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33 views23 pages

Capacity

Uploaded by

sagaranwesha
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© © All Rights Reserved
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CAPACITY TO

CONTRACT
CAPACITY TO CONTRACT – SEC. 11

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.
 Persons not competent to contract –

1. Minors

2. Persons of unsound mind

3. Persons disqualified by law


WHO IS A MINOR??
The term Minor is explained in sec 3 of Indian
Majority Act 1875 as -
‘A minor is a person who has not completed
eighteen years of age’.

Exceptions :
Where a guardian has been appointed to take care of a
minor’s person or property under the guardian and Wards
Act 1890 or
Where the superintendence of minor’s property is
assumed by a Court of Wards
The person becomes major on completing the age of 21
years
POSITION OF MINOR BEFORE
MOHRI BIBI CASE (1903)
 Before 1903 it was felt that the phrase in
Sec. 11 “ no person is competent to contract
who is not of the age of majority..” has two
interpretations –

(1) a minor is absolutely incompetent to contract;


the agreement with minor void ab initio,

(2) an agreement with the minor voidable, the


minor is not liable but the other party is liable.
EFFECTS OF MINOR’S CONTRACT….

Sec.10 & 11 make it clear that any agreement made by


a minor is void ab initio… Mohri bibi V. Dharmodas
Ghosh (1903)

Facts -
A minor borrowed Rs. 20000 from B and as security
executed a mortgage in his favor. He became major a few
months later and filed a suit for the declaration that the
mortgage executed by him during his minority was void and
should be cancelled.

Held -
A mortgage by a minor was void and B was not entitled for
The law dealing with minors is based upon two
principles –

- The law must protect the minor against his own


inexperience,

- That the law should not cause unnecessary


hardship to adults who deal fairly with minors.
I No ratification

A minor cannot ratify the agreement even on


attaining majority, because a void agreement
cannot be ratified.

If on becoming major, minor makes a new promise


for fresh consideration, then this new promise will
be binding.
II Minor can be a promisee or beneficiary

 If a contract is beneficial to a minor it can


be enforced by him.

 i.e minor can be payee or a promisee in a


contract.

 Minor may sue to recover the possession of


the property upon tender of the purchase
money.
III Rule of Estoppel and Minor –

 What is rule of estoppel?

When one person has, by his declaration, act or


omission, intentionally caused or permitted
another person to believe a thing to be true and
to act upon such belief, neither he nor his
representative shall be allowed, in any suit or
proceeding between himself and such person or
his representative, to deny the truth of that
thing.

(The Indian Evidence Act, 1872 Sec.115 –Estoppel)


 No estoppel against a minor

 Where a minor by misrepresenting his age has


induced the other party to enter into a contract
with him, he cannot be made liable for the
contract. There can be no estoppel against a
minor. It means he is not estopped from pleading
his infancy in order to avoid a contract.

 No Specific performance except in certain cases


Contract entered into by guardian or manager on
minor's behalf can be specifically enforced if
(a) The contract is within the authority of
the guardian or manager.
IV Doctrine of Restitution

 An act of restoring back to the rightful owner


that which has been taken away or lost.

 Minors can also be compelled to restore the


property or goods as long as the same is
traceable in his possession(Sec.33 Specific
Relif Act)
 Where the minor has sold the goods or
converted them, he cannot be made to
repay the value of goods as this would be
amount to enforcing a void agreement.
V Minor’s Liability for Necessities

Sec.68 of Indian Contract Act says –

‘If a person, incapable of entering into contract


or anyone whom he is legally bound to support, is
supplied by another person with necessities
suited to his condition in life, the person who has
furnished such supplies is entitled to be
reimbursed from the property of such incapable
person.’
 Conditions for establishing minor’s property liable
for necessities –

1. The contract must be for goods reasonably


necessary for minor’s support in his life.
2. The minor must not have already a sufficient
supply of these necessaries.

 Indian Contract Act does not define the term


‘Necessaries’ but understood upto food, clothing
and lodging.
The English Sales of Goods Act.1893 defines
‘The necessaries are the goods suitable to the
life of infant or other person, and to this actual
requirement at the time of sale and delivery’
CASE EXAMPLES….
 Srikakulam Subrahmanyam v. Kurra Shubha Rao
Facts –
In order to pay off the promissory note and
mortgage debt of his father, the minor son and
his mother sold a piece of the land to the
holders of the promissory note. Afterwards the
minor filed to recover the property back.
Held –
The sale was made for the benefit of the minor
and his mother (guardian) had the capacity to
contract on his behalf. The sale of land was
held to be valid.
PERSONS OF UNSOUND MIND

 Sec.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 effects upon his interest.
 Two conditions –

1. Person should be capable of


understanding the nature and contents
of the contract.

2. Person should be capable of forming a


rational judgment about the effects of
the contract on his interest.
 Categories of mental unsoundness –

1. Idiot –
Person who has completely lost his mental faculties of
thinking, so is incapable of forming a rational judgment.

2. Lunatics –
Person whose mental faculties of thinking are deranged
(disordered) but are not completely lost and he suffers from
intermittent intervals of sanity or insanity.
The contracts entered during sanity are valid otherwise void.
Contracts made for necessities would be valid even during
insanity and liability would be same as that for minor.

3. Intoxication, as a man under the influence of intoxication can


not take a rational decision, he would be categorized as an
unsound mind person, so a contract would be void
PERSONS DISQUALIFIED BY LAW

I Alien Enemies
 An alien enemy cannot enter into a contract
with an Indian national and cannot sue in Indian
court during the war.

 Any contract made by an alien enemy during


the war, without a license from the central
govt. is unenforceable.

 The contracts made before the war is either


cancelled or suspended during the war and/or
the govt. may impose conditions which it deem
fit in the interest of the nation.
II Foreign Sovereigns, diplomatic staff and
accredited representatives of foreign states.

 These persons can enter into a valid


contract and can also enforce them in Indian
courts.

 However, no suit can be filed against them


without prior permission of the central
Govt.
III Insolvents
 When a person has been declared as
insolvent, his property vests in Receiver
or Official assignee, and his power to
enter into a contract is withdrawn.

 However his disqualification of an


insolvent can be removed when a
competent court passes an order of this
intent.
IV Convicts

A convict cannot enter into a contract


during imprisonment, but when that
time expires or he is acquitted, he
becomes eligible to enter into a contract
again.

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