Capacity to Contract

According to Sec. 10 , an agreement becomes a contract if it is entered into between the parties who are competent to contract.

According to Sec.11, every person is competent to contract who (a) is of the age of majority according to the law to which he is subject, (b) is of sound mind, and (c) is not disqualified from contracting by any law to which he is subject.

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Contd..

Sec.11 declares the following persons to be incompetent to contract.

1. Minors2. Persons of unsound mind, and3. Persons disqualified by any law to

which they are subject.

MINORS

According to Sec.3 of the Indian Majority Act, 1875, a minor is a person who has not completed eighteen years of age. In the following two cases, he attains majority after twenty-one years of age:

(1) Where a guardian of a minor’s person or property has been appointed under the Guardians and Wards Act, 1890, or(2) Where the superintendence of a minor’s property is assumed by a Court of Wards.

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Position of Agreements by a Minor

The law protects minor’s rights because they are not mature and may not possess the capacity to judge what is good and what is bad for them.

Contd…

1. Validity

An agreement with a minor is void ab-initio.

Example

Mohiri Bibi V Dharmodas Ghose

In this case, a minor mortgaged his house in favor of a money-lender to secure a loan of Rs.20,000 out of which the mortgagee (the money-lender) paid the minor a sum of Rs. 8,000. Subsequently the minor sued for setting aside the mortgage, stating that he was underage when he executed the mortgage. Held, the mortgage was void and, therefore, it was cancelled. Further the money-lender’s request for the repayment of the amount advanced to the minor as part of the consideration for the mortgage was also not accepted.

Contd..

(2) He can be a promisee or a beneficiary:

The law does not regard him as incapable of accepting a benefit.

Example

A mortgage was executed in favor of a minor. Held, he could get a decree for the enforcement of the mortgage.A, a minor, under a contract of sale delivered goods to the buyer. Held, he was entitled to maintain a suit for the recovery of price. (Abdul Ghaffar V Prem Piare Lal)

Contd…

(3) His agreement cannot be ratified by him on attaining the age of majority:

Example

M, a minor, borrows Rs.5000 from L and executes a promissory note in favor of L. After attaining majority, he executes another promissory note in settlement of the first note. The second promissory note is void for want of consideration. (Indran Ramaswamy V Anthiappa Chettiar)

Contd..

(4) He can always plead minority:

Even if he has, by misrepresenting his age, induced the other party to contract with him, he cannot be sued either in contract or in tort for fraud because if the injured party were allowed to sue for fraud, it would be giving him an indirect means of enforcing the void agreement.

Example

S, a minor, by fraudulently representing himself to be of full age, induced L to lend him Rs. 4,000/- . He refused to repay it and L sued him for the money. Held, the contract was void and S was not liable to repay the amount. (Leslie V Shiell).

Contd..

The court may, where a loan or some property is obtained by the minor by some fraudulent representation and the agreement is set aside, direct him, on equitable considerations, to restore the money or property to the other party if the money or property could be traced. Whereas the law gives protection to the minors, it does not give them liberty “to cheat others”.

Contd..

(5) There can be no specific performance of the agreements entered into by him as they are void ab initio.

A contract entered into on his behalf by his parent/guardian or the manager of his estate can be specifically enforced by or against the minor provided the contract is (a) within the scope of the authority of the parent/guardian/manager, and (b) for the benefit of the minor.

Contd..

(6) He cannot enter into a contract of partnership:But he may be admitted to the benefits of an already existing partnership with the consent of the other partners.

Contd..

(7) He cannot be adjusted insolvent: This is because he is incapable of contracting debts.

(8) A person who has supplied the necessaries to a minor or to those who are dependent on him is entitled to be reimbursed from the property of such minor.

Contd…

(9) He can be an agent: A minor can act as an agent and bind his principal by his acts without incurring any personal liability.

Contd..

(10) His parents/guardian are/is not liable for the contract entered into by him, even though the contract is for the supply of necessaries to the minor. But if the minor is acting as an agent for the parents/guardian, the parents/guardian shall be liable under the contract.

Contd…

11. Validity of minor’s agreement jointly with a major person:

The agreements made by a minor jointly with a major person are void vis-a-vis the minor but can be enforced against the major person who has jointly promised to perform.