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CS Executive · Jurisprudence, Interpretation and General Laws · Contract Law

Meera and Karan agree to settle an old loan, both honestly believing that the debt is barred by the Indian law of limitation, although in fact the law in force in India does not bar it. Meera later wants to avoid the settlement on the ground of this mistake. What is the position under Section 21 of the Indian Contract Act, 1872?

The contract is not voidable. Section 21 provides that a mistake as to any law in force in India does not make a contract voidable, and the illustration on a debt wrongly believed to be time-barred confirms this, even if both parties shared the mistake.

  1. AThe contract is voidable at Meera's option because the mistake was mutual
  2. BThe contract is not voidable, because a mistake as to a law in force in India does not make a contract voidableCorrect
  3. CThe contract is void ab initio because both parties shared the same mistake
  4. DThe contract is voidable only if Karan knew about the mistake

Explanation

Section 21 says a contract is not voidable because it was caused by a mistake as to any law in force in India. Its illustration uses a mistaken belief that a debt is barred by the Indian law of limitation. Mutuality of the mistake does not change this, so the option treating it as voidable or void is wrong.

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