CAPACITY TO CONTRACT

Meaning & Definition

According to section 11 of the contract act: Every person is competent to contract who is of the age of majority according to the law to which he is subject, & who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

Persons disqualified from entering into the contract

Minors, who are not of the age of majority. Persons of unsound mind, and Persons disqualified to contract by any law ( Insolvents )

MINOR
Who is a minor Acc. To sec 3 of Indian majority act, 1875, a minor is a person who has not attained the age of 18 years.

Rules relating to an agreement with a minor

First rule- law protects minors against their own inexperience & against the possible improper designs of those more experienced Second rule-the law should not cause unnecessary hardship to persons who deal with minors

Minors Agreements
1. Agreement is void ab initio: Case mohori bibi vs. Dharmodas Ghose Dharmodas , a minor executed a mortgage for Rs. 20000 declaring himself major & received Rs. 8000 from mohori bibi, a mortgagee. The minor wanted to set aside the mortgage. The mortgagee wanted the refund of Rs 8000. It was held that the agreement with the minor was void ab initio & question of refunding money does not arise.

 However, the minor may enforce the agreement against the other party if he has carried out his obligation.- he can always be BENEFICIARY 2.No Ratification minor cannot ratify the agreement on attaining the age of majority which he has entered into in the age of minority. 3. Minor can plead minority to avoid contract. X, a minor borrows money by saying that he is a major ny mortgaging a land and later refused to pay. When L sued him, decision was that he cannot return the money spent but wil return the property.

4. A minor is not liable to restore the property or goods but Minor can be compelled : If goods are traceable in his possession. If minor has sold the goods then nothing can be claimed. 5. No specific Performance means actual performance of contract as agreed as contract is void ab intio. But in case guardians/parents enterd into a contract if they have the authority and it is for the benefit of minor, it is valid

6. Minor can be a promisee or a beneficiary Where the minor bears no obligation & rather the agreement is for his benefit, then such agreement is valid. ( A promissory note executed in favor of minor is valid ) 7. Minor as a partner A minor cannot become a partner in the partnership firm .but he can be admitted to benefits of the partnership with consent of all the partners. The minor is liable to losses but not his personal property.

8. Minor as an agent The principal shall be bound for the acts of minor agent. (link between principal & third party) 9. Minor cannot be adjudged as insolvent Even for necessaries, his property is liable but he is not personally liable. 10. Position of a surety Where in contract of guarantee, a major stands surety on behalf minor, then major would be liable.

11. Minors Liability for necessaries Minor is liable to pay a reasonable price for the necessaries supplied to him. His property is liable but he is not personally liable. 12. Position of minors parents The parents are not liable for the contract entered into by the minor himself. They r liable only if minor is their agent

13. Minor as a shareholder A minor cannot become a shareholder but fully paid up shares my be transmitted to him through his lawful guardians.

14. A minor is liable in tort(civil wrong) but where tort arises out of contract a minor is not liable in tort as indirect way of enforcing an invalid contract

 A minor is liable to pay for his necessaries supplied or services rendered to him whom he is legally bound to support.

Minors Liability for necessaries

Necessaries is not confined to food, clothing & shelter but it also includes articles or services which are reasonably necessary for a minor suitable to his conditions in life a watch or a bicycle may be necessary for a minor.

Following are considered as necessaries

For saving his property from sale in execution. For marriage of a minor. For marriage of his sister. For shradh ceremonies of the ancestors of the minor. For rent of house taken by minor for the purpose of studies. Medical, education, training, legal advice

Following are not considered as necessaries

Cigar & tabacco. Refreshment for entertainment. A silver gift The minor would not be personally liable for reimbursement of necessaries, however his property is liable for reasonable price for necessaries.

Services
Education Medical help Legal Advice Training for advice

Also liable to pay loan taken for necessaries

Persons of UNSOUND MIND

Acc to sec 12: A person is said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it & of forming a rational judgment as to its effect upon his interest.

Unsoundness may be categorized as:

Idiots has completly lost his mental powers Lunatic the person losses the capacity due to the illness of brain or mental bodily distress. Drunkenness

Persons disqualified from contracting

Alien enemy Foreign sovereign (prior sanction of central govt) Corporations contract is ultra vires if not in MOA) Insolvents- all property in hand of Official assignee. He can enter into contract when court passes an order of discharge Convicts persons who are sentenced to imprisonment cannot enter into contract during that period).

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