Jurisprudence, Interpretation and General Laws · Contract Law

Mistake and Effect of Mistake of Law Under Section 21

Updated 11 October 2026 · Fact-checked

Mistake means a wrong belief held when making a contract. If both parties are mistaken about a fact essential to the agreement, it is void (Section 20). If only one is mistaken about a fact, the contract is not voidable (Section 22). A mistake about Indian law never makes a contract voidable (Section 21).

Understand Mistake and Effect of Mistake of Law (Section 21)

A mistake is a wrong belief about something at the time the agreement is made. The Indian Contract Act, 1872 sorts mistakes by two questions. Is the mistake about fact or about law? And do both parties share it, or only one?

A bilateral mistake is one where both parties are mistaken about a matter of fact essential to the agreement. Under Section 20, the agreement is void. In the Act's illustration, A agrees to sell B a cargo that both think is at sea, but the ship was lost before the bargain. The subject-matter did not exist, so the agreement is void. Section 65 then requires anyone who received an advantage under it to restore it.

A unilateral mistake is one where only one party is mistaken about a matter of fact. Section 22 says the contract is not voidable merely because of it. The law protects the other party, who made no error. You cannot escape a deal just because you misjudged the facts.

Section 21 deals with law. A contract is not voidable because it was caused by a mistake as to any law in force in India. Everyone is expected to know the law of the land. In the Act's illustration, A and B contract believing wrongly that a debt is barred by limitation. The contract is not voidable. But a mistake as to a law not in force in India, such as a foreign law, is treated like a mistake of fact. So it can fall under Section 20 or Section 22 depending on whether one or both parties share it.

The Explanation to Section 20 adds a limit. A wrong opinion about the value of the subject-matter is not a mistake of fact. Paying too much because you misjudged worth does not make the agreement void.

Key rules to remember

Bilateral mistake of fact (Section 20): Both parties mistaken + fact essential to the agreement → agreement void; Both conditions are needed. An erroneous opinion as to value is not a mistake of fact.
Unilateral mistake of fact (Section 22): Only one party mistaken as to fact → contract not voidable merely for that reason; The word 'merely' matters. Other grounds such as fraud or misrepresentation are separate.
Mistake of Indian law (Section 21): Mistake as to law in force in India → contract not voidable; Applies whether one or both parties are mistaken.
Mistake of foreign law (Section 21): Mistake as to law not in force in India = mistake of fact; Then apply Section 20 (both mistaken) or Section 22 (one mistaken).
Restoration after a void agreement (Section 65): Agreement discovered void → advantage received must be restored or compensated; Use this to finish an answer where the agreement is void.

How to solve Mistake and Effect of Mistake of Law (Section 21) questions

Use this sequence for any problem or theory question on mistake. It keeps your answer in the provision, analysis, conclusion order.

1Identify what the mistake is about: a fact, the value of the thing, Indian law, or foreign law.
2If it is about Indian law, apply Section 21 at once. The contract is not voidable. Stop there.
3If it is about foreign law, treat it as a mistake of fact and move to the next step.
4For a fact, check who is mistaken. Both parties give a bilateral mistake (Section 20). One party gives a unilateral mistake (Section 22).
5For a bilateral mistake, test whether the fact is essential to the agreement. Also check that it is not merely an opinion about value.
6State the conclusion in plain words: void, or not voidable. Name the section.
7If the agreement is void, add the Section 65 consequence: restoration of any advantage received.

Quickest way: Three-question filter

When to use it: Use it for short-answer or case-based questions when time is tight.

Question 1: Is it law or fact? Indian law means not voidable (Section 21).
Question 2: Is the fact essential, and is it fact rather than value? If not, the contract stands.
Question 3: One party or both? Both means void (Section 20). One means not voidable (Section 22).
Write one line each for provision, application and conclusion. Add Section 65 if void.

Common mistakes in Mistake and Effect of Mistake of Law (Section 21)

Saying a mistake of Indian law makes the agreement void or voidable.
Students assume any mistake gives relief.
Fix: Remember Section 21: a mistake as to law in force in India does not make a contract voidable.
Treating a unilateral mistake of fact as making the contract void.
Students mix up Sections 20 and 22.
Fix: Ask who is mistaken. Void needs both parties. One party's mistake alone gives no relief under Section 22.
Treating a wrong opinion about value as a mistake of fact.
Value feels like a fact about the goods.
Fix: Quote the Explanation to Section 20: an erroneous opinion as to value is not a mistake of fact.
Treating foreign law like Indian law.
Students stop reading Section 21 after the first limb.
Fix: Read the second limb. A mistake as to a law not in force in India has the same effect as a mistake of fact.
Forgetting the 'essential to the agreement' condition in Section 20.
Students memorise only 'both parties mistaken'.
Fix: Always state that the fact must be essential, as with goods that no longer exist.
Ending the answer at 'void' without any consequence.
Students stop at the label.
Fix: Add that under Section 65 any advantage received must be restored or compensated for.

Worked examples

Example 1

Asha and Bhaskar agree that Bhaskar will pay Asha ₹40,000 on a debt, both believing it is barred by the Indian law of limitation. In fact it is not barred. Bhaskar later says the contract is voidable because of mistake. Decide.

Show the solution

Provision: Section 21 says a contract is not voidable because of a mistake as to any law in force in India.
Application: The mistake concerns the Indian law of limitation, which is a law in force in India. The Act's own illustration is on very similar facts.
The mistake is shared, but that does not change the result. Section 21 applies whether one or both parties are mistaken.
Conclusion: The contract is not voidable. Bhaskar cannot avoid it on this ground.

Answer: The contract is not voidable under Section 21, because the mistake is about a law in force in India.

Example 2

Meera agrees to buy a specific horse from Nikhil for ₹60,000. Unknown to both, the horse had died the previous night. Meera asks for her advance of ₹10,000 back. Is the agreement valid?

Show the solution

Provision: Under Section 20, where both parties are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Application: Both Meera and Nikhil wrongly believed the horse was alive. Its existence is essential to the agreement. This is not a mistake about value. The Act gives a near identical illustration of a dead horse.
Conclusion on validity: The agreement is void.
Consequence: Under Section 65, a person who has received an advantage under an agreement discovered to be void must restore it. Nikhil must return the ₹10,000.

Answer: The agreement is void under Section 20, and Nikhil must refund the ₹10,000 under Section 65.

Exam tips

Write the section number with each rule. Examiners reward the provision, then application, then conclusion.
Use the Act's illustrations (the lost cargo, the dead horse, the limitation debt) as ready examples in theory answers.
In case-based answers, state clearly whether the mistake is of fact or law before naming any section.
Compare Sections 20, 21 and 22 in a short list if asked for a distinction or an overview of mistake.
Mention the Explanation on value whenever the facts involve price or worth.

Practice questions from Contract Law

Mistake and Effect of Mistake of Law (Section 21) in other exams

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

Mistake and Effect of Mistake of Law (Section 21): frequently asked questions

Does a mistake of law make a contract void?

No. Under Section 21, a contract is not voidable because of a mistake as to any law in force in India. The law presumes everyone knows the law of the land.

What is the difference between bilateral and unilateral mistake?

In a bilateral mistake both parties are mistaken about an essential fact, and the agreement is void under Section 20. In a unilateral mistake only one party is mistaken, and the contract is not voidable merely for that reason under Section 22.

How is a mistake of foreign law treated?

Section 21 says a mistake as to a law not in force in India has the same effect as a mistake of fact. So you apply Section 20 if both parties share it, or Section 22 if only one does.

Is a wrong opinion about price a mistake of fact?

No. The Explanation to Section 20 says an erroneous opinion as to the value of the subject-matter is not a mistake of fact. The agreement therefore stays valid.