The Islamia University Bahwalpur

Name:
Muhammad Zeeshan Asif

Roll No: 120

Department:
LAW

Semester: 3rd

Subject: Law of
Contract

Capacity to Contract
One of the most essential elements of a valid contract is the
competence of the parties to make a contract. Section 11 of
the Contract Act, 1872, defines the capacity to contract of a person to
be dependent on three aspects; attaining the age of majority, being of
sound mind, and not disqualified from entering into a contract by any
law that he is subject to. In this article, we will look at all aspects in a
detailed manner.
Capacity:
Fundamentally, two or more parties enter into a contract.
A "party" may be an individual, a group of people, or even an
"artificial person" such as a corporation. The parties to a contract
must have the legal capacity to enter into that contract. Persons who
are deemed incompetent due to physical or mental illness lack
capacity to enter into contracts. Minors, which in most states refers
to persons under the age of 18, may enter into contracts. However,
any contract involving a minor is voidable. When a contract involving
a minor goes unfulfilled it may be affirmed or disaffirmed when the
minor reaches maturity, or legally becomes an adult. Parties to a
contract also must have the legal right to do what the contract
promises; for example, one cannot sell what one does not own.

Contract:
Obligations enforceable by law. The basic elements
required for the agreement to be a legally enforceable contract are:
mutual assent, expressed by a valid offer and acceptance; adequate
consideration; capacity; and legality.

According to Section 11:

“Every person is competent to contract
who is of the age of majority according to the law to which he is
subject, and who is of sound mind and is not disqualified from
contracting by any law to which he is subject.”

The following individual is competent to enter into a contract:-

 The individual must be a major not minor.
 The individual should be of sound mind.
 The individual should not be disqualified by the law.

Let us understand each in detail:-

1. Contract with Minor:

The law protects the minors against their

own inexperience and the possible improper designs of those
who are experienced. The Contract Act states that, only a
person who is major can enter into contract. A minor is a
person who is under 18 years of age. An agreement with minor
is void and cannot be ratified by him/her until he/she attains
majority. However, a minor can be promise or beneficiary
under a contract and can enter into special types of contracts
for necessaries of life.

Example:

 The case of Mohiri Bibi vs. Dharmdas Ghose

 A minor mortgaged his house in favour of moneylender to
secure a loan of Rs 20,000 of which the minor was paid Rs
8000.later; the minor sued the moneylender for setting aside
the mortgage on the pretext that he was under age. The
mortgage was deemed void and cancelled. The moneylender’s
contention that the minor should repay the amount was not
accepted

2. Soundness of Mind:

As per section12 of the Contract Act, An

individual is of sound mind to make a contract if the individual
is capable of understanding the terms of the contract at the
time of its creation and is capable of making rational
 judgements in his/her interests. As per the Act, Lunatics i.e.
person deranged because of the personal trauma, individuals
who have completely lost their mental capacity
and drunken/intoxicated persons who comes under influence
of any such substances are of unsound mind and do not have
capacity to enter into any contract. While a Lunatic and
drunken individual may have lucid intervals but an idiot is such
an individual who does not possess any soundness of mind and
all contracts with such persons are void. Lunatics and Drunker
individuals can enter into contract only at the period of their
lucidity but not otherwise.

Example:
Williams is drunk and he visits a broker for having a
house on rent. They fixed the price at Rs 15,000 to be payable
each month and one month deposit. He contract will be void
because he is in drunken state and not in any capacity to enter
into a valid contract. After he comes in lucid state the following
day, then he can enter into the same contract.

3. Individuals disqualified by law:

As per the contract Act, the

following are said to disqualify from entering into any
contract:-

(a). Alien Enemy:

Any Individual is not a citizen of India is
termed to be Alien and cannot enter into any contract.

(b). Foreign Sovereign

(c). Corporations:
 Any company is a different entity (artificial
person) created by law. To enter into any contract it can enter
via its board of directors.

(d). Convicts-Individual are sentence by the law for

imprisonment cannot enter into any contract as per the Act
during the imprisonment period. He can enter into contract
once his punishment completes with the sentence expiration.

(e). Insolvents:
Insolvents cannot enter into contract until the
court passes an order for Discharge.

(f). Pardanashin Women

Conclusion:
Competency of parties to contract is one of the
most important requirements to make an agreement valid and
enforceable in a court of law. ... A person regains the
legal capacity to contract upon removal of any of the
disqualifications.