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Capacity to contract

competent
 Legal ability to enter into a contract
 Legal capacity of parties
 Sec. 11 explains who are competent to
enter into a contract
Section 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.
So a person is incompetent if he a minor,
unsound mind, disqualified from
contracting by any law to which he is
subject.
Minor
 Not attained the age of majority
 Not completed his 18th year of age
 Minor under care and custody of court and
guardian appointed, attains majority only
on completion of the age of 21 years
Law regarding minor’s agreement
1. Agreement by or with a minor is void
2. Not bound to return the benefits received
under a void contract.
3. Cannot ratify his act
4. Restitution of property from minor in case
of fraud
5. Principle of estoppel is not applicable
Case Law
Mohori Bibi v. Dharmo Das Gosh
Minor executed a mortgage for Rs.20000 and
received 8000 from mortgagee. The
mrotgagee filed a suit for the recovery of
his mortgage money and for the sale of
property in case of default.
Agreement absolutely void.
Principle of Estoppel
When one person by his false and fraudulent
representation, makes another person to
believe a thing to be true, such a person in
subsequent proceeding, will not be allowed
to deny the truth of that thing
Liability for necessaries & Services
supplied
 If every contract void- find himself in
difficulties
 6. Necessaries
 Food & clothing
 7. Services
 education, medical aid and legal advice
 Thus minor and a minor’s property is liable
for this type of contract.
8. Minor as Promisee
1. Not promisor, cannot shoulder
responsibilities
9. Minor as agent
1. Principal cannot recover compensation for
the loss caused by minor.
10. Minor as Partner
1. Admitted to the benefits
2. No right for management and liability
limited to his interest.
Person of Sound Mind
 Sec 12 Contract Act- Person of sound mind
A person is said to be sound mind for the
purpose of making a contract if, at the time
when he makes it, he is as capable of
understanding it and of forming a rational
judgment as to its effect up on his interest
Person of Unsound Mind
 A person of unsound mind is one who is
suffering from permanent or temporary
mental derangement.
 idiots,
 lunatics and
 drunken persons
Idiots
A person who has completely lost his mental
power and who is incapable of forming a
rational judgment is called an idiot
No understanding power from his infancy
All agreements are void.
Drunken persons
In a state of intoxication
Contract during drunkenness is void.
But in lucid intervals contract is valid
Lunatics
Mental power deranged due to some mental
strain is called a lunatic.
Not permanent as idiocy
Intervals of sanity and insanity
Lucid intervals
Agreements entered when not in senses are
void.
Others
 Alien enemies
 Foreign sovereigns, their diplomatic staff and
accredited representatives of foreign states
 Cannot be sued unless they submit
 But they can enter and enforce those contracts
 Indian citizen get prior permission of CG.
 Exception ex-king.
 Corporations
 Insolvents
 Convicts
 1) A minor is supplied with necessaries of
life by a grocer.He makes out a
promissory note in favor of the grocer. Is
the grocer entitled to claim payment under
the promissory note
a) From minor personally?
b) Against his estate?
 2) A executed a promissory note in favor of
B while he was a minor. The pronote was
renewed by A in favor of B when he
attained the age of majority. B brings a suit
against A on the basis of the second pronote.
Will he succeed?
 3) A renders some services to B during his
minority at the request of B. B, on attaining
majority, enters into an agreement with A to
compensate him (A) for services rendered
during B’s minority.Is the agreement valid?
4) For a loan of Rs. 15,000- to be received in three
annual installments, A(the borrower) executed a
simple mortgage of his property in favor of B(the
lender)- the borrower receiving Rs.5,000/- towards
the first installment, at the time of executing the
mortgage deed. Examine B’s right on the
mortgage deed, and respecting the money paid
over to A:
1. If B did not know that A was a minor.
2. If B know that A was a minor.
3. If A fraudulently misrepresented his age.
4. If the money paid to A were required for advanced
studies abroad.
5. A minor falsely representing himself to be of age,
enters into an agreement to sell his property to R
and receives from him a price sum of Rs.72,000/-
in advance. Out of this sum, the minor purchases a
car for Rs.60,000/- and spends the rest on a
pleasure trip. After the minor has attained
majority, R sues him for the conveyance of the
pprty or in the alternative for the refund of
Rs.72,000/- and damages. How would you decide?
6. A an adult said to minor M: I will not pay
the commission I promised you for selling
the magazines. You are a minor and cannot
force me to pay. Is A right?