All India Bar Examination (AIBE) 4-IV Previous Year Question Papers with Answers

The correct option is B: Mistake of fact by both the parties.

According to Section 20 of the Indian Contract Act, 1872, an agreement is void if both the parties are under a mistake as to a matter of fact essential to the agreement. For example, if A agrees to sell his car to B, but the car was stolen before the agreement, then the agreement is void because both A and B were mistaken about the existence of the car.

Mistake of fact by one party (option A) does not make an agreement void, but it may make it voidable if the other party has induced the mistake by fraud or misrepresentation. For example, if A sells a painting to B, claiming that it is an original work by a famous artist, but in fact it is a copy, then B can avoid the agreement on the ground of fraud.

Mistake of foreign law (option C) does not make an agreement void, but it has the same effect as a mistake of fact. This is because foreign law is treated as a matter of fact and not as a matter of law. Section 21 of the Indian Contract Act states that a contract is not voidable because of a mistake as to any law in force in India, but a mistake as to a law not in force in India has the same effect as a mistake of fact. For example, if A and B enter into a contract in India, but they are mistaken about the law of England which governs their contract, then their contract may be void if the mistake is material.

Therefore, option D (all of above) is also incorrect. Only option B is correct.