Correct option is B
If A and B enter into a contract under the mistaken belief that a debt is time-barred, the contract is void under Section 20 of the Indian Contract Act, 1872. A contract is void if both parties are under a mutual mistake of fact essential to the agreement. Here, the mistake regarding the debt being time-barred is a mistake of law, not of fact, but it renders the contract void because the parties acted under a misconception about their legal obligations.
Information Booster:
A void contract has no legal effect from the beginning (ab initio). A mistake of fact can void a contract, whereas a mistake of law typically does not, except in certain circumstances like in this case, where it affects the very foundation of the agreement.
Additional Knowledge:
· Valid: Contracts are valid when there is no mistake that affects the basis of the contract.
· Illegal: Would involve a contract that is against the law; this situation involves a mistake, not illegality.
· Both (b) and (c): This is incorrect as the contract is void due to the mistake, not illegal.
