business regulation and control final shankynew (2)

7/30/2019 Business Regulation and Control Final Shankynew (2)

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Business Regulation and Control

PRESENTATION ONCompetency to Contract-

Contract with minorGroup No. 2

Presented By:-

Anshul Agrawal(09)Arpit Shukla(10)

Ekta Shah(17)

Mayank Bhadani(29)

Shanky Agrawal(42)Vineet Kumar(56)


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Contract An agreement enforceable by law is a contract.

When an agreement compels another to dosomething, or not to do something it is a contract.

Essential elements of a valid contract:-

1. Proposal and acceptance.

2. Consideration.3. Capacity of parties to contract- competent

parties.4. Free Consent.

5. Possibility of Performance.6. Enforceable by law.

7. Legal Relationship.

8. Certainty.


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Capacity of parties to contract-

Competent parties.

An agreement becomes a contract if itis entered into between the partieswho are competent to contract.

Every person is competent to contract:

I. Who is of the age of maturityaccording to the law which he issubject.

II. Who is of sound mind andIII. Who is not disqualified from

contracting by any law to which he

is subject.


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Contract by a minor Rules relating to

a minors contract

According to the Indian Majority Act,

1875, a minor is a person who has not

completed 18 years of age.

But in case where a guardian of the

minors person or property(or both) is

appointed or where a minors property

is taken over by a Court of Wards, theminority continues upto the

completion of his age of 21 years.

A minor is not competent to contract.


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1.Minors agreement is absolutely void:- Privy council had held that a minors contract is void ab

initio and not merely voidable.

A minors agreement being absolutely void, neither he

nor the other party acquires any right or incurs any

liability under the agreement. So a minor is neither liable

to perform what he has promised to do under anagreement, nor he is liable to repay money that he has

received under it. The principle behind this ruling is, a

minor is incapable of judging what is good for him.

Even if a minor has received any benefit, he cannot be

asked to compensate or pay for it. A minor is incapable of

giving a promise imposing a legal obligation upon

himself.


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2.Specific performance of a

minors agreementAs a minors agreement is absolutely void,

there can be no specific performance of

such a contract.

Privy Council has held that guardian has no

power to bind a minor by a agreement for

the purchase of immovable property. Even

a minor cannot enforce specific

performance as there is no mutuality.However, when such a agreement is

entered into by a guardian on behalf of a

minor, for minors benefit, it can be


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3. Ratification of a minors

agreement. Ratification means consenting to a past

agreement entered into during minority at afuture date on attaining majority.

It relates back to the date of the making of the

agreement. Since a minors agreement is void,there can be no question of ratifying it as theconsideration given during the minority is heldto be no consideration at all.

It cannot be made valid by a subsequentratification. A fresh contract can be enteredinto by a minor on attaining majority with a

fresh consideration.


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4. False representation by a minor -

Estoppel

A minor cannot be stopped by a falserepresentation as there can be no estoppel against astatue.

A minor who falsely represents himself to be a

major and thereby induces another person to enterinto a contract with him, can plead minority as adefence. The infant is not estopped from settingup infancy.

A minor cannot be sued on the ground that hefalsely represented that he is of full age andthereby induced other person to enter into acontract, because to allow an injured person to suea minor person would be giving him an indirect

means of enforcing a void contract.


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Meaning of Estoppel.

Estoppel is a rule of evidence. When a manhas by words, spoken or written, or byconduct, induced another to believe thatcertain state of things exist, he will not be

allowed to deny the existence of that state ofthings.

However, a minor even though he falselyrepresents himself to be a minor can yet deny

the stand and take up the defence ofminority. He is not stopped from pleading hisminority. The law of estoppel, therefore,does not apply to a minor.


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Example:- S, a minor, borrowed Rs.4000 from L, a

moneylender, by fraudulently misrepresentingthat he was of full age. On default by S, L sued

for return of Rs.4000, and damages of deceit.

Held : L could not recover Rs.4000, and his

claim for damages also failed. The court didnot grant the relief; otherwise, it would have

been an indirect way of enforcing a void

contract. Even on equitable grounds, the minorcould not be asked to refund Rs.4000, as the

money was not traceable and the minor had

already spent the same.


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5.Liability of a third person-

Surety for a minor.

An agreement by a minor is void, but anagreement by a guardian on his behalf is

valid.

When a guardian enters into a contract inrespect of his property on behalf of the minor,

it is valid, provided it is for his benefit or for

legal necessity.

Insolvency:-

A minor cannot be adjudged insolvent as he is

incapable of contracting.


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6.Minors marriage:

Minors marriage contracted by their

parents and guardians is valid. It is valid

on the grounds of the custom of the

community.

7.Service contracts: A contract for personal service by minor is

void under the Indian Law and the mere

fact that it is for his benefit would not

entitle the minor to sue under the contract.


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Exception to the rule that minors

agreement is absolutely void.

1) Promisee or transferee: A minor can be a

promisee or a transferee for ex. a

promissory note executed in favour of a

minor can be enforced by the minor.2) Agency: A minor can act as an agent. He

can bind his principal by his acts, but

unlike other agents, he is not liable tohis principal for his acts.


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3.) Partnership: A minor cannot be a partner in apartnership firm. However, a minor may, be

admitted to partnership by his guardian with the

consent of all the partners for the time being, be

admitted to the benefits of partnership.

4.) Necessaries: If a person supplies necessaries to a

minor, or to minor dependents, which he actually

needs, whom the minor is bound to support, theperson who supplies such necessaries is entitled to

be reimbursed from the properties of such a minor.

A minor is therefore, liable to pay out of his

property for necessaries supplied to him.

Exception to the rule that minors

agreement is absolutely void(contd)


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Example-

G, a minor and a professional billiards player,

agreed with R, a leading professional player, to go

on a world tour, competing against each other in

matches. G was to pay a certain sum of money to

R for this purpose and also for the purpose oflearning the game. R made all arrangements for the

matches and spent money, but G refused to go. R

sued G and claimed damages for breach of his

contract. Held : G was liable to pay as the agreement was

for the minors benefit in that he would in effect be

receiving instruction

C t t b P f U d


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Contracts by Persons of Unsound

Mind. 1. Agreement by lunatics: A contract by a lunatic,

for example, a person of unsound mind like that ofa minors contract, is altogether void. A person ofunsound mind is incompetent to contract.

A person is said to be of sound mind for the purpose

of making a contract if, at the time when he makesit, he is capable of understanding it and forming arational judgment as to its effect upon his interests.

Examples-A patient, in a lunatic asylum, who is

at intervals, of sound mind, may contractduring those intervals

The liability for necessaries of life supplied to

persons of unsound mind is the same as forminors


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Example

In Indersingh Vs. Parmeshwar Singhcase, where a person who was an

idiot and incapable of understanding

the transactions, agreed to sellproperty worth Rs. 25000 for Rs.

7000 only , it was held that the

agreement was void as the personwas incapable of exercising his own

judgment.


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2.Idiots

An idiot is a person who is permanently of

unsound mind.

He does not have lucid intervals.

He is incapable of entering into a contract

and, therefore, a agreement with an idiot is

void.

However, like a minor, his properties, if

any, shall be liable for recoveries onaccount of necessaries of life supplied.

Also he can be a beneficiary.

A t b D k I t i t d


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Agreements by Drunken or Intoxicated

Persons

Agreement by a drunken person isabsolutely void and cannot be ratified. A

person who is drunk, intoxicated or delirious

from fever so as to be incapable of

understanding the nature and effect of an

agreement or to form a rational judgment as

to its effect on his interests cannot enter into

valid contracts whilst such drunkenness ordelirium lasts.

Under the English Law, Agreement made by

persons of unsound mind are voidable and

C t t ith P d Ni hi


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Contracts with Parda-Nishin

Women AParda-nishin women is one who is obliged

to observe complete seclusion

She is open to undue influence, and therefore,

unable to exercise her independent

understanding. In order to make a valid contract with a

parda-nishin woman, it should be established

that the deed was not only executed by her butwas explained to and understand by her,

besides she had independent and disinterested

advice in the matter.

C t t b C ti


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Contracts by Corporations A corporation is an artificial person created by law

under the Companies Act.

It is competent to contract. A corporation cannot enter into contracts of a strictly

personal nature.

Its powers are subject to limitations which may be

either-a) Necessary or Natural limitations: This is imposed bythe nature of the corporation, for ex., a corporationmust contract through its agents under its seal.

b) Express or Legal limitations: The express or legal

limitation is one which is imposed by the terms of itsincorporation. For ex. The corporation cannotcontract beyond the powers defined in itsMemorandum and Articles of Association, forotherwise the contract would be ultra vires and void.


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Contracts by Insolvents

Insolvent Persons (Legal status) -Insolvent persons are incompetent to

contract until they obtain a certificate of

discharge. Insolvent person cannot enter into a

contract.

Disqualification of an insolvent isremoved after he is discharged.


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References

Business Law by K. R.

Bulchandani - Chapter 6 (Page

47-51).www.legalindia.in/minority-and-

partnership.


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