CAPACITY TO
CONTRACT
UNIT - |
CAPACITY [QO CONT RAC I
® An agreement becomes a contract if it is
entered into between the parties who are
competent to contract (Sec. 10).
® The term “capacity to contract" is defined
in Sec 11 of the Indian Contract Act which
“Everyone is competent to contract (i) who
is of the age of majority: (ii) who is of
sound mind; and (iii) who is not disqualified
from contracting by any law.
CONTRACTS BY A MLNOR
© A ‘minor’ is a person who has not attained the age
of majority. For the purpose of entering into
contract, "the age of majority" is eighteen years.
©In the non ow Ng: two cases, a person becomes
major on completion of 21 years:
(a) Where a guardian of a minor's person or
property has been appointed under the
Guardians and Wards Act 1890 and
(b) Where the superintendence of minor's
property is assumed by court of wards.
Case Law:
Mohri Bibee Vs. Dharmdas Ghose (1903) -
Mortgage
MINOR’ S AGREEMEN |!
1. A minor's contract is absolutely void ab-
initio: In other words, a minor is neither
liable to perform what he has promised
under an agreement, nor liable to repay
money received under it.
®Principle behind this ruling is that a minor is
incapable of judging what is good for him.
IRE RULE OF ESTOPPELS DOES
NOT APPLY 10 AMINOR
The rule of estoppels (Legal Principles) does not
apply to a Minor i.e., minor is not estopped from
pleading his infancy in order to avoid a contract,
even if he has entered into an agreement by
falsely representing that he was of full age.
NO RESTITUTION (RECOMPENSE FOR
INJURY OR LOSS) IN CERTAIN CASES
A minor cannot be ordered to make
compensation for a benefit obtained under a
void agreement because Sections 64 and 65
of the Contract Act, which deal with
restitution, apply only to contracts between
competent parties and are not applicable to
a case where there is not and could not have
been any contract at all.
Case Law : Leslie Vs. Sheill (1914) - Infants
Relief Act 1874 - Doctrine of Restitutions -
Loan
MINOR’S LIABILITY FOR NECESSARIES
(FOOD, SHELTER, CLOTH)
- Minor is liable for ‘necessaries’ supplied or
‘necessary services’ rendered to him or his minor
dependents.
= lf a person supplies necessaries to a person who
is incapable of entering into a contract or to anyone
whom such incapable person is legally bound to
support, then he can claim reimbursement from the
property of such incapable person.
- For such contract he cannot be held liable
personally. His property or estate alone will be
liable. Eg: Rental House
MINOR’S LIABILITY IN TORT
(WRONG)
The infant is liable for his tort, i.e., wrong,
unless the tort is in reality a breach of
contract. The tort must be separate from
and independent of contract otherwise many
contracts would be enforced on minors in an
indirect manner.
For example, an infant hired a horse for riding
and injured it by over riding. Here the Infant
had committed a tort, i.e., negligence in the
performance of the contract.
NO SPECIFIC PERFORMANCE
<|Since an agreement by a minor is absolutely
void, the contract will never direct “specific
performance” of such an agreement by him.
<|But a contract is enter into on behalf of
minor, by his guardian or by a manager of his
estate, is binding on the minor and can be
specifically enforced by or against the minor
provided: (a) the contract is within the
authority of the guardian or manager, and (b)
it is for the benefit of the Minor.
A MINOR CAN BE A BENEFICIARY
- Incompetency of a minor to enter into
contract means incompetency to bind
himself by a contract. There is nothing which
debars him from becoming a beneficiary.
- The law does not regard him as incompetent
for accepting a benefit.
A MINOR CAN BE AN AGENT
© An Agent is merely a connecting link between
his principal and third person. Therefore, a
minor can be appointed as an agent. But he
will not be personally liable for any of his
acts.
A MINOR CAN BE A SHAREHOLDER
© A minor can hold fully paid up shares of a
company. He cannot hold partly paid - up
shares as he cannot be held liable for calls.
Since membership of a company arises on the
basis of contract a minor cannot be a
member of a company.
®A minor, being incompetent to contract,
cannot be a shareholder of the company.
© A company can also refuse to register
transfer or transmission of shares in favour of
a minor unless the shares are fully paid.
PARTNERSHIP BY MINOR
® The partnership of partners results from
their agreement. A minor, being incompetent
to enter into a contract, cannot be a partner
of the firm.
© However, he may be admitted only to the
benefits of the firm
INSOLVENT
© A minor cannot be adjudicated an insolvent,
for, he is incapable of contracting debts.
Even for necessaries supplied to him, he is
not personally liable, only his property is
liable.
MINOR CANNOT BE A SURETY
© A minor cannot be a surety as he is not liable
to pay or compensate anything under a
contract.
POSITION OF MINOR’S PARENTS
® Minor’s contracts do not impose any liability
on his parents even if the contract are for
necessaries. The parents or the guardians of
the minor may pay money borrowed by him
just out of moral obligations. But the parents
or guardians can be held liable when the
minor child is acting as an agent of his
parents or guardians
CONTRACTS BY PERSONS OF
VNSOUND MIND
® Contracts by Lunatics( a person whose mental
faculties of thinking, disordered due to some
mental strain or some other reasons)
© Example: A patient in a lunatic asylum who is at
intervals of sound mind, may contract during
those times.
® Contracts by Drunkards. Contract by such a
person is absolutely void and cannot be
ratified.
PERSONS DISQUALIFIED BY LAW
1. Alien Enemies
2. Convicts
3. Insolvents
4. Married women
5. Professional Persons
6. Corporations and Companies
