Chapter II - Of Contracts, Voidable Contracts and Void Agreements
Section 20
Section 20: Agreement void where both parties are under mistake as to matter of fact
An agreement is void where both parties mistake a fact essential to it. A wrong opinion about value alone is excluded.
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Need advice on Section 20?
This article is for general information. Refer to the Indian Contract Act, 1872 official text for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
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.
Illustration (a): A agrees to sell to B a specific cargo of goods supposed to be on its way from England to Bombay. It turns out that, before the day of the bargain, the ship conveying the cargo had been cast away and the goods lost. Neither party was aware of these facts. The agreement is void.
Illustration (b): A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.
Illustration (c): A, being entitled to an estate for the life of B, agrees to sell it to C. B was dead at the time of the agreement, but both parties were ignorant of the fact. The agreement is void.
Introduction
Section 20 applies when both parties share a mistake about a fact essential to their agreement; the agreement is void.
Its explanation excludes a mere erroneous opinion about the subject matter’s value. The Act’s cargo and horse illustrations show an essential subject matter that had already ceased to exist.
Key takeaways
Both parties
The mistaken essential fact must be shared by both parties.
Essential fact
An incorrect valuation alone does not meet this provision.
Apply the rule
Identify the specific fact, its truth at agreement date and why it was essential.
Establish what each party believed at that time, then separate valuation error from factual error.
Illustration
Two firms contract for a specifically identified shipment, both unaware that it was destroyed before the bargain. That tracks the Act’s cargo illustration.
Practical checklist
Do
- Identify the shared essential factual belief.
- Preserve evidence of what both parties knew when they agreed.
Avoid
- Do not treat a poor bargain or wrong valuation alone as a Section 20 mistake.
Frequently asked questions
Does a bad price alone void an agreement?
No. The explanation says an erroneous opinion about value is not the relevant factual mistake.
What if only one party was mistaken?
Section 20 requires both parties; Section 22 addresses a mistake of one party.
Need help applying this provision to your situation?
Contact BizeneedLast updated 10 October 2026