A was employed to sell B’s cargo which was on voyage. After the sale of cargo at an intermediate port to C, it was discovered that the cargo had been damaged by bad weather. Decide.
The sale of cargo at an intermediate port to C, before its discovery that it had been damaged by bad weather is a void contract under Sec. 20 of the Indian Contract Act due to bilateral mistake as to non existence of subject matter.
When both the parties to the contract are under a mistake as to a matter essential to the contract, it is called Bilateral Mistake. Thus the mistake must be mutual and relate to the essential terms of the contract.
If both the parties believe the subject matter of the contract to be in existence/good condition but in fact, it is non-existent/damaged, then such contract between the parties is void.
The facts of the above case resemble the leading case Couturier Vs. Hastie, (1856) 5 H.L.C. 673, wherein the Court held that the agreement of sale of fermented corn unknown to both the buyer and the seller due to bilateral mistake was void and hence the buyer was not liable to pay for the price to the seller.