When parties to a contract are under a ‘mistake’ regarding an important fact related to such contract, it may affect the contract in two ways. It may, firstly, defeat the consent altogether that the parties are supposed to have given, that is to say, the consent is unreal. Two or more persons are said to consent when they agree upon the same thing in the same sense. Secondly, the mistake may mislead the parties as to the purpose which they had contemplated. Where the mistake does not defeat consent, but only misleads the parties, i.e., where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. However, if the mistake is concerning an erroneous opinion regarding value of the subject-matter of the agreement, it is not a mistake as to a matter of fact. Thus, agreement is void when: (1) both the parties to an agreement are mistaken, (2) their mistake is as to a matter of fact, and (3) the fact about which they are mistaken is essential to the agreement. Further, it is pertinent to note that a mistake, in order to invalidate a contract, should be a mistake of fact and not a mistake of law. Furthermore, where only one party to the contract is under mistake of fact, and the other party is not, the contract is not voidable merely for such reason.

mr. d appointed mr. K to manage the cultivation of his land as he was unable to manage it himself due to his advanced age. mr. K agreed to manage the cultivation of mr. d’s land if he granted mr. K a lease of the said land. mr. d agreed to the same and signed a deed which was, unknown to both parties, a gift deed of the land and not a lease deed. in the given situation, which of the following statements is true?