Section 20 : Agreement void where both parties are under mistakes as to matter of fact
2022 PLD 73 SUPREME-COURT
MUHAMMAD FAROOQ VS JAVED KHAN
20—Agreement void where both parties under a mistake as to matter of fact—Scope—Mistake of fact relating to the area of land being sold was recognised as essentially fundamental for the purposes of attracting S.20 of the Contract Act, 1872.
2022 PLD 73 SUPREME-COURT
MUHAMMAD FAROOQ VS JAVED KHAN
Ss. 20 & 65—Agreement void where both parties under a mistake as to matter of fact—Principles and scope—According to S.20 of the Contract Act, 1872, a mistake of fact took effect when the parties to an agreement were under a mistake as to a matter of fact essential to the agreement, thus, rendering the agreement void—Judicial consensus that had developed on the common mistake of fact rendering an agreement void, was to discourage frequent intrusions by the court on the smallest of mistakes and to encourage positive exercise of jurisdiction on fundamentally apparent mistake of facts, so as to uphold freedom of contracts and certainty of terms of contracts—As to the nature of what would render the state of affairs a vital attribute or fact, the “mistake” must be fundamental or essential to the agreement going to the root of the contract, which would render execution of the contract wholly or partially unenforceable, and must not be a minor mistake of fact—Effect of such fundamental mistake of fact must be such that the vendee would not have made payment for the object being sold, had the mistake been known to the vendee at its inception—Function of mistake was to show that the benefit, which had been received was an unintended benefit—Satisfying this element was important to ensure that freedom of contract was protected and that parties could not avail provision of S.20 of the Contract Act, 1872 on minor mistakes to try get out of a bad bargain—In order to render an agreement, void under S.20 of the Contract Act, 1872, both the parties must be labouring under the same mistake of fact—Where one party knew the facts but refrained from communicating the same to the other party, S.20 of the Contract Act, 1872 was not attracted, therefore, a unilateral mistake did not enable a party to avoid the contract—Mistake must be a bilateral one, where both parties were mistaken about the same vital fact—Once a common mistake of fact between the contracting parties was established, the legal consequence to ensue was that the agreement entered between the parties was to be declared void under S.20 of the Contract Act, 1872—Such vitiation of the agreement would then lead the aggrieved party to be able to seek restitution under S.65 of the Contract Act, 1872—Where restitution was not possible, the recipient of the money must return the sum so received.
2017 CLD 538 LAHORE-HIGH-COURT-LAHORE
ASIM RIAZ QURESHI VS BANK AL-FALAH LIMITED
Ss. 2(d), 2(e), 9, 7 & 22—Contract Act (IX of 1872) Ss. 20 & 65—Terms “finance” and “obligation” under Financial Institutions (Recovery of Finances) Ordinance, 2001—Scope—Facility/Agreement of Finance—Mistake as to a matter of fact, essential to the agreement, in finance facility agreement—Obligation of person who has received advantage under void agreement or contract that becomes void—Scope—Caveat emptor, principle of—Applicability—Suit for recovery was decreed against defendant—Contention of defendant was, inter alia, that defendant availed finance for purchase of a plot, and it was the obligation of the plaintiff Bank to check the title of the said plot, and since, the title of the said plot was not clear and seller of the plot was not the actual owner, the finance agreement became void—Validity—Agreement executed between the defendant and plaintiff Bank was a finance agreement rather than an agreement between the seller and purchaser of a plot of land, and the same could not be said to be a void instrument owing to disclosure of fraud at such belated stage—Plaintiff Bank was under no mistake as to the terms of the agreement between the parties, and said agreement was for the facilitation of the specified amount to the defendant to buy a plot of land and thus there was no mistake as to the fact that the defendant was obtaining money from the Bank and the same was clear from the offer letter for the finance facility availed by defendant—Present case was therefore within the ambit of S. 65 of the Contract Act, 1872, and S. 20 of the Contract Act, 1872 was not attracted to the same—Under Ss. 2(d) & 2(e) Financial Institutions (Recovery of Finances) Ordinance, 2001, defendant was bound to return the amount obtained through the finance facility and the plaintiff Bank rightly filed suit for recovery under S. 9 of the Financial Institutions (Recovery of Finances) Ordinance, 2001—Act of the defendant for not having done proper due diligence before purchase of said plot was hit by the principle of caveat emptor, which was “let the buyer be aware”—-No illegality existed in the impugned order—Appeal was dismissed, in circumstances.
2016 PLD 199 SUPREME-COURT
PAKISTAN RAILWAYS through AGM(Trafic), Lahore VS FOUR BROTHERS INTERNATIONAL (PVT) LTD
2(e) & Chap. II [Ss.10 to 30-C]—Agreement, rescission of—Agreement between the parties had the status of a statute and unless it was shown that any term of the agreement was violative of the law, it could not be rescinded by a party.
2013 PLD 641 SUPREME-COURT
Maulana ABDUL HAQUE BALOCH VS GOVERNMENT OF BALOCHISTAN through Secretary Industries and Mineral Development
3—Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act (XXIV of 1948), S. 5—Contract Act (IX of 1872), Ss. 20, 23 & 29—Transfer of Property Act (IV of 1882), S. 7—Constitution of Pakistan, Arts. 185(3) & 184(3)—Copper and gold reserves in Reko Diq area of province of Balochistan—Joint Venture exploration agreement between Provincial Development Authority and respondent-company—Irregularities and illegalities committed in the execution of the said agreement—Jurisdiction of Supreme Court to adjudge the validity of said agreement—Scope—Supreme Court had the jurisdiction to adjudge the validity of Joint Venture agreement in question on several grounds, including non-transparency, violation of law/rules, curtailment of the fundamental rights of the general public, etc.—Joint Venture agreement was executed contrary to the provisions of the Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act, 1948, the Balochistan Mining Concession Rules, 1970, the Contract Act, 1872, the Transfer of Property Act, 1882, etc., and was even otherwise not valid, therefore, the same was illegal, void and non est—All subsequent agreements which were based upon or emanated from the Joint Venture agreement were also illegal and void—All such agreements did not confer any right on respondent-company or any other company—Exploration licence granted in respect of Reko Diq area tantamount to exploration contrary to rules and regulations as it was based on the Joint Venture agreement, which itself had been held to be non est—Joint Venture exploration agreement in question was held to be void and unenforceable.
2013 PLD 641 SUPREME-COURT
Maulana ABDUL HAQUE BALOCH VS GOVERNMENT OF BALOCHISTAN through Secretary Industries and Mineral Development
3—Balochistan Development Authority Act (X of 1974), Ss. 3(2), 16(1)(b)(i) & 17(6)— Contract Act (IX of 1872), Ss. 20 & 196—Balochistan Government Rules of Business, 1976, R. 7(2)—Constitution of Pakistan, Arts. 185(3) & 184(3)—Copper and gold reserves in Reko Diq area of province of Balochistan—Joint Venture exploration agreement between Provincial Development Authority and respondent-company—Provincial Government was subsequently made party to the said agreement by the Provincial Development Authority, which purportedly acted as an agent of the Provincial Government—Legality—Uncertainty as to the relationship between principal and agent—“Mistake of fact”—Effect—Provincial Government was purportedly made a party to the Joint Venture agreement by way of an addendum to the agreement—While signing the said addendum Provincial Development Authority purportedly acted as an agent of the Provincial Government under the Joint Venture agreement, which was a mistake of fact, therefore, the same was void under S.20 of the Contract Act, 1872— Provincial Development Authority possessed its own legal personality, distinct and separate from the Provincial Government—Balochistan Development Authority Act, 1974 did not authorize the Provincial Development Authority to act as an agent of the Provincial Government—By means of the addendum, in the name of ratification in terms of S.196 of the Contract Act, 1872, instead of making amendments in the Joint Venture agreement, its entire complexion was changed—Provincial Development Authority while entering into the addendum remained in a state of confusion as to whether Joint Venture agreement was, or any subsequent agreement on the subject had, to be entered into by it independently of any other department of the Provincial Government—Such confusion on the part of Provincial Development Authority as well as Provincial Government led to a fundamental “uncertainty” and ambiguity in the Joint Venture agreement, which rendered the contract void ab initio—Joint Venture agreement suffered from “uncertainty” as to the parties to the agreement and was void ab initio.
2012 PTD 313 FEDERAL-TAX-OMBUDSMAN-PAKISTAN
HASHIM SABIR RAJA VS SECRETARY, REVENUE DIVISION, ISLAMABAD
R.65(ii)—Contract Act (IX of 1872), S.20—Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3)(i)(b) & 10(4)—Auction—Auctioneer, at the time of auction, presented the vehicle as Mercedes Benz of 1998 model and delivery order issued by the auctioneer in favour of buyer on behalf of Department also indicated the vehicle to be of 1998 model—Inspection of the vehicle revealed that vehicle was of 1992 model—Complainant contended that auction be cancelled as he was led to buy the vehicle on wrong information made available to him by the Department and auctioneer—Validity—Goods were auctioned on, “as is where is” basis, Department was nevertheless required to provide the correct “details of goods” to the prospective purchaser in terms of R.65(i) of the Customs Rules, 2001—Section 20 of the Contract Act, 1872 provided that where both the parties were under a mistake as to a matter of fact, the agreement was void—Delivery alone was not of the essence—Irrespective of the fides of the Department, the complainant, a bona fide purchaser had suffered a loss because of the wrong information provided by the Department—Where there was a wrong, there was a remedy, grievance had to be redressed—Department’s resistance to reverse a process which was so patently unfair and unjust was tantamount to maladministration—Federal Tax Ombudsman recommended the Federal Board of Revenue to cancel the auction and refund the full auction amount after retrieval of the vehicle.
2011 PLD 44 SUPREME-COURT
PAKCOM LIMITED VS FEDERATION OF PAKISTAN
Ss. 14, 15, 16, 17, 18, 20, 21 & 22—“Coercion”, “undue influence “, “fraud”, “misrepresentation”, “mistake”-Scope-“Consent”-Ingredients-Where all the terms and conditions enumerated in the contract have been accepted by the parties freely and at their own, contract does not fall within the ambit of “coercion” as defined in S.15 or “undue influence” as defined in S.16 or “fraud” as defined in S.17 or “misrepresentation” as defined in S.18 or “mistake” as enshrined in Ss.20, 21, 22 of the Contract Act, 1872—All agreements or contracts are made by the free consent of parties—“Consent” is said to be free as provided under S.14 of the Act, when it is not caused by coercion, undue influence, fraud, misrepresentation and mistake subject to the provisions of Ss.20, 21 & 22 of Contract Act, 1872—Principles.
2008 CLC 1340 HIGH-COURT-AZAD-KASHMIR
ASHFAQ AHMED VS Ch. MAQBOOL RAZA
12—Contract Act (IX of 1872), S.20-Suit for specific performance of agreement to sell—Applicability of S.20, Contract Act, 1872—Scope—Absolute contract—Enforceability—Execution of agreement between the parties was dependant upon the condition that the vendor would execute the sale-deed after obtaining the proprietary rights—If the proprietary rights had not been granted to vendor by the government for failure to deposit the sale price or for any other reason, only in that eventuality it could be said to be frustrated and its execution had become impossible—During the pendency of the suit for specific performance of the contract vendor had acquired proprietary rights vide Notification—Contract, in circumstances was absolute and had become enforceable—Findings of the court below that parties were under some mistake and the contract was liable to be ignored under S.20 of Contract Act, 1872, could not be approved because S.20 was not attracted in the case—Section 20 of Contract Act, 1872 would come into play only when both the parties to an agreement were under a mistake as to a matter of fact essential to the agreement—Only in that case the agreement would become void—Transferee during pendency of the suit could not be regarded as a necessary party and decree passed against the transferor could be executed without impleading such transferee a party to the proceedings—Where a title was acquired during pendency of the proceedings the specific performance of contract executed in respect of the said property could not be avoided nor after the execution of the contract its executant could come with volta face that he was not competent to enter into a contract.
2006 CLD 497 KARACHI-HIGH-COURT-SINDH
Messrs TRAVEL AUTOMATION (PVT.) LTD. through Managing Director VS ABACUS INTERNATIONAL (PVT.) LTD. through President and Chief Executive
–Ss. 3 & 4—Contract Act (IX of 1872). Ss.20 & 56—Stay of proceedings—Court can refuse stay of the proceedings if at the time of execution of the arbitration agreement same was void or becomes void subsequently, by some reason or some event such as
2006 CLD 497 KARACHI-HIGH-COURT-SINDH
Messrs TRAVEL AUTOMATION (PVT.) LTD. through Managing Director VS ABACUS INTERNATIONAL (PVT.) LTD. through President and Chief Executive
–Ss. 3 & 4—Arbitration Act (X of 1940), S.3—Arbitration (Protocol & Convention) Act (VI of 1937), S.3—Contract Act (IX of 1872), Ss.20 & 56—United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards. 1958—Discretion
2002 CLD 1280 LAHORE-HIGH-COURT-LAHORE
AGRICULTURAL DEVELOPMENT BANK OF PAKISTAN VS Malik IFTIKHAR AHMED
Contract Act 1872 —-S.20—Mistake as to a matter of fact—One of the parties under mistake contended that the agreement was void under S.20 of Contract Act, 1872—Validity—Where both the parties were not under a mistake but only one party was under misconception of facts, the agreement was not void under S.20 of Contract Act, 1872.
2001 CLC 1323 LAHORE-HIGH-COURT-LAHORE
MUHAMMAD IBRAHIM VS AKHTAR ALI
Contract Act 1872 —-S. 20— Void agreement—Where both the parties to an agreement, were under a mistake as to a matter of fact essential to the agreement, the agreement would be void.
2001 CLC 1112 LAHORE-HIGH-COURT-LAHORE
KARAM BI VS KHAN BAHADUR
42—Civil Procedure Code (V of 1908), S.100—Contract Act (IX of 1872), S.20—Suit for declaration—Appellate jurisdiction of High Court in second appeal—Mistake as to matter of fact—Effect—Plaintiffs in their suit had assailed judgment and decree passed in earlier suit on the ground that parties in that suit were under a bona fide mistake as to suit property–Plaintiffs had also asserted that the agreement on basis of which decree was passed was void as both parties were under mistake as to matter, of fact essential to the agreement—Trial Court decreed the suit and decree earlier passed was declared to be ineffective and inoperative against the rights of the plaintiffs and said findings of the Trial Court were concurred by Appellate Court below—Concurrent findings of fact recorded by both Courts below being perfectly in accordance with the evidence on record,, warranted no interference by High Court in second appeal.
2001 YLR 1193 KARACHI-HIGH-COURT-SINDH
TARIQ SOHAIL VS DEFENCE HOUSING AUTHORITY
Contract Act 1872 —-S. 20—Mistake by parties under agreement—Effect—Where mistake occurs, one of the two persons must suffer loss and the loss should fall on the one who is mast culpable; who would most easily have avoided its consequences and on whom the greater duty to discover the cause and defect rested, requires a grantor rather than a grantee to suffer loss in case of breach of covenant of warranty or of a covenant for quiet and peaceful possession.
1990 CLC 1514 LAHORE-HIGH-COURT-LAHORE
MUHAMMAD AMEER QASMI VS MUHAMMAD AZHAR
Contract Act 1872 Ss. 20, 21 & 22—Mistake as to a matter of fact entertained by one of parties, held, would not make contract voidable, but mistake as to matter of fact entertained by both parties would make contract void.
1988 CLC 1272 LAHORE-HIGH-COURT-LAHORE
PUNJAB PROVINCE VS ATTA MUHAMMAD
Contract Act 1872 S. 20–Parties were not at all under mistake of fact in regard to area or identification of land–If there was some clerical mistake, whole contract, held, could not be avoided on basis of such mistake which needed rectification–Plea that due to mistake in contract whole contract was void, was not correct in circumstances.
1973 PLD 444 KARACHI-HIGH-COURT-SINDH
MUHAMMAD BIBI VS ABDUL GHANI
Contract Act 1872 Ss. 20 & 22– Contract Mistake—Avoidance of contract on ground of its being void for mistake of fact—Both parties should be under mistake as to matter of fact essential to agreement–Contract not voidable because of one of parties only being under mistake as to matter of fact.
1967 PLD 275 KARACHI-HIGH-COURT-SINDH
SYED GHOUSUDDIN AHMED VS CHAIRMAN, KARACHI PORT TRUST
Contract Act 1872 —-, Ss. 19, 20, 21 & 22′-Karachi Port Trust is statutory body and governed by Karachi Port Trust Act, 1886 and Bye-laws-Contract of high valuation can be made with consent of Board-Board giving consent upon basis of mistake of question of fact-No valid contract-Application under S. 20 of Arbitration Act (X of 1940), by contractor in such circumstances not maintainable.
1964 PLD 337 SUPREME-COURT
SIBTAIN FAZLI VS STAR FILM DISTRIBUTORS AND MUHAMMAD ALI KHAN
Contract Act 1872 S. 20-Parties to contract both under misapprehension as to a relevant fact and one party abandoning a right under contract as result of such misapprehension-Such abandonment does not affect rights of party abandoning such right-Principle of S. 20 applicable.
1957 PLD 95 PRIVY-COUNCIL
SHEIKH BROTHERS LIMITED VS ARNOLD JULIUS OCHSNER
Contract Act 1872 ——Ss. 20 and 56-Contract void under S. 20 for a mistake of fact essential to the agreement Promisee not entitled to compensation under S. 56.
1950 PLD 42 LAHORE-HIGH-COURT-LAHORE
RAI BAHADUR JHODHA MAL KUTHIALA VS THE ASSOCIATED HOTELS OF INDIA, LTD
25–(b)-Agreement of sale–Development Scheme including property agreed to be sold-Publication of notice under section 36 Punjab Town Improvement Act 1922, effect of-Vendor’s title free from reasonable doubt-Purchaser whether can rescind contract-Contract Act (IX of 1872) section 20-Mistake as to a matter of fact essential of agreement-Transfer of Property Act (IV of 1882) section 55 (1) (a)-Duty of seller.