Capacity to Contract

agree, english, consent

Meaning: 

The word capacity means qualification or competence of parties towards the agreement. The Indian contract act 1872 defines the essentials of a contract, in which capacity to contract is one of the factors. where section 11 of the contract act defines capacity to contract where every party to the contract should be major, should be sound-minded and who is qualified by the law.

Section 11:  Of the Indian contract act says that any competent person, who is of sound mind, and who is qualified by law.

According to section 11 of the Indian contract act:

  • Should be major: Minors or not allowed.
  • Should be of sound mind: Party should not be unsound.
  • Should be qualified by He/she shouldn’t be disqualified by law.

Disqualification of contract:

As examined before minors, unsound minds, disqualified people are not allowed for any contract.

  • Minor
  • Unsound
  • Disqualified by law.

Minor:

A minor is a person who didn’t attain the age of 18years at the time of contract, which is mentioned under section 3 of the Indian Majority Act,1875.

Section 10 of the contract talks about what agreements are contracts, where it says that parties of the contract should be competent towards the contract, section 11 directly says that any person who is under the age of  18 is not eligible to contract.

Contractual capacity is explained in the following ways.

  • Void ab initio: At the very beginning of the contract with the minor is voidable. In the case of MOHIRIBIBI V. DHARMADAS GHOSE held that entering into a contract with the minor is void.

However, if the minor has any obligations towards the contract he can sue the other party for the obligations of the party.

  • A minor can be a promise or beneficiary: A minor can enjoy the privileges of the contract, but he cannot be made liable under the contract. A minor can be a promise or beneficiary but he cannot be the promisor.
  • No ratification: Ratification means approval/sanction. An agreement with a minor is void, being worthless in the eye of law and therefore it cannot be ratified and it cannot be supported by the new promise after the attainment of the majority. Once the contract is entered with the minor, all the benefits of the contracts are entitled to the minor after attaining the age of majority.

In the case of Suraj Narian v. Sukhu Akhir, ILR(1928). A minor borrowed money from a moneylender by executing a bond, after attaining the age of 18 he aging made another bond towards the earlier borrowed money. Here the court held that the second bond is invalid because there is no consideration towards the contract, in the first instance the vendor entered the contract with a minor, where itself is void.

  • No restitution: Any contract entered with the minor is void, but the other party cannot take the benefits back which gave to the minor. Minor can be asked to return the things which are given to him under misrepresenting his age which is traceable, where money cannot be restored because it cannot be traceable.
  • No estoppel: In a simple term estoppel means hiding the real facts.

The main important question here whether estoppel can be applied towards the minors who misrepresent themselves to enter the contract.

In the case of Nawab Sadiq Ali khan v. Bibi Jai Kishori, (1928) it was decided that the minor is not liable upon a contract by any means of estoppel. Now it is a settled law that a minor is not estopped from pleading minority even though he misrepresented himself. Section 11 of the contract is the substantive law, where section 115 of the evidence act is a matter of procedure.

  • No specific performance: A minor cannot be sued for specific performance of the contract.

A minor agreement being void cannot be specifically enforced. But agreements favoring the minor are valid. The difficulty is that minors cannot seek special performance because it is being an equitable remedy that can be granted only when there is mutuality when each party is entitled to the remedy.

Persons of unsound mind :

According to section 11 of the contract act, any person who is unsounded is not competent to be a party to the contract.

Section 12 of the contract act defines the term unsound mind. Any person who is capable of understanding things while drafting the contract and should be rational towards the judgment. A person who is of the mind for some time and sound mind for some time may make a contract, he is eligible to make a contract when is of sound mind.

Following are the persons who are unsound mind

  • Lunatics
  • Idiots
  • Drunken person

Persons disqualified by law:

The persons: who are Aliens, insolvents, convicts, etc are disqualified by law.

Reference : 1https://indiankanoon.org/

2) law of contract Dr s.s Srivastava.

3) MOHIRIBIBI V. DHARMADAS GHOSE

4) Suraj Narian v. Sukhu Akhir, ILR(1928).

5) Nawab Sadiq Ali khan v. Bibi Jai Kishori, (1928)

6) The evidence act1872

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