Site navigation

Two parties contract on the shared assumption that the specific subject matter still exists, but it had already ceased to exist without their knowledge. How is the agreement classified under Section…

Question and options

Two parties contract on the shared assumption that the specific subject matter still exists, but it had already ceased to exist without their knowledge. How is the agreement classified under Section 20 of the Indian Contract Act, 1872?

  1. Void, as the mistake on both sides concerns an essential fact

  2. Voidable at the option of either party, as both were mistaken

  3. Voidable at the option of the buyer, who receives nothing

  4. Valid, but the seller must refund the price as damages

Answer and explanation

Correct answer: A - Void, as the mistake on both sides concerns an essential fact

Section 20 of the Indian Contract Act, 1872 makes an agreement void where both parties are under a mistake as to a matter of fact essential to the agreement, and the existence of the specific subject matter is such a fact. A mistake of fact under Section 20 does not make the agreement voidable, and with no valid contract there is no breach to compensate.

Practice for these exams

Related exam syllabi

More solved explanations in Free consent