25/07/2026
🚩 Under the Indian Contract Act, 1872, bilateral mistake means a situation where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement.
1️⃣ Provision:
Section 20 – Agreement void where both parties are under mistake as to matter of fact
“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.”
2️⃣ Essentials of Bilateral Mistake
For Section 20 to apply:
1. Both parties must be mistaken.
2. The mistake must relate to a matter of fact (not law).
3. The fact must be essential to the agreement.
If all these conditions are satisfied, the agreement is void ab initio (void from the beginning).
3️⃣ Examples
💡 A agrees to buy B’s horse. Unknown to both A and B, the horse had already died before the agreement was made. The agreement is void because both parties were mistaken about an essential fact (existence of the subject matter).
💡A agrees to purchase a specific painting from B. Both believe it is an original, but it is actually a replica. If the originality was the basis of the agreement, there is a bilateral mistake regarding an essential fact, and the agreement is void.
4️⃣ Bilateral Mistake vs Unilateral Mistake
Bilateral Mistake
- Both parties are mistaken
- Governed by Section 20
- Agreement is void if the mistake relates to an essential fact.
Unilateral Mistake
- Only one party is mistaken.
- Governed by Section 22
- Generally, the contract is not void (subject to certain exceptions). Agreement usually remains valid.
5️⃣ Important Summary Points for CA Foundation Exam 📌
✔ Must be a mistake of fact, not a mistake of law.
✔ The mistake must be common to both parties.
✔ The fact must be essential to the agreement.
✔ The effect is that the agreement is void under Section 20.
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