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
 Minor’s 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.

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.
4. A minor is not liable to restore the property or
goods.
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 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 parents
& 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. Minor’s 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 minor’s 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.
 Minor’s 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.
 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).
THANK YOU