True or false: void contract; past consideration; unilateral mistake

(i)False The Act keeps apart two things that are often confused: an agreement that is void and a contract that becomes void.

• Void agreement. Section 2(g) states: “An agreement not enforceable by law is said to be void.” Such an agreement never binds anyone; it is void from the very start, that is, void ab initio.
• Void contract. Section 2(j) states that “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. The words ceases and becomes show that it was a valid, enforceable contract when it was made and loses its force only later, typically because the law changes or because circumstances arise that the parties did not contemplate.

Example: in January a Pune caterer agrees to serve the food at a banquet hall on 15 March; in February the hall burns down. The contract was good when made and becomes void only when the fire makes performance impossible. It is a void agreement, not a void contract, that is void ab initio.

(ii)False Indian law accepts past consideration.

• Section 2(d) treats as consideration what the promisee or any other person, at the promisor's desire, “has done or abstained from doing” as well as what he does or promises to do; those words recognise past consideration.
• Condition: the past act must have been done at the promisor's desire, that is, at his earlier request. A later promise to pay for it is then binding, because the law reads the promise as an admission that the service was not meant to be free. A past act done without any request is only the motive for a later promise, not its consideration.
• Past voluntary acts: even a past act done voluntarily supports a later promise if the promise falls within the second exception to section 25, which, as the section states, saves “a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor” (it equally covers an act that the law could have compelled the promisor to do).

Example: in June, at Meera's request, Arjun designs the website of her boutique in Lucknow; in July Meera promises to pay him ₹40,000 for it. The work done in June is past consideration, and Arjun can recover the ₹40,000.

(iii) True, as a general rule. Under section 22, a contract does not become voidable just because one of its parties entered it under a mistake about a matter of fact. A party who has misjudged the facts on his own cannot escape the bargain for that reason alone.

Example: at a Jaipur handicrafts fair a buyer pays ₹15,000 for a rug, assuming without asking that it is hand-knotted; the seller says nothing about how it was made, and it turns out to be machine-made. The buyer's own mistake gives him no right to avoid the purchase.

The limit of the rule. Consent under section 13 means that the parties agree upon the same thing in the same sense. If one party's error is fundamental, going to the nature of the transaction (for instance, the character of the document he signs) or to the identity of the person he is dealing with, there is no consent at all, so no contract comes into being. Example: a man posing as the purchase officer of a well-known Kolkata firm orders goods in that firm's name from a supplier who means to deal only with the firm. In such a case the agreement is void from the start; it is not a voidable contract that the mistaken party must avoid.

So a unilateral mistake is not, by itself, a ground for avoiding a contract: either the contract stands, or, where the mistake is fundamental, there was never a contract to avoid.