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CSEET · Business Laws and Management · Elements of Law of Contracts

Ramesh buys a machine from Sunita believing a particular Indian statute entitles him to a rebate that does not in fact exist. Sunita did not induce this belief. Ramesh wants to cancel the contract. What is the legal position?

Ramesh cannot avoid the contract merely because of his mistake. Under Section 21, a contract is not voidable because it was caused by a mistake as to any law in force in India, so his wrong belief about the statutory rebate does not release him.

  1. AHe can avoid it as the contract is voidable for mistake
  2. BHe cannot avoid it merely because of his mistake as to law in force in IndiaCorrect
  3. CThe contract is void under Section 20
  4. DThe contract becomes contingent on the rebate being granted

Explanation

The mistake concerns a law in force in India. Section 21 says a contract is not voidable because of such a mistake, so Ramesh remains bound. Section 20 applies only to a mutual mistake of fact, and nothing makes the contract contingent.

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