Chapter 1.
4 Contracts Act 1872- Capacity of Parties to Contract 41
Chapter 1.4
Capacity of Parties to Contract
➢ As per section 10, parties which enter into contract, must be competent to contract. This is an
essential element of a contract. An agreement entered into with an incompetent person is void ab
initio.
Law
Who are Section 11 “Every person is competent to contract
competent • who is of the age of majority according to the law to which he
to contract is subject, and
• who is sound mind and
• is not disqualified from contracting by any law to which he is
subject.”
➢ On analysis of the above definition, it is clear that following persons cannot enter into contract –
• Minors
• Persons of unsound mind
• Persons disqualified from contracting by any law.
42 CA. Ashish K Agrawal Chapter 1.4
MINOR
➢ As per section 3 of Majority Act 1875, a person domiciled in India, attains the age of majority on
completion of age of 18 years. A person is a minor till the date he completes 18 years of age. Even
if one day is short, he is a minor.
Law relating to minor’s agreement
1 An ➢ A minor is not considered mentally mature enough to understand the terms
agreement of the contract and its implications on his interest. Therefore, law acts as a
made with a shield to protect them from being cheated.
minor (or by ➢ An agreement with a minor is void ab initio. This means that the agreement
a minor) is is of no value starting from the day it was made.
void ab initio.
2 No ➢ It is not possible that an agreement with a minor could be ratified on his
ratification attaining the age of majority. This is so because an agreement with a minor is
on attaining a nullity from the first day. Hence, it cannot be validated later on.
the age of ➢ Example – A enter into agreement with B (aged 17 years 11 months) for sale
majority of B’s house. After two months B denied to sell the house. Here, no legal
remedy is available to A, as the time of entering into agreement, B was a
minor. The fact that at the time of litigation, B has attained the age of
majority, is of no value.
3 Minor can be ➢ A minor can enjoy the benefits of a contract. This is so because law protects
a beneficiary the rights of a minor.
to a contract ➢ Thus, a minor can make the other party bound to him.
➢ Example – A executes a promissory note in favour of a minor. Now, the
minor can force A to abide by the terms of promissory note as it is for the
benefit of minor.
➢ A minor cannot be a partner in a partnership firm. But he can be admitted to
the benefits of a partnership firm.
➢ A minor can be a payee, endorsee or a promisee under a contract.
4 A minor can ➢ If a minor falsely represents that he is of the age of majority, and on the basis
always plead of that he enters into a contract with someone, he can plead that he is a minor
minority and, thus, avoid the contract.
➢ However, this does not give a right to the minor to defraud others. If the
minor is in possession of goods which he obtained by falsely representing his
age, he will have to return the goods to the rightful owner. If the minor has
converted such goods (or money) into some other form, the converted form
will have to be given to the aggrieved person. However, if the minor has
consumed or wastefully spent such goods/money, then he is under no
obligation to return the goods/money from his personal sources.
5 Necessaries ➢ As per section 68, a minor’s property is liable for necessaries supplied to a
supplied to a minor or his dependant.
minor ➢ A minor is not personally liable to pay the person who has supplied the
necessaries to him or his dependant. But, from the estate of the minor a
reasonable amount can be recovered by the supplier.
➢ Example of necessaries are – food, clothing, medical expenses, legal
expenses etc.
6 Contract by ➢ When a guardian makes a contract for the minor, for the benefit of the minor,
