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CA Foundation · Business Laws · The Indian Contract Act, 1872

Mohan agrees to buy a painting from Nisha, both believing it to be an original by a famous artist. In fact, it was a copy, a fact unknown to both. Mohan later discovers this. Which is the correct legal position under the Indian Contract Act, 1872?

The contract is void. Both Mohan and Nisha wrongly believed the painting was an original, and authenticity is a fact essential to the agreement. A bilateral mistake of fact of this kind makes the agreement void, and neither fraud nor misrepresentation arises since neither party knew the truth.

  1. AThe contract is voidable at Mohan's option for misrepresentation
  2. BThe contract is void because of a bilateral mistake as to a matter of fact essential to the agreementCorrect
  3. CThe contract is valid because mistakes never affect a contract
  4. DThe contract is voidable at Nisha's option for fraud

Explanation

Both parties were mistaken about the same fact, the authenticity, which is essential to the agreement. Under the Act, an agreement is void where both parties are under a mistake as to a matter of fact essential to it. There was no fraud since neither knew the truth, and an innocent misstatement would make it voidable, but here the mistake is mutual, so it is void.

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