Section 21 of Indian Contract Act

21. Effect of mistakes as to law.— A contract is not voidable because it was caused by a mistake as to any law in force in India; but a mistake as to a law not in force in India has the same effect as a mistake of fact.

Illustration

A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation: the contract is not voidable.

Final Thoughts

Introduction

Section 21 of the Indian Contract Act, 1872 talks about mistakes related to law and how they affect the validity of a contract. It clarifies whether a contract becomes void or voidable if it was made under some misunderstanding or mistake about the law.

Explanation of Key Terms

• Mistake: Wrong belief about something by one or both parties.
• Voidable: A contract that is valid but can be cancelled by one party.
• Law in force in India: Any law applicable and operational in India.
• Law not in force in India: Foreign law or international laws not applicable in India.
• Mistake of fact: Wrong belief about a factual situation.

Explanation of Section 21

Section 21 says that:

• If two parties enter into a contract based on a mistake about Indian law, that does not make the contract voidable.
• However, if the mistake is about a foreign law (i.e., not applicable in India), then it is treated like a mistake of fact, which can make the contract voidable in certain cases.

Types of Mistake in Contract Law

There are generally two types of mistakes:

a) Mistake of Fact

• If both parties are mistaken about a fact that is important to the agreement, the contract may be void.
• Example: Buying a car that both parties believe exists, but it has already been destroyed.

b) Mistake of Law

• A mistake about what the law says or means.
• According to Section 21:
  • If the mistake is about Indian law, it does not affect the contract.
  • If the mistake is about foreign law, it is treated as a mistake of fact.

Illustration Explained

“A and B make a contract grounded on the erroneous belief that a particular debt is barred by the Indian Law of Limitation: the contract is not voidable.”

Explanation:

• A and B wrongly believe that a debt cannot be recovered due to limitation law (Indian law).
• Based on this belief, they enter into a contract.
• Even though they misunderstood Indian law, the contract remains valid.
• Why? Because the mistake is about Indian law, and mistake of Indian law does not make a contract voidable.

Indian Law vs Foreign Law

• People cannot cancel a contract just because they did not know the Indian law correctly. It helps maintain certainty and stability in contractual relationships.
• However, for foreign law, courts may be a bit more flexible, as such laws are not expected to be commonly known by everyone.

Conclusion

Section 21 of the Indian Contract Act clearly says that a mistake of Indian law is not a valid reason to cancel a contract, because everyone is expected to know the law of their own country. But if the mistake is about foreign law, then it is treated as a mistake of fact, and the contract may be voidable depending on the situation.

This provision is important to avoid misuse of ignorance of law and to ensure that contracts are not unnecessarily cancelled due to misunderstandings about Indian law.