Law: Contract Act (IX of 1872)

Section: 20,56

Contract Act (IX of 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.   Held, that the third paragraph of section 56, Contract Act, requiring compensation to be paid to the promisee for the failure of performance of a contract, on account of its impossibility or unlawful nature, which impossibility or unlawful nature was known, or might, with reasonable diligence, have been known to the promisor, applied only where an agreement otherwise valid was rendered void by such impossibility of performance.   Therefore, compensation was not payable under section 56 in respect of non performance of a contract which was void under section 20, Contract Act, for a mutual mistake a to matter of fact essential to the agreement.   Where A, a lessee of certain area of land and B a licensee from A, having a license to cut, decorticate, process and manufacture all sisal growing upon that area, entered into a kind of joint adventure, B undertaking, that he will deliver to A sisal fibre manufactured from sisal leaf in average minimum quantities of 50 tons per month, and it turned out that the leaf potential of the sisal area was incapable of yielding that quantity of sisal fibre, both parties having had an erroneous belief in regard to this and the contract was thus void under section 20:   Held, that no compensation was payable to A.   Bell v. Lever Bros. 1932 A C 161 mentioned.   Solicitors: T. L. Wilson & Co.   Solicitors: Field Roscse & Co.   Date of hearing: 19th November 1956.   JUDGMENT   LORD COHEN.-----This appeal raises questions as to the effect of sections 20 and 56 of the Indian Contract Act on a license agreement between the appellant and the first respondent on the 9th December 1950.   Sections 20 and 56 are in the following terms:-   "20. 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…