Section 20 Contract Act: Agreement void where both parties are under mistake as to matter of fact

Section 20 of Indian Contract Act: Agreement void where both parties are under mistake as to matter of fact

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void .

Explanation. — An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement, is not to be deemed a mistake as to a matter of fact.

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Agreement Sec 2(e) Contract Sec 2(h)

Legal Commentary & Landmark Judgments: Section 20

Section 20 of the Indian Contract Act, 1872 declares an agreement void ab initio where both parties labor under a bilateral mistake of fact essential to the agreement.

Core Legal Standard: Section 20 provides that where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void (bilateral mistake).
Operational Mechanism & Scope: The statutory explanation clarifies that an erroneous opinion regarding the monetary value of the subject matter is not an essential mistake of fact.

This statutory framework establishes clear operational guidelines, balancing legal compliance with procedural safeguards.

Key Landmark Precedents:

Tarsem Singh v. Sukhminder Singh (1998) 3 SCC 471: The Supreme Court held that where the buyer intended to purchase land on a per-bigha basis while the seller intended a per-kanal basis, both parties were under a bilateral mistake of fact essential to the contract, rendering the agreement void ab initio under Section 20 and entitling the buyer to a full refund under Section 65.
Couturier v. Hastie (1856) 5 HLC 673: The House of Lords ruled that a contract for the sale of a cargo of corn was void where, unknown to both parties, the cargo had already spoiled and been sold before the contract was executed.

Legal Commentary:

Under Section 20, bilateral mistake destroys the contract from its inception (void ab initio). Neither party can sue for specific performance or breach. However, under Section 65, any advance or benefit transferred under the mistaken agreement must be restored to prevent unjust enrichment.

Section 20: Agreement void where both parties are under mistake as to matter of fact

Section 20 of Indian Contract Act: Agreement void where both parties are under mistake as to matter of fact

Legal Commentary & Landmark Judgments: Section 20