CAPACITY

CAPACITY OF
OFPARTIES
PARTIES
 INTRODUCTION
INTRODUCTION
For a valid Contract the parties to a contract
must have capacity that is competence to enter
into a contract.
Section 11 of the Contract Act deal with the
competency of parties and provides 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 .”
It follows that the following
persons are incompetent to
contract :

1. Minor
2. Person of unsound mind, and
3. Persons disqualified by any law to
which they are subject .
Contracts enter into by persons
mentioned above are void .
 Minor
Minor
A minor is one who has not completed his or her 18 th
year of age .
WHY SHOULD MINORS BE PROTECTED ?
A minor has a immature mind and cannot think what
is good or bad for him .
Minors are often exploited. So they must be protected
by law from any exploitation.
 Effects of
Effects of minor’s
minor’s agreement
agreement
1. An agreement with or by a minor is void :

A minor hired a car and took responsibility of the damage of the

car. If the car is damaged, the minor cannot be sued.
2. No ratification: A minor cannot ratify the
agreement even on attaining majority , because
a void agreement cannot be ratified .

ARUMUGAN V. DURAISINGA [1914]

“A minor borrowed a sum of money executing
a simple bond for it, and after attaining
majority executed a second bond in respect of
the original loan and interest .It was held that
suit upon the second bond was not
maintainable .”
3. Minor can be a beneficiary
A minor is capable of accepting benefit. Any
contract is valid which is for the benefit of a minor
and under which the minor is not required to bear
any obligation.
If one party to a contract a minor, liability of other
party is affected.
A, a minor delivered some goods under an
agreement to B. B refused to pay. The court held
that A could the price.
4.NO ESTOPPEL AGAINST A MINOR:
Where a minor by misrepresenting his age has
induced the other party to enter into a contract
with him , he cannot be made liable on the
contract. No contract is formed.
There can be no estoppels against a minor. It
means he is not estopped from pleading his
infancy in order to avoid a contract.
5. No insolvency: A minor cannot be declared in
solvent as he is incapable of contracting debts
and dues are payable from the personal
properties of minor and he is not personally
liable.
6. Partnership : A minor being incompetent to
contract cannot be a partner in a partnership firm ,
but he can be admitted to the benefits of
partnership.

7.Minor can be an agent : A minor can act as an

agent. But he will not be liable to his principal for
his acts . A minor can draw, deliver and endorse
negotiable instruments without himself being liable.
8. Minor cannot bind parent or guardian : In the
absence of authority, express or implied ,an infant is
not capable of binding his parent or guardian, even for
necessaries . The parents will be held liable only when
the child is acting as an agent for parents. A sends his
son B to buy from C. A is responsible for payment.
9. Joint contract by minor and adult : In such a
case, the adult will be liable on the contract and not the
minor.
10. Surety for a minor: In a contract of guarantee
when an adult stands surety for a minor then he [adult]
is liable to third party as there is direct contract
between the surety and the third party.

11. MINOR AS SHAREHOLDER: A minor, being

incompetent to contract cannot be a shareholder
of the company . If by mistake he becomes a member
the co. can void the transaction and remove his name
from register .
PERSONS
PERSONS OF
OF UNSOUND
UNSOUND MIND
MIND
• As per section 11 of Contract Act , for a valid contract
each party to the contract must have a sound mind .
Contracts made by persons of unsound mind are void . The
reason is that a contract requires assent of two minds but a
person of unsound mind has nothing which the law
recognizes as a mind .
• Unsoundness of mind does not mean weakness of mind or
loss of memory . It means not only lack of capacity to
understand the terms of the contract but also lack of
understanding to realize the effect of the terms of the
contract.
Unsoundness
Unsoundness of
of mind
mind may
may arise
arise from
from ::
1. Idiocy : An idiot is a person with no intervals
of saneness . He is incapable . His mental
powers of understanding even ordinary
matters are absent because of lack of
development of brain . The agreement with
an idiot is void .
INDERSINGH V. PARMESHWARDHARI
SINGH [1957]
A property worth about Rs.25000 was agreed
to be sold by a person for Rs. 7000 only. His
mother proved that he was a congenital idiot ,
incapable of understanding the transaction .
The sale was held to be void .
2. Lunacy or insanity : It is a disease of the brain. A
lunatic loses the use of his reason due to some
mental strain or disease . He may have lucid
intervals of sanity . He can enter into contract during
that period when he is of sound mind .
3.Drunkenness : It produces temporary incapacity till
the man is under the effect of intoxication creating
impotence of mind . He stands on the same footing
as a lunatic .
4. Hypnotism : It also produces temporary incapacity
till the person is under the impact of artificially
induced sleep.
5.Mental decay : It is on account of old age etc.
 PERSONS
PERSONS DISQUALIFIED
DISQUALIFIED FROM
FROM
CONTRACTING
CONTRACTING BY
BYANY
ANY OTHER
OTHER LAW
LAW

1. Alien friend and enemies : An alien is competent to

contract with citizens of Pakistan living in Pakistan . He can
maintain an action on a contract entered into by him during
peace time . But if a war is declared , an alien enemy cannot
enter into any contract with an Pakistani citizen .
2. Foreign sovereigns and Amy minors : These persons are
immune from the jurisdiction of local courts , unless they
voluntarily submit to its jurisdiction . These persons have a
right to contract but can claim the privilege of not being
sued . The rules regarding suits by or against foreign
sovereigns are laid down in sections 84 to 87 of Civil
Procedure code .
3. Insolvents : An insolvent cannot enter into a
contract as his property vests in the official receiver
or official assignee . This disqualification of an
insolvent is removed after he is discharged .
4. Convict : A convict while undergoing
imprisonment is incapable of entering into a
contract . But this disability comes to an end on the
expiry of the sentence .
5. Corporations : A corporation is an artificial person
recognized by law . It exists only in the eyes of the
law . It is competent to enter into a contract only
through its agents. MOU limits.
6. Professional persons : Doctors and advocates are included
in this class . In England barristers are prohibited by the
etiquettes of their profession from suing for their fees. In
other countries these personal disqualifications do not exists
. According to the Bar Council Act 1927 an advocate of the
High Court can enter into a contract with his client and can
also bring a suit against him for his fees .
7. Contractual capacity of married women : A woman is
competent to enter into a contract . Marriage does affect the
contractual capacity of a woman . She can even bind her
husband in cases of pressing necessity . A married women
may sue or be sued in her own name in respect of her
separate property .