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Contract Assignment- Incapacity to contract

Contract Assignment- Incapacity to contract

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Published by aditf14

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Categories:Types, Research, Law
Published by: aditf14 on Jan 11, 2010
Copyright:Attribution Non-commercial


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A contract is an exchange of promises between two or more parties to do, or refrain from doing, an act which is enforceable in a court of law. It is a bindinglegal agreement. That is to say, a contract is an exchange of promises for the breach of which the law will provide a remedy.Section 10 of the Contract Act requires that the parties must becompetent to contract. Competence to contract is defined in Section 11 as:
‘ Every person is competent to contract who is of the age of majority according to laws to whichhe is subject, and who is of sound mind, and isnot disqualified from contracting by any law towhich he is subject. ’
 Thus the following persons are said to be incompetent to contract:
Persons of unsound mind
Persons disqualified by law to which they are subject[Type text]
The age of majority in India is governed by the Indian Majority Act of 1875. Bysection 3 of the Act, every person domiciled in India shall be deemed to haveattained his majority when he shall have completed his age of eighteen years andnot before. In the case of a minor of whose person or property or both a guardianhas been appointed by a court, or of whose property the superintendence isassumed by a Court of Wards, before the minor has attained the age of eighteenyears, the Act provides that the age of majority shall be deemed to have beenattained on the minor completing the age of twenty one years. A guardian may beappointed under the Guardian and Wards Act, 1890.
Effect of Minority.
The contract Act does not expressly state whether a contract made by a minor isvoid or voidable. By section 11 a minor is not competent to contract. Yet theremight be two possibilities. It may be completely void or on the other hand it may be enforceable against the other contracting party but not against the minor. Insuch cases, therefore, the contract is voidable. In early cases, following the rules of English law, it was held that a minor’s contract was voidable and could becomevalid by ratification on attainment of majority.[Type text]
In 1903 the Privy Council considered the position in Mohori Bibi v. DharmadasGhose (1903, 30 Cal. 539, P.C)
Mohori Bibi v. Dharmadas Ghose.
The plaintiff, a minor for whom a guardian had been appointed under the Guardianand Wards Act, had executed at the age of twenty, a mortgage for a sum of Rs20,000 out of which the moneylender had paid him only about Rs.8000. Thedefendant had sufficient notice of the plaintiff’s minority. A suit was instituted bythe minor for setting aside the mortgage. It was contended by the defendant that acontract was only voidable and the sum borrowed must be refunded under section65 of the Contract Act. According to section 65:
‘When a contract becomes void any person whohas received any advantage under suchcontract, is bound to restore it, or makecompensation for it. ’
The Privy Council rejected the argument and held that the minor’s contract was abinitio void and no question of refunding any money could arise in suchcircumstances.By the decision of the Privy Council in Mohori Bibi’s case it is finally settled thata minor’s agreement in India is absolutely void.
Raj Rani vs. Prem Adib.
Mohori Bibi v. Dharmadas Ghose
30 IA 114: 30 Cal (1903)).
 Raj Rani vs. Prem Adib
(A.I.R 1949 Bom. 215)
[Type text]

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