Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Mistake under the Indian Contract Act (Sections 20-22)

Updated 10 October 2026 · Fact-checked

Mistake is a wrong belief about a fact or law. If both parties are mistaken about an essential fact, the agreement is void (Section 20). A one-sided mistake does not make a contract voidable (Section 22). A mistake about Indian law does not make it voidable; a mistake about foreign law is treated like a fact mistake (Section 21).

Understand Mistake (Sections 20-22)

Free consent means both parties agree to the same thing in the same sense. A mistake is a wrong belief about something. If the belief goes to the root of the deal, consent may be missing.

The Act splits mistake into two kinds. Mistake of fact is a wrong belief about a fact, such as whether the subject-matter exists, what it is, or its quantity. Mistake of law is a wrong belief about what the law says.

Mistake of fact can be bilateral (both parties are mistaken) or unilateral (only one is). Under Section 20, when both parties are under a mistake about a matter of fact that is essential to the agreement, the agreement is void. Examples: both think the goods exist but they were already destroyed; or two parties have different things in mind (the Raffles v Wichelhaus situation, where two ships named Peerless were involved and each party meant a different ship, so there was no real agreement).

The Explanation to Section 20 adds that a wrong opinion about the value of the thing which forms the subject-matter is not a mistake as to a matter of fact. A bad bargain on price does not make the agreement void.

Under Section 22, a contract is not voidable just because one party made a mistake about a fact. The other party did not share the error, so the law protects the deal. Say Rohan buys a flat wrongly believing that a metro station already exists nearby, and the seller, Meera, never said so. Rohan is bound. Note that if the mistake was caused by the other party's misstatement, you study misrepresentation or fraud instead.

Under Section 21, a contract is not voidable because of a mistake about a law in force in India. Everyone is presumed to know Indian law. A mistake about a law not in force in India, a foreign law, is treated like a mistake of fact. So if both parties are mistaken about foreign law, Section 20 can apply and the agreement is void.

Key formulas to remember

Section 20: bilateral mistake of fact: Both parties mistaken + fact essential to the agreement ⇒ agreement is void; Both conditions must be met. Essential facts include, for example, whether the subject-matter exists.
Explanation to Section 20: Erroneous opinion about the value of the thing ⇒ not a mistake as to a matter of fact; A bad bargain on price does not make the agreement void.
Section 21: mistake of law: Mistake about Indian law ⇒ contract is not voidable; mistake about foreign law ⇒ treated as mistake of fact; Foreign law mistake by both parties on an essential matter can lead to a void agreement under Section 20.
Section 22: unilateral mistake: Only one party mistaken about a fact ⇒ contract is not voidable on that ground; Section 22 covers a mistake on its own. If the other party's fraud or misrepresentation caused the mistake, Section 22 does not decide the case. That is dealt with under fraud or misrepresentation, where the contract is voidable.

How to solve Mistake (Sections 20-22) questions

Use this order for any scenario question on mistake.

1Read the facts and find who is mistaken: both parties or only one.
2Ask whether the mistake is about a fact or about a law.
3If it is about law, ask whether it is Indian law or foreign law.
4If it is about a fact and both are mistaken, check if the fact is essential to the agreement (for example, existence of the subject-matter).
5Check whether the mistake is only about value or opinion. If so, there is no mistake of fact.
6Apply the section: Section 20 gives void, Section 21 gives valid for Indian law, Section 22 gives valid for unilateral mistake.
7Check if another party's false statement caused the error. If yes, think misrepresentation or fraud instead.

Quickest way: Who, What, Which law

When to use it: Use this for MCQs where you have under a minute per question.

Both mistaken on an essential fact: pick void.
Only one mistaken: pick valid (not voidable), unless the other party caused the mistake.
Indian law mistake: valid. Foreign law mistake: same as fact.
Mistake only about price or value: valid.
Eliminate options that say voidable for a plain mistake. A mistake alone, without fraud or misrepresentation, does not make a contract voidable under Sections 21 and 22. Section 20 gives void, and Sections 21 and 22 leave the contract valid. A mistake induced by the other party is dealt with under misrepresentation or fraud.

Common mistakes in Mistake (Sections 20-22)

Saying a unilateral mistake makes the contract voidable.
Students link all free-consent defects with voidable contracts, as in coercion and fraud.
Fix: Remember Section 22: unilateral mistake leaves the contract valid. Voidable arises from coercion, undue influence, fraud and misrepresentation.
Treating a mistake about Indian law as a mistake of fact.
Students forget that people are presumed to know the law of the land.
Fix: Indian law mistake does not help the mistaken party. Only foreign law is treated as fact.
Calling a bilateral mistake about value a void agreement.
Students ignore the Explanation to Section 20, which says a wrong opinion on value is not a mistake of fact.
Fix: Check that the fact is essential, such as existence of the subject-matter. Price or value expectations do not qualify.
Writing that a bilateral mistake makes the contract voidable.
Mixing up Section 20 with Sections 19 and 19A.
Fix: Section 20 says void. There is no contract to enforce.
Ignoring a mistake caused by the other party's false statement.
Students apply Section 22 mechanically.
Fix: If the other side induced the error, move to misrepresentation or fraud, where the contract is voidable.

Worked examples

Example 1

Asha agrees to buy a particular cargo of cotton from Bharat, which both believe is lying in a godown in Surat. Unknown to both, the cargo was destroyed in a fire the day before. What is the status of the agreement?

Show the solution

Who is mistaken? Both Asha and Bharat.
What is the mistake about? A fact: whether the cargo exists.
Is the fact essential? Yes, the cargo is the subject-matter.
Apply Section 20: bilateral mistake on an essential fact.

Answer: The agreement is void.

Example 2

Rohan buys a flat from Meera, wrongly believing that a metro station already exists nearby. No station exists. Meera said nothing about it and did not know of Rohan's belief. Rohan later wants to cancel. Can he?

Show the solution

Who is mistaken? Only Rohan.
The mistake is about an existing fact (whether a metro station exists nearby), so Section 22 applies.
Meera did not cause the mistake by any false statement.
Under Section 22, a contract is not voidable merely because one party was mistaken as to a fact.

Answer: Rohan cannot cancel on the ground of mistake. The contract is valid and binding.

Exam tips

Most questions are short scenarios. First identify one party or both, then pick void or valid.
Watch for the word essential. A bilateral mistake only about value or opinion does not make the agreement void.
Remember that foreign law is treated as fact, but Indian law is not.
For Raffles v Wichelhaus, recall the two ships of the same name leading to no consensus: there was no meeting of minds.
Eliminate any option saying a plain mistake under these sections makes the contract voidable.

Practice questions from Capacity of Parties, Free Consent

Mistake (Sections 20-22) in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Mistake (Sections 20-22): frequently asked questions

What is the effect of bilateral mistake under Section 20?

If both parties are mistaken about a matter of fact essential to the agreement, the agreement is void. It cannot be enforced by either side.

Is a unilateral mistake enough to cancel a contract?

No. Under Section 22, a contract is not voidable merely because one party was mistaken about a fact. The mistaken party stays bound.

What does Section 21 say about mistake of law?

A mistake about a law in force in India does not make a contract voidable. A mistake about a law not in force in India is treated as a mistake of fact.

What is the Raffles v Wichelhaus case about?

It involved cotton to arrive on a ship named Peerless. There were two ships with that name, and each party meant a different one. The court held there was no real agreement between them.