CAPACITY TO

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Competence: क्षमता� Infant: शि��� Immature: अपरि�पक्वExploitation: ��षणHardship: कठि�ना�ईRatification: अना�समर्थ�ना, विव��धनाEstoppel: विवबं�धना Insolvency: ठि�व�ला�Necessaries: आवश्यकता�एँ#Saneness: (Of sound mind; mentally healthy) समझ���Lunatic: प�गलाHypnotism: सम्म�हनाmental decay: म�नाशिसक क्षय Intoxication: म��कता�

Important Jargons in this session

Who are Competent to Contract ?

Section 11 of the Contract Act deals with the competency of parties and provides that

“every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.”

In Brief,Every person is competent to Contract:1) Who is of the age of majority;2) Who is of sound mind; and3) Who is not disqualified from contracting by

any law.

1.MinorAn infant or a minor is a person who is not

a major.According to the Indian Majority Act,

1875, a minor is one who is not completed his or her 18th year of age.

Why should minors be protected ?A minor has an immature mind and

cannot think what is good or bad for him. Minors are often exploited. So he must be protected by law from any exploitation.

1) An agreement with or by a minor is void: Sec 11 says that a minor is not competent. So any contract with or by minor is void-ab-initio.

2) No ratification: As any agreement with minor is completely void and hence cannot be ratified even on attaining majority, because a void agreement can’t be ratified.

3) No estoppel against a minor: (false representation by a minor) A minor who falsely represents himself to be a major and thereby induces another person to enter into a contract with him, can plead minority as a defence. A minor can’t be sued on the ground that he falsely represented that he is a major.

Rules regarding minor's Agreement

4) Minor can be a promisee or beneficiary: If a contract is beneficial to a minor it can be enforced by him. There is no restriction on a minor from being a beneficiary.

5) Surety for a minor: (liability of guardian) An agreement by minor is void, but an agreement by a guardian on his behalf is valid, provided it is for his benefit or for legal necessity.

6) No insolvency: A minor cannot be declared insolvent as he is incapable of contracting debts and dues payable from the personal properties of minor.

7) Minor cannot be a shareholder of a company:

Promisee or beneficiary: A minor is allowed to enforce a contract which is of some benefit to him and under which he has to bear no obligations.

Agency: A minor can act as an agent. He can bind his principal by his acts, but he is not liable to his principal for his acts.

Partnership: A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Partnership Act, he can be admitted to the benefits of partnership.

Necessaries: If a person supplies necessaries to a minor, or to minor dependents, which he actually needs, is entitled to be reimbursed from the properties of such a minor. Note- minor is not liable for any price which is more than the value of necessaries, also there is no personal liability for the minor. Only his property is liable.

Exceptions:

Contracts made by persons of unsound mind are void. The reason is that a contract requires assent of two minds but a person of unsound mind has nothing which the law recognises as a mind .

According to Section 12,“ A person is said to be of sound

mind if at the time of making a contract, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.”

2. Persons of Unsound Mind

The question whether a party to contract is of sound mind or not has to be decided by the courts.

Unsoundness of mind does not mean weakness of mind or loss of memory. It means lack of capacity to understand the terms and the effects of the contract.

Unsoundness of mind may arise from:1) Idiocy: An Idiot is a person with no intervals of

saneness. It is permanent. It is due to the lack of development of brain.(always void)

2) Lunacy or Insanity: It is a disease of the brain. Such persons can enter into contract during that period when he is of sound mind.

3) Drunkenness: It produces temporary incapability till the man is under the effect of intoxication.

4) Hypnotism: It is caused under the impact of artificially induced sleep.

5) Mental Decay: It is caused due to old age.

1) Alien enemies: An alien can contract with the citizens of India only in case of peace between the both countries. Not in case of war.

2) Insolvents: An insolvent cannot enter into a contract as his property belongs to the official receiver.

3) Convict: A convict while undergoing imprisonment is incapable of entering into a contract.

4) Married women: A woman married or single whether under Hindu or Mohammedan Law can enter into a contract if she is a major and of a sound mind. For a contract , the consent of her husband is not required. She may sue or be sued in her own name in respect of her separate property.(in old laws married women were totally disqualified from contracting)

3. Persons disqualified from Contracting by any law