Mistake Under Indian Contract Act (2026): Bilateral & Unilateral Mistake Explained
Reviewed by Lawsection.in Editorial Team | June 22, 2026
Mistake Under Indian Contract Act is one of the most important topics under contract law because it determines whether an agreement is valid, void, or enforceable. Under Sections 20, 21 and 22 of the Indian Contract Act, 1872, a mistake regarding facts or law can significantly affect contractual rights and obligations. Understanding bilateral mistake and unilateral mistake is essential for law students, judiciary aspirants, AIBE candidates, CLAT PG aspirants and legal professionals.
If parties enter into an agreement under a fundamental misunderstanding regarding facts or law, the law determines whether the contract remains valid, becomes void, or continues to be enforceable.
Under the Indian Contract Act, 1872, the law relating to mistake is primarily governed by:
- Section 20 – Bilateral Mistake (Mistake of Fact)
- Section 21 – Mistake of Law
- Section 22 – Unilateral Mistake
This guide explains every concept with illustrations, landmark judgments, examples, exam-oriented notes, and practical legal analysis updated for 2026.
Related Reading: Visit our Law Notes Hub for complete Indian Contract Act notes, case laws, judiciary preparation materials, and legal concepts explained in simple language.
Featured Snippet: What Is Mistake Under the Indian Contract Act?
Mistake under the Indian Contract Act, 1872 refers to an erroneous belief regarding a fact or law existing at the time of making a contract. Sections 20, 21 and 22 govern mistake. A bilateral mistake regarding an essential fact makes the agreement void, whereas a unilateral mistake generally does not affect the validity of the contract.
Meaning of Mistake in Contract Law
A mistake means a wrong belief or misunderstanding about something existing at the time of entering into an agreement.
In contract law, a mistake may relate to:
- Facts
- Law
- Subject matter
- Identity of parties
- Nature of transaction
- Ownership or title
- Quantity or quality of goods
The doctrine is based upon the principle that there must be consensus ad idem (meeting of minds). When parties are fundamentally mistaken, true consent may not exist.
Statutory Provisions Relating to Mistake
Section 20 – Bilateral Mistake of Fact
Section 20 provides:
Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Important Essentials
For Section 20 to apply:
- Both parties must be mistaken.
- The mistake must relate to a fact.
- The fact must be essential to the agreement.
- The mistake must exist at the time of formation of the contract.
If all these conditions are satisfied, the agreement becomes void ab initio.
Essential Conditions of Bilateral Mistake
1. Mistake Must Be Mutual
Both contracting parties must be mistaken.
If only one party is mistaken, Section 20 will not apply.
2. Mistake Must Relate to Fact
The mistake should concern an existing fact rather than future expectations.
3. Fact Must Be Essential
The mistaken fact must go to the root of the contract.
Minor or insignificant mistakes do not affect validity.
Types of Bilateral Mistake
Mistake Regarding Existence of Subject Matter
Both parties believe that the subject matter exists.
In reality, it does not exist.
Example
A agrees to buy a cargo believed to be arriving from England.
The cargo had already been destroyed before the agreement.
The contract is void.
Mistake Regarding Identity of Subject Matter
Both parties have different things in mind.
There is no consensus ad idem.
Example
A intends to purchase House X.
B believes he is selling House Y.
No valid agreement exists.
Mistake Regarding Title or Ownership
Both parties mistakenly believe that ownership belongs to one party.
Landmark Case
Cooper v. Phibbs (1867)
A person agreed to take a fishery on lease.
Later it was discovered that he already owned the fishery.
The agreement was held void because of mutual mistake regarding title.
Mistake Regarding Quantity
Both parties misunderstand the quantity involved in the transaction.
Such mistake may render the agreement void if quantity is essential.
Mistake Regarding Nature of Subject Matter
The parties misunderstand the fundamental nature of the property or goods involved.
Mistake as to Value: Is Contract Void?
No.
The explanation to Section 20 specifically states that an erroneous opinion regarding value is not treated as a mistake of fact.
Example
A purchases an old painting for ₹50,000.
Later it turns out to be worth ₹20 lakh.
The contract remains valid.
A wrong assessment of value is not a bilateral mistake.
Landmark Indian Case on Bilateral Mistake
Tarsem Singh v. Sukhminder Singh (1998)
The parties misunderstood the measurement units used for land.
One party understood the area in “bighas” while the other understood it in “kanals.”
The Supreme Court held that the agreement was void due to mutual mistake regarding an essential fact.
Exam Point
This is one of the most frequently cited Indian cases under Section 20.
Unilateral Mistake Under Indian Contract Act
Meaning of Unilateral Mistake
A unilateral mistake occurs when only one party is mistaken regarding a fact.
The other party knows the true position.
Generally, such a mistake does not affect the validity of the contract.
Section 22 provides that a contract is not voidable merely because one party was under a mistake of fact.
Section 22 – Contract Caused by Mistake of One Party
The law states:
A contract is not voidable merely because it was caused by one of the parties being under a mistake as to a matter of fact.
Why Is Unilateral Mistake Generally Not a Ground to Avoid Contract?
The law protects commercial certainty.
If every one-sided misunderstanding could invalidate contracts, business transactions would become unstable.
Therefore, unilateral mistake ordinarily does not make a contract void.
Example of Unilateral Mistake
A agrees to purchase a property believing that it includes a garden.
The contract documents clearly exclude the garden.
B has made no false representation.
The contract remains valid.
The mistake belongs only to A.
Exceptions: When Unilateral Mistake Makes Contract Void
Although the general rule favors validity, important exceptions exist.
Exception 1: Mistake Regarding Identity of Person
When identity is crucial and consent is obtained through deception regarding identity, the agreement may become void.
Example
A intends to sell goods on credit only to a reputed company.
A fraudster falsely claims to be an authorized representative of that company.
A enters into the agreement because of mistaken identity.
The contract may be void.
Exception 2: Mistake Regarding Nature of Transaction
A person signs a document believing it to be something entirely different.
If the misunderstanding is fundamental and not caused by negligence, the agreement may be void.
Example
An elderly person signs a document believing it to be a guarantee form.
In reality, it is a sale deed.
The transaction may be invalid.
Difference Between Bilateral and Unilateral Mistake
| Basis | Bilateral Mistake | Unilateral Mistake |
|---|---|---|
| Parties mistaken | Both parties | One party only |
| Relevant section | Section 20 | Section 22 |
| Effect | Agreement is void | Contract generally valid |
| Essential fact | Must relate to essential fact | Usually irrelevant |
| Exceptions | Not required | Identity and nature of contract |
Difference Between Mistake of Fact and Mistake of Law
| Basis | Mistake of Fact | Mistake of Law |
| Sections | 20 & 22 | 21 |
| Subject Matter | Facts | Legal Rules |
| Effect | Depends on Circumstances | Indian Law Mistake Not Excused |
| Foreign Law | Treated as Fact | May Render Agreement Void |
Most Important Judiciary, AIBE & CLAT PG Notes
Section 20
Both parties mistaken + essential fact = void agreement.
Section 21
Mistake of Indian law = no relief.
Section 22
One party mistaken = contract generally valid.
Foreign Law
Treated as a question of fact.
Value of Subject Matter
Not a mistake of fact.
Important Case
Tarsem Singh v. Sukhminder Singh.
Important Maxim
Ignorantia Facti Excusat.
People Also Ask
Conclusion
The doctrine of mistake under the Indian Contract Act, 1872 ensures that contracts are based upon genuine consent. Sections 20, 21 and 22 establish a clear distinction between bilateral mistake, unilateral mistake, mistake of fact and mistake of law. A bilateral mistake affecting an essential fact destroys consensus ad idem and renders the agreement void, while a unilateral mistake generally leaves the contract enforceable. Understanding these principles is essential for law students, young lawyers, judiciary aspirants, AIBE candidates, CLAT PG aspirants and anyone seeking a strong foundation in contract law.
