Capacity of the Parties

Section II of the Contract Act states that "Every person is competent

MINORITY
Who is a minor?
According to the Indian Majority Act, 1875, a minor is one who has not
completed his or her 18th year of age.
To this rule there are two exceptions-{i) when a guardian of the
minor's person or property is appointed by a court of law and (ii) when
a minor's property is taken over by the Court of Wards! for
management. In either cases minority continues up to the
completion. of the 21st year.'
The Law regarding Minor's Agreement:
1.Minor's Agreement is Void: An agreement by a minor is absolutely
void and inoperative. Molwri Bibi v. Dharmodas Ghose. In this case a
minor executed a mortgage for Rs,20.000 and received Rs. 8000 from
the mortgagee. He sued for setting aside the mortgage. The
mortgagee wanted refund of the sum which he had actually paid; viz.
Rs. 8,000. The Privy Council held that an agreement by a minor was
absolutely void and therefore the question of refunding the money did
not arise. Had the agreement been only voidable, the benefit received
would have been refundable under Sec. 64 or Sec. 65 of the Act. The
decision of the Privy Council that an agreement by a minor is void, is
based upon a strict interpretation of Section II of the Act.
2. A minor can be a promise: An agreement under which a minor has
received a benefit can be enforced as against the other party. A minor
in whose favo!Jr a mortgage has been executed can get a decree for
the enforcement of the mortgage.
3.Minor's Liability for Necessaries: The minor's property is liable for
the payment of a reasol1 able price for necessaries supplied to the
minor or to anyone whom the minor is bound to support. What is a
necessary article is to be determined from the status, and the social
position of the minor and the price which the trader will get is
reasonable price, not the price "agreed to" by the minor and also the
liabilities will be to the property of the minor not the minor
himself.[Section 68].
4. Law regarding Compensation or Restitution: A minor cannot be
compelled to compensate for or refund any benefit which he has
received under a void agreement because Sections 64 and 65 of the
Act do not apply to such cases. But it has been held in a number of
cases that the court may, on cancelling an instrument at the instance
of a minor, require the minor to make compensation to the other
party. The court's power, to do so, is given by Section 41 and 38 of the
Specific Relief Act of 1877.
5. No Estoppel: The Principle of estoppel is a rule of evidence. When
a man has by words spoken or written or by conduct induced another
to believe that a certain state of things exists he will not be allowed to
deny the existence of that state of things. "Estoppel arises when you
are precluded from denying the truth of anything which you have
represented as a fact, although it is not a fact."[Section 115, Evidence
act 1872]
11. Position of minor's guardian: An agreement by a minor is void
but an agreement by his guardian on his behalf is valid provided the
obligations undertaken are within the powers of the guardian. An
agreement made by the guardian is binding on the minor if it is for the
benefit of the minor or is of legal necessity.
PERSONS OF UNSOUND MIND
Definition of "Sound mind"
For a valid agreement it is necessary that each party to it should have
a sound mind. What is a "sound mind" for the purpose of contracting,
is laid down in Section 12 of the Indian Contract Act. Section 12 : "A
person is said to be of sound mind for the purpose of making a
contract if. at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its effect
upon his interests.
A person who is usually of unsound mind, but occasionally of sound
mind may make a contract when he is of sound mind. A person who
is usually of sound mind, but occasionally of unsound mind may
make a contract when he is of sound mind. A person who is u'sually
of sound mind, but occasionally of unsound mind, may not make a
contract when he is of unsound mind."
Idiocy: The term idiot is applied to a person whose mental powers are
completely absent. Idiocy is a congenital defect caused by lack of
development of the brain.
Lunacy or Insanity: This is a disease of the brain. A lunatic is one
whose mental powers are deranged so that he cannot form a rational
judgment on any subject. Lunacy can sometimes be cured. Idiocy is
incurable.
Drunkenness: Drunkenness produces temporary incapacity. The
mental faculties are clouded for a. time, so that no rational judgment
can be formed.
Effects of Agreements made by Persons of Unsound Mind :
Agreements by persons of unsound mind are void. But an agreement
entered into by a lunatic or a person of unsound mind for the supply
of necessaries for himself or for persons whom he is bound to
support (e.g., his wife or children) is valid as a quasi-contract under
section 68 of the Act. Only the estate of such a person is liable. There
is no personal liability. The guardian of a lunatic can bind the estate
of the lunatic by contracts entered into on his behalf. The mode of
appointment of such a guardian and his powers are laid down in the
Lunacy Act.
DISQUALIFIED PERSONS
Any person for who is disqualified by any existing law of the country
fall under this category. For instance an insolvent person. An
insolvent person can not go into any contract. Another is an alien
means a citizen of a foreign state. Contracts with aliens are valid. An
alien living in Bangladesh is free to enter into contracts with citizens
of Bangladesh. But the state may impose restrictions. Certain types
of transactions with aliens may be prohibited. A contract with an alien
becomes unenforceable if war breaks out with the country of which
the alien concerned is a citizen etc.