Introduction

• ‘Consensus ad idem’ is a ‘Latin’ term that means, agreement. This is the first principle that's the foundation of enforceable contracts because for contracts to be enforceable, agreement or a meeting of the minds of all involved parties is required.
• It is a common law concept that requires both parties entering into a contract to have a common intention to accept and comply with the terms outlined in the contract.
• Section 2(a) of the Indian Contracts Act, 1872 (ICA) provides that ‘when one person signifies to another his willingness to do or abstain from doing anything, with a view to obtaining the assent of that other to the act or abstinence, he is said to make a proposal. Hence, an offer is a promise made by a party to do or refrain from doing something in exchange for specific performances from the other party.
• Once the other party accepts the offer, an agreement is formed. Although other elements have to be fulfilled before a valid contract can be concluded, the doctrine of consensus ad idem serves as the basis which leverages the existence of a contract.

Example

• A agrees to sell his car to B. A owns three cars and wants to sell the Maruti. B thinks he is buying his Honda. Here A and B have not agreed upon the same thing in the same sense. Hence there is no consent and subsequently no contract.

Parties Must Agree on the Same Thing in the Same Sense

• According to Section 13 of the ICA, when two or more persons are said to consent to a common thing when they agree upon the same thing in the same sense.
• In other words, the meeting of minds takes place when both contracting parties fully understand and freely consent to undertake all contractual obligations upon entering into a contract.

Mistake

• Mistake is not defined in the ICA Sections 20, 21 and 22 deal with the concept related to mistake.
• Mistake means wrong belief, which is innocent and leads one party to rise misunderstanding against another.
• A mistake happened when the terms and conditions of the agreement were not clear between the parties. Both parties understand consequences on different terms and there was no consensus-ad-idem thus not understanding the same thing in same sense.

Mistake of Fact

• Ignorance of fact is excusable under law. Under Section 20 of the act, this term is explained.
• Bilateral Mistake
  • When both parties of a contract are under a mistake of fact essential to the agreement, such a mistake is what we call a bilateral mistake.
  • Since there is an absence of consent altogether the agreement is void.
• Unilateral Mistake
  • A unilateral mistake is when only one party to the contract is under a mistake.
  • Section 22 of the act states that just because one party was under a mistake of fact the contract will not be void or voidable. So, if only one party has made a mistake of fact the contract remains a valid contract.

Types of Bilateral Mistakes

• Mistake regarding the Existence of the Subject Matter
  • When the existence of the subject matter of the contract ceases to exist before the agreement has been made between the parties to the contract may not be aware of this fact, it is considered that the contract has perished and hence the agreement would be considered void.
• Mistake regarding the Quality of the Subject Matter
  • If the parties to the contract are not mistaken regarding the subject matter of the contract but regarding its quality, the contract would be said to be valid.
• Mistake regarding the Quantity of the Subject Matter
  • If both parties to the contract are under a mistake as to the quantity of the subject matter, the agreement is said to be void.
  • For Example, Ankita agreed to buy a car from Shubham based on his letter in which the price mentioned was 50000 instead of 5 lakhs due to a typing error. The said agreement is considered void due to a mistake as to the quantity of the subject matter.
• Mistake regarding the Title of the Subject Matter
  • Sometimes the buyer of said property or good may already be the owner of what the seller wishes to sell.
  • Both the parties here might be under a mutual mistake as to the title of the said good or property.
  • Since in such a case there is nothing that the seller can transfer, there is no contract which subsequently becomes void.

Case Law

• Cundy v. Lindsay (1878):
  • It is an English contract law case on the subject of mistake, introducing the concept that contracts could be automatically void for mistake as to identity, where it is of crucial importance.
• Smith v. Hughes (1870):
  • The plaintiff agreed to buy certain oats from the defendant believing that they were old when in reality they were new. The English Court held that the defendant cannot avoid the contract on the ground that he was mistaken as to the oldness of the oats.