CAPACITY TO CONTRACT

Monday, June 12, 2017

1. Who is competent to make a contract:-
Section 11. Every person is competent to contract who is of age of majority according to the Law to which he is subject, who is of sound mind and not is disqualified from contracting by any Law to which he is subject.


Age of majority:- According to section 3 of Indian majority Act-1875 every person domiciled in Indian attains majority on the completion of 18 years of age.


Exception: – 21 years- in the following cases.


a. Where a guardian of a minor’s person or property is appointed under the Guardian and wards Act, 1890.
b. Where minor’s property has passed under the superintendence of the court of words.


Position of Agreements by Minor:-
1. Validity: – An agreement with a minor is void-ab-initio
[ Mohoribibee v. Dharmodas Ghose]
Example :


Mr. D, a minor, mortgaged his house for Rs.20000 to a money – lender, but the
mortgagee, i.e. the money – lender, paid him a sum of Rs.8000. Subsequently, the minor sued for setting aside the mortgage. Held that the contract was void, as Mr. D was minor and therefore he is not liable to pay anything to the lender.
2. A minor’s has received any benefit under a void contract, he cannot be asked to return the same.
3. If a minor has received any benefit under a void contract, he cannot be asked to return the same.
4. Fraudulent representation by a minor- no difference in the status of agreement. The contract remains void.
5. A minor with the consent of all the partners, be admitted to the benefits of an existing partnership.
6. Contracts entered into by minors are void-ab-initio. Hence no specific performance can be enforced for such contracts.
7. Minor’s parent/guardians are not liable to a minor’s creditor for the breach of
contract by the minor.
8. A minor can act as an agent but not personally liable. But he cannot be principal.
9. A minor cannot become shareholder of a the company except when the shares are fully paid up and transfer by share.
10. A minor cannot be adjudicated as insolvent.
11. Can enter into contracts of Apprenticeship, Services, Education, etc:
(a) A minor can enter into contract of apprenticeship, or for training or instruction in
a special art, education, etc.
(b) These are allowed because it generates benefits to the Minor.


12. Guarantee for and by minor
A contract of guarantee in favour of a minor is valid. However, a minor cannot be a
surety in a contract of guarantee. This is because, the surety is ultimately liable under a contract of guarantee whereas a minor can never be held personally liable.


13. Minor as a trade union member
Any person who has attained the age of fifteen years may be a member for registered trade union, provided the rules of the trade union allow so. Such a member will enjoy all the rights of a member.


EXCEPTION
Contract for the benefit of a minor.


Contract by Guardian


Benefit of a minor by his guardian or manager of his estate.
a. within the scope of the authority of the guardian.
b. Is for the benefit of the minor.


Contract for supply of Necessaries.
Example :
Food, clothes, bed, shelter, shoes, medicines and similar other things required for the maintenance of his life or for the life of his dependents, expenses for instruction in grade or arts; expenses for moral religions or intellectual education, funeral expenses of his deceased family members, marriage expenses of a dependent female member in the family; expenses incurred in the protection of his property or personal liberty, Diwali pooja expenses, etc. have been held by courts to be necessaries of life. However, the things like earrings for a male, spectacles for a blind person or a wild animal cannot be considered as necessaries.


Liability for tort: A minor is liable for a tort, i.e., civil wrong committed by him.
Example :


A, a 14 – year – old boy drives a car carelessly and injures B. He is liable for the accident
i.e., tort

 


Person of Unsound Mind
A person who is usually of unsound mind, but occasionally of sound mind can make a contract when he is of sound mind. Similarly, a person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.
At time of entering into a contract, a person must be sound mind. Law presumes that every person is of sound mind unless otherwise it is proved before court. An agreement by a person of unsound mind is void. The following are categories of a person considered as person of a unsound mind.


An idiot
An idiot is a person who is congenital (by birth) unsound mind. His incapacity is
permanent and therefore he can never understand contract and make a rational judgment as to its effects upon his interest. Consequently, the agreement of an idiot is absolutely void ab initio. He is not personally liable even for the payment of necessaries of life supplied to him.


Delirious persons
A person delirious from fever is also not capable of understanding the nature and
implications of an agreement. Therefore, he cannot enter into a contract so long as
delirium lasts.


Hypnotized persons
Hypnotism produces temporary incapacity till a person is under the effect of artificial
induced sleep.


Mental decay
There may be mental decay or senile mind the to old age or poor health. When such
person is not capable of understanding the contract and its effect upon his interest, he cannot enter into contract.


Lunatic is not permanently of unsound mined. He can enter into contract during lucid intervals i.e., during period when he is of sound mind.


Person Disqualified by Law
Body corporate or company or corporation
Contractual capacity of company is determined by object clause of its memorandum of association. Any act done in excess of power given is ultra – virus and hence void.


Alien enemy
An ‘alien’ is a person who is a foreigner to the land. He may be either an ‘alien friend’ or an ‘alien enemy. If the sovereign or state of the alien is at peace with the country of his stay, he is an alien friend. An if a war is declared between the two countries he is termed as an alien enemy.

During the war, contract can be entered into with alien enemy with the permission of central govt.

 

 

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