordinary education & competence.

CASE: NINGAWWA v. BYRAPPA HIREKURABAR –Husband obtd

signature of his spouse to a gift deed without making any misrep as to
its character-but subseq included 2 more plots in the deed –HELD-
Transaction voidable-not void.

LIMITATIONS:

Mistake operates to-avoid an ag subject to the following limitations:-

a) MISTAKE OF BOTH PARTIES (S.20): Ag void-if-both parties mistaken

as to-matter of fact essential to ag. (Eg: Beach v. Pearl life..from Law
of Ins).

S.22: UNILATERAL MISTAKE: A contract is not voidable-merely coz it

was caused by-1 party to it being under a mistake as to matter of fact.

CASE: A.A. SINGH v. UOI –Govt by auction sold-right of fishery-

plntf offered highest bid believing that the right was sold for 3 yrs-but
it was actually for 1 yr –HELD-He can’t aovid the ag-REASON-It was his
unilateral mistake.

Even where mistake is of 1 party only-if it has effect of nullifying

consent-S.13-no contract arises-coz-no ag on same thing in same
sense bet parties.

COMMON MISTAKE: Both parties make the same mistake (Eg: Parties
aren’t aware that the subject-matter has already perished).

CASES:

• PRITCHARD v. MERCHANTS & TRADESMEN MTUAL LIFE

ASSURANCE SOCIETY –Premium paid for revival of lapsed policy at a
time when assured was already dead.
Dr. KUMUDHA RATHNA
• GALLOWAY v. GALLOWAY –Parties made a seperation deed under the
mistaken belief that they were married-when infact they weren’t.

b) ERRONEOUS OPINION (Expln to S.20): Erroneous belief/opinion as to

value of thing which is subject-matter of ag-isn’t be deemed as a
mistake of matter of fact.

CASE: KOCHAVAREED v. MARIAPPA –A pty which was leased out was

sold-lessee had right to receive value of improvements-ag of sale
didn’t disclose this-buyer (on becoming aware of this cl) tried to set
aside the ag-on ground of mistake abt rights –HELD-Can’t do so-
REASON-No mistake-if there was a mistake it wasn’t abt matter
essential to ag for sale-only related to value of subject-matter-which
won’t be deemed to be mistake vitiating the ag.

c) MISTAKE OF FACT-NOT OF LAW (S.21): Contract is not voidable

cause it was cozd by-mistake as to any Law for the time being in
force in India.

Illustration: A & B make a contract-on erroneous belief that- a

particular debt is barred by Indian Limitation Act-contract not voidable.

CASE: KALYANPUR LIME WORKS v. ST OF BIHAR –Mistake as to

effect of registration on validity of doc –HELD-Mistake of Law.

Foreign Law: Mistake as to foreign Law-not mistake of Law.

CHESHIRE & FIFOOT:

Common Mistake: Both parties make the same mistake.

Mutual Mistake: Parties misunderstand each other & are at cross

purposes. (Eg: A intends to offer to sell his interior plot of land, but B
believes the offer is of his front plot of land adjacent to the street).
Dr. KUMUDHA RATHNA
CASE: RAFFLES v. WICHELHAUS –Deft bot from plntf Surat cotton-‘to
arrive ex Peerless form Mumbai-there were 2 ships by that name sailing
from Mumbai-1 in Oct (which deft had in mind) the other in Dec (which
plntf thot of most) HELD-No contract-REASON-No consensus ad idem.

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