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Capacity to contract

The parties who enter into a contract must havethe capacity to contract ie they must becompetent to enter into contract

A person is competent to enter into a contract ifhe

1. has attained the age of majority

2. is of sound mind3. is not disqualified by any law

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Disqualification Any person who isdisqualified by law for any reason other

than that of being a minor or of unsoundmind, is not competent to contract.

Ex; A convict while undergoing

imprisonment cannot enter into contract.

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Unsoundness of mind

A Person who is said to be of sound mind for the purpose of makinga contract if, at the time when he makes it, he is capable ofunderstanding if at the time when he makes it, he is capable of

understanding it and of forming a rational judgment as to its effectsupon his interests

A contract with a person of unsound mind is absolutely voidEg: A contract with a lunatic, a person in drunken state, a persondelirious from fever, an idiot, all are void.

A person who is usually of unsound mind but occasionally of soundmind, may make a contract when he is of sound mind.Eg: lunatic may enter into contract durries lucid intervals.

A person who is usually of sound mind but occasionally of unsoundmind, may not make a contract when he is of unsound mind.Eg: A person who has drunk cannot enter into contract when he is

in drunken state Where necessaries are supplied to a person of unsound mind, theestate of such unsound person shall be liable. But there shall be nopersonal liability of the unsound person.

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Minors contracts

Who is a minor A minor is a person who has not attained the ageof majority . the age of majority is 18 years except where aguardian has been appointed for a minors property or person inwhich case the age of majority is 21 years.

Agreement with a minor is void ab initio. This is because a child may show poor judgment in making aparticular contract and this rule is a protection against his ownignorance and immaturity.Case study : Mohoribibi vs Dharamdas Ghosh.

A person under the age of 18 is presumed by law to be incapable ofunderstanding the consequences of his actions. He may show poorjudgement.

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Some aspects of minors contracts

1. No liability of minor Minor is not liableunder a contract.

-Minor cannot be saddled with

liability-Minor does not have any obligations

under a contract

-Minor cannot be shouldered withresponsibility

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2. Contracts can be beneficial to minor When we say that a minor cannot enter into a

contract we mean that a minor cannot be saddled with

an obligation. But a minor can always take a benefitunder a contract.

The general rule that a minor is incompetent to enterinto a contract does not debar him from becoming abeneficiary under a contract. Thus a minor can enforce a

contract which is of some benefit to him and underwhich he is required to bear no obligation . A minorcannot make a promise.Eg : A minor may recover the price of goods alreadydelivered to the buyer.

Eg: Where a mortgage is executed in favour of a minorwho has advanced the whole of the mortgage moneythe mortgage is enforceable by the minor.

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3. No ratification

An agreement made by a minor cannotbe subsequently rectified by him onattaining majority. Rectification relatesback to the date of making of the contract

and therefore a contract which was thenvoid cannot be made valid by subsequentrectification.

Eg : Arumugam Us Duraisinga

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4. No estoppel against minor Where a minor represent fraudulently that he

is of the age of majority and thereby induces theother party to enter into a contract with him,then in an action founded on the contract , themind may disclose his real age. He is notestopped from pleading minority and claiming

the contract void by reason of his beingincompliant. Eg: A aged 17 years fraudulently represents to B

that he is a major and induces him to sell booksto him .later when B sues A for the payment of

money , A may plead his minority as defenseand set aside the contract. The rule of estoppeldoes not lie against a minor.

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5. Doctrine of restitution S 65 provides for the doctrine of restitution . When a contract

becomes void or is discovered to be void, the person who hasalready received any advantage under the contract shall refund the

advantage. The doctrine of restitution does not apply in the case of

minors contract. For example in the famous case of Mohoribibi VsDharamadas Ghose , where a minor had secured a loan from amoney lender by mortgaging his house, the mortgage was cancelledand the minor was not liable to refund the loan.

But the law does not in all cases allow a minor to cheat others. If aminor obtains property or goods by misrepresenting his age, he canbe compelled to restore it so long as the same is traceable in hispossession. This doctrine of restitution shall not apply where theminor has received money or has sold, consumed or converted thegoods received. He cannot be made to repay the money or the

value of the goods because that would amount to enfolding acontract which is void. Restitution stops where payment begins. Eg: P a minor has taken a loan of Rs.10,000/- from Q . Q cannot

compel P to repay the loan.

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6. Minor is liable for supply of necessaries A person who supplied necessaries to a minor is entitled to be

reimbursed from the property of such minor. Thus a minor isliable to pay out of his property for necessaries supplied to him. It

is only the property for necessaries supplied to him. It is only theproperty of the minor and not the minor personally that can beheld liable for such transactions. Liability of minors estate fornecessaries arise because necessaries have already been suppliedto him .

Supply of necessaries is quasi-contractual in nature and hence isenforceable against the estate of the minor.

What are necessaries depends upon the status of the minor his actual need at the time of supply the goods or services supplied to him

Necessaries include food, clothing, shelter, education, medicines,etc. Also loans incurred by a minor to obtain necessaries, shall berecoverable from the minors property as if the lender himself hassupplied necessaries.

Eg: A supplies B, a minor with food and shelter. He is entitled tobe reimbursed from Bs property.

Eg: A advances Rs. 1000 to B, a minor for his school fees. A isentitled to be reimbursed from Bs estate.

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7. Contracts of marriageA contract for the marriage of a minor is for hisor his benefit. Thus the contract of marriage isenforceable by the minor against the othercontracting party but it cannot be enforcedagainst the minor.

Eg: A the father of B aged 17 years has entered

into a contract of marriage with C aged 22 yearsfor the marriage of B and C. If later on B refusesto marry, C cannot enforce it against C.

8. Partnership- A minor can be admitted to sharethe profits of a partnership firm but cannot bemade liable to pay the liabilities of the firm.

9. Company Minor can become a member orshareholder of a company through his guardian,but only of fully paid-up shares