To make aware the importance of capacity of parties in
a contract.
To understand the various issues related to Capacity of
Parties. Case It was for only five minutes that Raman had left his shop to his eight year old son, Deepak. Deepak always imagined he was grown up enough to do all that his father did. A customer come up to the shop and asked the boy, “ could I have that electric iron”. The boy had seen his father sell things for Rs. 10. he thought Rs. 20 would be a good value for the iron. He asked for Rs. 20 for the iron. The customer paid the money and was about to leave that Raman came back. Raman attempted to intervene by requiring the buyer to either par Rs. 300 for the iron or returning it back. The customer pointed to the sign on the shop – ‘ Goods once sold will not be returned back’ and insisted on taking the iron away. CAPACITY OF PARTIES Capacity of Parities means contracting parties must be competent to contract.
Section 11 lays down that `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.’ Contd…… Thus the following persons are not competent to contract:
A person who is Minor
A person of Unsound mind A person who is disqualified to make a contract Minor According to Section 3 of the Indian Majority Act 1875 ‘a person who has not completed eighteen years of age is considered as Minor.
Twenty one years if person or property or both a guardian is
appointed by the Court (under the Guardians and Ward act 1890 or where the minor’s property has been placed under he superintendence of a Court of wards.’ General Principles Governing the Law for Minor The law must protect minor against their own inexperience. It therefore should protect minor person, preserve their rights & properties, excuse their negligence & assist them in pleading.
In pursuing the object of protection of minors, the law
should not cause unnecessary hardship to the person who deals with them. Thus in case of minor . the law should behave like his guardian. Rules or Effect as to Nature of Minor’s Agreement An agreement with minor is absolutely void. U/s 26 of the Negotiable Instrument Act1881, Minor can be a promisee of the negotiable instrument not a promisor. Ratification or confirmation of minor’s contract is not possible even after attaining majority. Minor is not Liable to compensate - U/s 64 and 65 of the Act minor is not liable to compensate or restoration of any benefit, that he has received from the other party. Contd….. No estoppels against a Minor - Under section 115 of the Indian Evidence Act, minor has a right to tell a lie i.e. minor cannot be stopped from pleading his infancy in order to avoid a contract, even if he has entered into an agreement by falsely representing that he was of full age. The parents (guardian) of a minor are not liable for agreements made by their minor ward. Minor can be appointed as an agent but he cannot appoint an agent because u/s 183 of agency Act, only a person competent to contract can appoint an agent. Contd… Minor can be a shareholder of a company, but he is not liable for the unpaid calls to the company. U/s 4 and 30 of the Indian Partnership Act 1932, minor can be admitted for sharing the benefits of an existing firm with the consent of all the partners. Minor cannot be declared as insolvent because minor’s agreement is void. A contract of personal service by minor is void. Because minor can not be appointed as an employee. U/s 68 of the Indian Contract Act and provisions of Specific Relief Act, if a person supplying necessities to the minor is entitled to be reimbursed form the property of such incapable person. Minor as joint promisor- the adult (Major) joint promisor will be liable on the contract & not the minor Contd…. Minor & Guarantee – a person who stands as surety (guarantor) for a minor against money advocated to him, can be sued & made liable. However, the minor cannot be held liable.
Minor & Sale of Good act – Minor is capable of purchasing immovable
property. But he cannot sale that property.
Minor as Trade Union Member – Under section 21 of Trade Union Act
1926, a person who has attained the age of fifteen years may be a member of registered trade union. Such member will enjoy all the rights of a member.
Marriage Contract – Contract of Marriage of Minor by their parents or
guardians has been held to be valid an in interest of minor on the ground of the customs of the community Persons of Unsound Mind
Under Section 12 of the Indian Contract Act, 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 and of forming a rational judgment as to its effect upon his interests. The soundness of mind is required only at the time of making contract, if person becomes of unsound mind after making a contract; the validity of contract remains unaffected. Persons of unsound minds include lunatics, idiots, drunken persons, hypnotized persons, mentally decayed and delirious (person in high fever). Effects
Agreements are absolutely void, if agreement is for the
benefit of a person of unsound mind it can be enforced. Agreements made by such a person for supply of necessities of life to him or to his dependent are valid as quasi contract The contract made by the guardian of a lunatic (appointed under the Lunacy Act) on his behalf can be enforced and his estate is liable for the same) Types of Person of Unsound Mind Idiot Lunacy or Insanity Delirious Person Drunken Or Intoxicated Person Hypnotized Person Mental Decay Burden of Proof and other Related Provisions:
It is the duty of every person making a contract to
know about the soundness on mind of another person. Agreement made in ignorance of unsoundness of another person is also void.
Effected person who wants to cancel the voidable
contract, has to prove that he was of unsound mind at the time of making the contract. Persons Disqualified by other Laws
government their representatives, ambassadors etc. have full capacity to contract in India but they cannot be sued without obtaining the prior sanction of the Central Government. Thus, they are in a privileged position and are ordinarily considered incompetent to contract. Alien enemy: Alien means foreign citizen living in India. When an alien is declared as alien enemy, the contracts are void. The contracts before declaration of war stand suspended till declaration remains in force. Persons Disqualified by other Laws Corporations and companies: A company or corporation is an artificial person created by law. They cannot enter into contract beyond the powers conferred upon it by its Memorandum of Association and their special Act. They also cannot enter into contracts of a strictly personal nature e.g. marriage. Insolvents: Before order of discharge, an insolvent person suffers from certain disqualifications e.g. he cannot be a director of a company or member of local body, he cannot sell his property but he can purchase goods and services in his own name. Persons Disqualified by other Laws Married women: They can enter into contracts with respect to their separate properties (called as Stridhan) provided they are major and are of sound mind. They cannot enter into contracts with respect to their husbands’ properties except for necessaries which are supposed to be supplied by her husband but he fails to supply. Cases……. Teji, a minor, broke his right leg in a football match. He engaged Cure well, a doctor to set it. Does the doctor have a valid claim for his services? Give reason.
Akash is 16 years of age. He pretended to be a major
and bought portable CD player from a shop on credit. Having got the possession of the CD player, he refused to pay the money for the CD player. His claim is that he is a minor and thus, the contract is not enforceable against him. Case……. Dev is of 17 years old. He bought a ticket for a music performance for Rs. 100. the terms on the ticket indicated that if the show was cancelled, organizers would refund the full value of the ticket and give additional compensation of Rs. 25. the performance got cancelled as the artist could not reach the city. Dev is demanding refund as well as the damages of Rs 25. the organiser are claiming that as Dev is a minor, there is no enforceable agreement between the parties, and they are not obliged to give him either the refund or the damages…. Case…… Sushman is a 16 year old boy. He has a computer which he rents to Rahul for 10 days with daily rental charges of Rs. 100. After using the computer for ten days, Rahul declares that as Sushman is a minor, there is no contract between Sushman and him. Rahul is refusing to give back the computer and the rental of Rs. 1000.