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CAPACITY TOCONTRACT

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Meaning & Definition…• According to section 11 of the contractact:

“ Every person is competent to contract whois of the age of majority according to thelaw to which he is subject, & who is ofsound mind, and is not disqualified from

contracting by any law to which he issubject.”

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Persons disqualified from

entering into the contract…• Minors, who are not of the age of

majority.• Persons of unsound mind, and• Persons disqualified to contract by

any law ( Insolvents )

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MINOR• Who is a minor – Acc. To sec 3 of

Indian majority act, 1875, a minor isa person who has not attained theage of 18 years.

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Rules relating to an

agreement with a minor• First rule- law protects minorsagainst their own inexperience &

against the possible improper designsof those more experienced• Second rule-the law should not cause

unnecessary hardship to persons whodeal with minors

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Minor’s Agreements1. Agreement is void ab initio:Case mohori bibi vs. Dharmodas Ghose –Dharmodas , a minor executed a mortgage for Rs.

20000 declaring himself major & received Rs.8000 from mohori bibi, a mortgagee. The minorwanted to set aside the mortgage. The mortgageewanted the refund of Rs 8000. It was held thatthe agreement with the minor was void ab initio &

question of refunding money does not arise.

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• However, the minor may enforce the agreementagainst the other party if he has carried out hisobligation.

2.No Ratification – minor cannot ratify theagreement on attaining the age of majority whichhe has entered into in the age of minority.

3. Minor can plead minority to avoid contract.X, a minor borrows money by saying that he is a

major.

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4. A minor is not liable to restore the property orgoods.

Minor can be compelled :• If goods are traceable in his possession.If minor has sold the goods then nothing can be

claimed.

5. No specific Performance – means actualperformance of contract as agreed as contract isvoid ab intio. But in case guardians enterd into a

contract if they have the authority and it is forthe benefit of minor, it is valid

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6. Minor can be a promisee or a beneficiary – Wherethe minor bears no obligation & rather theagreement is for his benefit, then suchagreement is valid. ( A promissory note executedin favor of minor is valid )

7. Minor as a partner – A minor cannot become apartner in the partnership firm ….but he can beadmitted to benefits of the partnership withconsent of all the partners. The minor is liable tolosses but not his personal property.

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11. Minor’s Liability for necessaries – Minor is liableto pay a reasonable price for the necessaries

supplied to him…. His property is liable but he isnot personally liable .

12. Position of minor’s parents – The parents are not

liable for the contract entered into by the minorhimself. They r liable only if minor is their agent

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13. Minor as a shareholder – A minor cannot become

a shareholder but fully paid up shares my betransmitted to him through his lawful guardians.

14. A minor is liable in tort(civil wrong) but wheretort arises out of contract a minor is not liable intort as indirect way of enforcing an invalidcontract

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• A minor is liable to pay for his necessariessupplied or services rendered to him whom he islegally bound to support.

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Minor’s Liability for

necessaries …• Necessaries is not confined to food,clothing & shelter but it also includes

articles or services which arereasonably necessary for a minorsuitable to his conditions in life … awatch or a bicycle may be necessaryfor a minor.

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Following are considered

as necessaries …• For saving his property from sale inexecution.

• For marriage of a minor.• For marriage of his sister.• For shradh ceremonies of the ancestors of

the minor.

• For rent of house taken by minor for thepurpose of studies.

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Following are not

considered as necessaries …• Cigar & tabacco.• Refreshment for entertainment.

• A silver giftThe minor would not be personally liable forreimbursement of necessaries, howeverhis property is liable for reasonable pricefor necessaries.

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Services• Education• Medical help

• Legal Advice• Training for advice

• Also liable to pay loan taken fornecessaries

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Persons of UNSOUND

MIND…• Acc to sec 12:“ A person is said to be of sound mind

for the purpose of making a contractif, at the time when he makes it, heis capable of understanding it & of

forming a rational judgment as to itseffect upon his interest.”

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Unsoundness may be

categorized as:• Idiots – has completly lost his mentalpowers

• Lunatic – the person losses thecapacity due to the illness of brain ormental bodily distress.

• Drunkenness

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Persons disqualified from

contracting• Alien enemy• Foreign sovereign (prior sanction of central govt)• Corporations – contract is ultra vires if not in

MOA)• Insolvents- all property in hand of Official

assignee. He can enter into contract when courtpasses an order of discharge

• Convicts – persons who are sentenced toimprisonment cannot enter into contract duringthat period).

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THANK YOU