CAPACITY Animesh Bordoloi

CAPACITY

Section 10 of the Indian Contract Act, 1872 stipulates that all agreements made with the ‘free consent’ of
parties who are ‘competent’ to contract are enforceable as contracts. Section 11 declares that minors are not
competent to contract. While the Act goes on to specifically set out the consequences of vitiated ‘consent’ in ss.
19, 19A and 20, it omits spelling out the consequences of contracting with a minor.
Nevertheless, a decision of the Privy Council, Mohori Bibee v. Dharmodas Ghose (1903) read the Act as having
given a definitive answer to this question and took the view that minors’ contracts were void ab initio (not
voidable or void) which meant that neither party could enforce it; nor could they seek to be restituted to their
original positions under provisions stipulating restitution in the case of either voidable (s.64) or void (s.65)
contracts.
Indian courts have since invoked Mohori Bibee in bloodless abstraction, as if it were an unquestionable axiom
of Indian contract law—a tendency exhibited even in a recent judgment of Supreme Court of India in Mathai v
Joseph Mary (2015). Courts have over the years tried to find pathways around Mohri Bibee in limited
situations. But is this reading of the Act by the Privy Council justified? Does the notion of “void ab initio” hold
up?
 QUESTION IN THIS MODULE

(1) Who is competent to contract ?

(2) What is sound mind for the purposes of contracting?

(3) What are the consequences of a lack of capacity in contracting?

WHAT AGREEMENTS ARE
CONTRACT? (SECTION 10)
All agreements are contracts if they are made by the free consent of parties competent
to contract, for a lawful consideration and with a lawful object, and are not hereby
expressly declared to be void.
ELEMENTS OF A VALID CONTRACT
Free consent
Parties competent
Lawful consideration
Lawful object
WHO ARE COMPETENT TO
CONTRACT? (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.

PERSONS COMPETENT TO PERSONS INCOMPETENT TO

CONTRACT CONTRACT

MAJOR MINOR

SOUND MIND UNSOUND MIND

NOT DISQUALIFIED BY LAW DISQUALIFIED BY LAW

RATIONALE BEHIND THIS
PROVISION
A child or a lunatic may show poor judgement in making a particular contract.
It is a protection against their ignorance and immaturity.
To protect them from the fraudulent manipulation of others.
The general presumption is that every man is the best judge of his own interests.
WHO IS A MAJOR?
According to the Indian Majority Act 1875, a minor is a person, male or female, who
has not completed the age of 18 years.
In case a guardian has been appointed to the minor, the person continues to be a
minor until he completes his age of 21 years.
In England the age of majority formerly was 21 years. But after the Family Law
Reform Act, 1969, a minor is a person under the age of 18 years.
MINOR’S CONTRACT
What happens if the minor enters into a contract?
The Act does not specifically state the consequence of a minor’s contract.
Before the Indian Contract Act came into force minor’s contracts in India were generally
voidable at the option of the minor. It was the common law position at the relevant time. It
treated minor’s contract as voidable with exception of contracts to necessity.
In Mohri Bibee v Dharmodas Ghose, the Privy Council held that the Indian Contract Act
rendered the Minor’s Contract as void ab initio. It means absolutely void/ void from the
begining.
It means that not only could neither party enforce it, but also that no restitution was
possible to the pre-contractual position.
This is the landmark judgement on this issue.
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
Facts
Dharmodas Ghose, who was a minor at that time mortgaged his property in favour of the defendant
Brahmo Dutt, a money lender to secure a loan.
In the absence of Brahmo Dutt from Calcutta, the whole transaction was carried out by his attorney Kedar
Nath Mitter and the money was advanced by his manager, Dedraj.
It was claimed that while the transaction was being considered, the respondent’s mother and guardian,
Smt. Jogendranundinee Dasi, had sent a letter through her attorney, Mr. Bhupendra Nath Bose, revealing
the minority of the respondent and intimated to Mr. Kedar Nath Mitter that any money lent to the
respondent would be at the lender’s own peril.
The deed of mortgage contained a declaration by the respondent that he had attained majority and the
mortgagee’s assent to lend him money was obtained upon assurance of the same.
The minor brought an action against the money-lender contending that he was a minor when the mortgage
was executed by him. Thus, the mortgage was void and inoperative.
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
Issues
Position of Minor's Contract
Question of Estoppel
Refund the loan money
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
The Act makes it essential that all contracting parties should be competent to
contract and expressly provides that a person who by reason of infancy is
incompetent to contract cannot make a contract within the meaning of the Act. The
question whether a contract is void or voidable presupposes the existence of a
contract within the meaning of the Act and cannot arise in the case of an infant. 
Minor’s agreement is absolutely void.
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
Estoppel
The defendant contended that the plaintiff had falsely misstated his age.
The Privy Council rejected this contention, and the minor was allowed to plead that
he was a minor at the time of entering into the agreement.
The defendant had knowledge about the plaintiff being minor.
The law of estoppel was not applicable.
NO ESTOPPEL AGAINST
MINOR
If the minor by misrepresenting his age induces another to contract with him,  will
there be any estoppel against him?
In other words, can he be made liable on the agreement on the ground that earlier he
had stated that he has attained majority?
eg- If X has entered into a contract with Y by mistating that he has attained
majority. Later, X, a minor can always plead his minority and will not be estopped
from doing so.
The aim of this provision is to protect the minor from contractual liability. 
Therefore, the doctrine of estoppel cannot be used to defeat the policy.
Section 115 of Indian Evidence Act lays down the law of estoppel.
Which basically states that if a person by his declaration, act or omission intentionally
cause or permitted another to believe a thing to be true and acts upon such belief .
Then in that instance neither he nor his representatives shall be allowed to deny that
statement.
So, if you make a statement or act or omission which misleads another person, then you
are not allowed to deny or step back from it when the question of your liability arises.

The rule of estoppel under section115 of the Indian Evidence Act is not applicable on
minors.
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
If the mortgage is cancelled, then the minor should be asked to refund the loan which he
had taken

Section 64- When a person at whose option a contract is voidable rescinds it, the other
party thereto need not perform any promise therein contained in which he is the promisor.
The party rescinding a voidable contract shall, if he had received any benefit thereunder
from another party to such contract, restore such benefit, so far as may be, to the person
from whom it was received.
Section 65-When an agreement is discovered to be void, or when a contract becomes void,
any person who has received any advantage under such agreement or contract is bound to
restore it, or to make compensation for it to the person from whom he received it.
MOHRI BIBI V. DHARMODAS
GHOSE, 1903 30 IA 114
It was held that section 64 and section  65 are applicable to a contract between two
competent parties and has no application to a case in which there never was, and
never could have been any contract.
Voidness contemplated by section 65 presuppose the existence of a contract.
In minor’s case there could not be any contract at first place due to lack of capacity.
Minor’s contract is void from the inception or void ab initio.
The minor could not be asked to repay the amount under section 65.
PROBLEM WITH MINOR’S
CONTRACT AS VOID ABINTIO
In Mohri Bibee case it was held that minor’s contract is void ab initio.
Strict application of it creates problem and adversely impacts the interest of the parties concerned.
The contracts which aims at protecting or benefiting the minors cannot be enforced. These situations
gave rise to practical difficulties.
Minors enter into contract in the course of daily life.
The rigid application of Mohri Bibee creates problem.
Situations where the minor had already performed his part or obligation under the contract was
unable to enforce it.
So, judiciary kind of created new pathways.
Even though they emphasized that the underlying agreement with the minor’s remain unenforceable
 SPECIFIC RELIEF ACT, 1963
Section 33 - Power to require benefit to be restored or compensation to be made when instrument is
cancelled or is successfully resisted as being void or voidable.—
(1) On adjudging the cancellation of an instrument, the court may require the party to whom such relief is
granted, to restore, so far as may be any benefit which he may have received from the other party and to
make any compensation to him which justice may require.
(2) Where a defendant successfully resists any suit on the ground—
(a) that the instrument sought to be enforced against him in the suit is voidable, the court may if the
defendant has received any benefit under the instrument from the other party, require him to restore, so far
as may be, such benefit to that party or to make compensation for it;
(b) that the agreement sought to be enforced against him in the suit is void by reason of his not having
been competent to contract under section 11 of the Indian Contract Act, 1872 (9 of 1872), the court may,
if the defendant has received any benefit under the agreement from the other party, require him to restore,
so far as may be, such benefit to that party, to the extent to which he or his estate has benefited thereby.
 IMPORTANT POINTS –
FOOD FOR THOUGHT
The court will not compel restitution where the other party
was aware of the infancy
Beneficial contracts – when no liability with the minors –
In all such cases the minor is has already given all
consideration and nothing remains to be done by him but
to be benefited by the contract.
Minor can retire from a contract of beneficial nature on
attaining majority.
Is ratification possible?
Liability for necessaries – Section 68 – What is necessary?
Section 12
WHEN BENEFICIAL TO THE
MINOR - A.T. RAGHAVA
CHARIAR V. O.A SRINIVASA
(1916
Facts
) 31MLJ 575
The minor had advanced money against the security of a mortgage. The mortgage
deed was challenged that it was void ab initio on grounds of minority of the lender
(mortgagee).
Issue
Whether a mortgage executed in favour of a minor, who has advanced the whole of
the mortgage money, is enforceable by him or by any other person on his behalf?
A.T. RAGHAVA CHARIAR V. O.A
SRINIVASA (1916 ) 31MLJ 575 ​
Judgment
The court turned down the challenge on mortgage deed which was based on the
ground of minority of members.
The court held that the minor had fulfilled his obligations under the contract. There
was nothing that precluded him from enforcing obligation due from another party.
A.T. RAGHAVA CHARIAR V. O.A SRINIVASA (1916 )
31MLJ 575 

The provision of law which renders minor’s incompetent to bind themselves by

contract was enacted in their favour and for their protection and it would be a
strange consequence of this legislation if they are to take nothing under transfers in
consideration of which they have parted with their money. 
When an infant had paid for something under a void contract and had used or
consumed it, it would be contrary to natural justice that he should recover back the
money which he had paid on the ground that the contract was void.
 A.T. RAGHAVA CHARIAR V. O.A
SRINIVASA (1916 ) 31MLJ 575
The court turned down the challenge on mortgage deed which was based on
the ground of minority of members.
The court held that the minor had fulfilled his obligations under the contract.
There was nothing that precluded him from enforcing obligation due from
another party.
This case created an exception.
In this case the liability is not on minor. Like it was in Mohori Bibi
 FERNANDEZ V. GONSALVES
AIR 1925 BOM 97 
Facts
The defendant wanted to get married to the plaintiff. He expressed his desire
to marry the plaintiff to both the plaintiff and her father. 
Both plaintiff and plaintiff's father agreed. 
The defendant desired that the plaintiff should go out with him as his fiancé.
The plaintiff's father objected. 
The defendant agreed to marry the plaintiff within two years and to pay Rs.
2,000 by way of damages if he failed to do so. He gave this in writing to the
plaintiff's father who was the natural guardian of the plaintiff. The plaintiff
was about thirteen years old at that time. The plaintiff's father thereupon
allowed the plaintiff to go out with the defendant as desired by him.  
The defendant married another lady.
The plaintiff after attaining majority filed a suit against the defendant to
recover damages for breach of contract of marriage made by the defendant
with her and her father.
FERNANDEZ V. GONSALVES
AIR 1925 BOM 97 
Issue
Whether the father can enter into such a contract as guardian of the minor on her
behalf so as to bind her and whether such a contract is for the benefit of the minor?

Held
Where a contract is made by a guardian of the minor so as to be binding on the
minor and which is for the benefit of the minor there is an enforceable contract in
law and the minor can enforce it.
RAJ RANI V. PREM ADIB AIR
1949 BOM 215
The defendant orally agreed with the plaintiff's father, Dhiraj Singh Muramal, to
employ the plaintiff as an artist in the defendant's concern called the Prem Adib
Pictures for a period of one year at the salary of Rs. 9500 to be paid in twelve equal
monthly instalments.
As the plaintiff was and is a minor, Mr Dhiraj Singh Muramal entered into the said
agreement on behalf of and for the benefit of the plaintiff.
It was agreed between the Mr Dhiraj Singh Muramal and the defendant that the
plaintiff was to attend the defendant's office, shootings and rehearsals as and when
required by the defendant.
RAJ RANI V. PREM ADIB AIR
1949 BOM 215
The plaintiff carried out her part of the contract, but the defendant had engaged another
artist for the role allotted to the plaintiff.
The defendant called upon the plaintiff to attend shooting and/or rehearsals, but when
the plaintiff attended she was not given any work and was kept idle.
The plaintiff states that the defendant falsely alleged breaches of the agreement on the
part of the plaintiff and wrongfully terminated the contract of service and refused to
pay to the plaintiff or her father the salary due to her.
The plaintiff states that the agreement was entered into by her father for and on behalf
of the plaintiff and that the same was for her benefit and that she was ready and willing
to perform her part of the agreement, but the defendant prevented the plaintiff from
earning her salary during the remainder of the term whereby she suffered damages.
RAJ RANI V. PREM ADIB AIR
1949 BOM 215

It is stated in the plaint that the contract was entered into by the plaintiff's father, for
and on behalf of the plaintiff.
Now, under Contract Act, a minor is not entitled to employ an agent.
The contract, therefore, though it is made for and on behalf of the minor by a person
who purported to act as his agent, is not the contract of the minor.
In fact under S. 11, Contract Act, a minor cannot enter into a contract. Therefore, in
order that there should be a contract, it must be a contract entered into with the
guardian of the minor by the other party to the contract.
RAJ RANI V. PREM ADIB AIR
1949 BOM 215
Will the promise of the father that the plaintiff would serve and the promise of the defendant
that he would in that case pay the plaintiff her salary be sufficient to constitute an agreement? 
But what was the consideration for which the defendant promised to pay the plaintiff her
salary’? 
"In my opinion it was not the bare promise of the plaintiff's father that the plaintiff will serve
the defendant in terms of the contract, and his liability to pay damages for breach of that
undertaking which formed the consideration, but the real consideration, or at least a part of
the real consideration, was the promise of the plaintiff to serve in terms of the agreement
between the plaintiff's father and the defendant. If the plaintiff instead of having been a minor
had been a major, such promise to serve would form good consideration within the meaning
of s. 2 (d), Contract Act, though the consideration moved from a third party. Under S. 11, the
plaintiff was not competent to enter into a contract and, therefore, her promise would not be
enforceable against her. In my opinion, therefore, the plaintiff's promise to serve supplies no
consideration and the contract was therefore void."
RAJ RANI V. PREM ADIB AIR
1949 BOM 215
The Bombay High Court Held that neither she nor her father could have sued the
defendant for breach of contract.
If it was a contract with the plaintiff, she being a minor, it was nullity.
If it was a contract with her father it was void for being without consideration.
The contractual obligation on the film producer to pay a minor for the work done by
her as an actor was held to be not enforceable because the consideration for the
bargain was not entirely executed from the minor’s side.
The motive of Justice Raghava Chariar’s judgment was to allow minors to enter into
the agreement but at the same time giving them protection.
However, this solution has it’s shortcomings.
Contracts where consideration on behalf of the minor was only part-performed or
part executed were excluded from it’s scope.
Such contracts were deemed not to create any rights in favour of the minor because
the liability of the minor under the contract remained.
MATHAI V. JOSEPH MARY
(2015) 5 SCC 622
Facts
The plaintiff setup a mortgage deed executed by his uncle in favour of his mother,
who was a minor at the relevant time.
At the time of execution and registration of the document, the deceased mother of
the appellant was 15 years as mentioned in the mortgage deed itself. Therefore, she
had not attained the majority under the Indian Majority Act, 1875.
Issue
Whether the mortgage deed executed in favour of the minor was valid?
MATHAI V. JOSEPH MARY
(2015) 5 SCC 622
It is clearly stated that for an agreement to become a contract, the parties must be
competent to contract, wherein age of majority is a condition for competency.
The mortgage executed by the uncle of the appellant in favour of the deceased
mother of the appellant, is not a valid mortgage deed in respect of the property
covered in the said document for the reason that the deceased mother at the time of
execution and registration of the document was a minor, aged 15 years.
She was not represented by her natural guardian to constitute the document as valid
as she has not attained majority according to law.
MATHAI V. JOSEPH MARY
(2015) 5 SCC 622
A deed of mortgage is a contract and we cannot hold that a mortgage in the name of
a minor is valid, simply because it is in the interests of the minor unless she is
represented by her natural guardian or guardian appointed by the court.
The law cannot be read differently for a minor who is a mortgagor and a minor who
is a mortgagee as there are rights and liabilities in respect of the immovable property
would flow out of such a contract on both of them.
Therefore, the Court held that the mortgage deed is void ab initio in law and the
appellant cannot claim any rights under it.
MATHAI V. JOSEPH MARY
(2015) 5 SCC 622
“Many courts have held that a minor can be a mortgagee as [mortgage] is transfer of
property in the interest of the minor. We feel that this is an erroneous application of the law
keeping in mind the decision of the Privy Council in Mohori Bibee case. As per the Indian
Contract Act, 1872 it is clearly stated that for an agreement to become a contract, the parties
must be competent to contract, wherein age of majority is a condition for competency. A deed
of mortgage is a contract and we cannot hold that a mortgage in the name of a minor is
valid, simply because it is in the interests of the minor, unless she is represented by her
natural guardian or guardian appointed by the court. The law cannot be read differently for
a minor who is a mortgagor and a minor who is a mortgagee as there are rights and
liabilities in respect of the immovable property would flow out of such a contract on both of
them. Therefore, this Court has to hold that the mortgage deed... is void ab initio in law and
the Appellant cannot claim any rights under it. (sic) (emphasis supplied)”
 WHAT HAS
BEEN THE
SEQUENCE?
Which is the correct position of Law?

Is Mohri Bibi and the Other provisions

still relevant?

Cases of executed contracts may be

distinguished from a case where the
contract is merely executory and thus
imposes obligations upon the minor; for
instance, in Pramila Balidas, it was held
that a lease in favour of a minor will be This Photo by Unknown Author is licensed under CC BY

void as it imposes obligations upon him to

pay rent and to perform covenants.
EXPLANATION
Section 2 definitions
Statutory scheme provides that every promise is an agreement. It is not essential that
the consideration for the agreement be another promise (that is only required for
reciprocal promises) – and consideration could also include any act or abstinence
done at the desire of the promisor. A promise made by an adult in favour of a minor
is thus an agreement by the adult. If the consideration for such an agreement is a
reciprocal promise by the minor, the whole thing is void - for instance, in Mohori
Bibee, the agreement which the plaintiff sought to enforce was a promise by a minor;
which was held to be void
 MATHAI V. JOSEPH MARY
(2015) 5 SCC 622
The Appellant pleaded that his mother had advanced Rs. 7,000 (the amount given to her as dowry upon
marriage) to the uncle of the Appellant, who in turn had mortgaged certain land as collateral security to her.
The Appellant further contended that his mother had been in possession of the said land for more than fifty
years.
On the strength of both these facts, the Appellant filed an application to be declared as a deemed tenant
under Section 4 A of the Kerala Land Reforms Act, 1963, in terms of which he would be entitled to a
purchase certificate and would have a statutory right to purchase the said land at a pre-determined rate.
Various arguments were raised on the side of the Respondents. It is noteworthy that as a matter of
undisputed fact, the mother of the Appellant was a minor (15 years) when she executed the mortgage deed
with her uncle, though this was never the subject of any argument before the forums below, nor was this
issue raised by the Respondents before the Supreme Court.
On the basis of this fact inter alia the Supreme Court ultimately rejected the case of the Appellant. The
Supreme Court specifically noted the facts of the case, and referred to the decision in Mohori Bibee and
also the decisions of the "many courts" laying down the executed contracts exception (as above), and
ultimately held that they represent an "erroneous application of the law."
RATIFICATION OF MINOR’S
AGREEMENT
A person cannot on attaining majority ratify an agreement made by him during his
minority.
Ratification relates back to the date of the making of the contract.
Therefore, a contract which was void then cannot be made valid by subsequent
ratification.
If necessary, a fresh contract can be made after attaining majority. But a void
contract cannot be ratified.
GUARDIANS
Mohri Bibee, allowed guardians to act on behalf of a minor provided the actions of
the guardian were for the benefit of the minor or undertaken out of necessity.
In Mathai v Joseph, the Supreme Court held that the contract entered into by the
guardian on behalf of the minor is binding provided it is in the interest of the minor.
CLAIM FOR NECESSARIES SUPPLIED TO
PERSON INCAPABLE OF CONTRACTING,
OR ON HIS ACCOUNT (SECTION 68)
If a person, incapable of entering into a contract, or any one whom he is legally bound to support, is
supplied by another person with necessaries suited to his condition in life, the person who has
furnished such supplies is entitled to be reimbursed from the property of such incapable person.
Essentials of this section
Supplied to a person incapable of entering into a contract/ or to the persons who he is legally bound
to support
Supplied with necessaries suited to his condition in life
The person who supplied such necessaries is entitled to be reimbursed
From the property of such incapable person
The incapable person is not personally liable
It is a kind of quasi contract
NECESSARY
The word ‘necessary’ is not defined in the Act.
Necessary means food, lodging, basic amenities without which an individual cannot reasonable
exist.
Education, intellectual development, proper cultivation of mind of a minor could be termed as
necessity.
The term ‘necessity’ is a relative term and it would vary from case to case. It is a relative fact to
be determined with reference to the state, condition and circumstances of the particular minor.
It also depends on the social status of the minor. And what are the essentials needed for the
existence of the minor of that class.
It is important to see the end use of the product. Although ornamental objects cannot be deemed
as necessity.
NASH V. INMAN, [1908] 2 KB 1
Facts
Inman, who was a minor, joined Trinity College, Cambridge as an undergraduate.
Nash, the plaintiff supplied Inman with a number of dresses, including eleven fancy
waistcoats.
Nash sued Inman to recover the money of the waistcoats and other dresses.
Issue
Whether it can be regarded as contract for necessaries and hence enforceable against
the minor?
NASH V. INMAN, [1908] 2 KB 1
Judgement
To render an infant's contract for necessaries an enforceable contract two conditions must be
satisfied
(1) the contract must be for goods reasonably necessary for his support in his station in life, and
(2) he must not have already a sufficient supply of these necessaries.
Waistcoat may be a necessity but not a supply of eleven waistcoats.
An infant, like a lunatic, is incapable of making a contract of purchase in the strict sense of the
words; but if a man satisfies the needs of the infant or lunatic by supplying to him necessaries, the
law will imply an obligation to repay him for the services so rendered, and will enforce that
obligation against the estate of the infant or lunatic. The consequence is that the basis of the action is
hardly contract. Its real foundation is an obligation which the law imposes on the infant to make a
fair payment in respect of needs satisfied. In other words the obligation arises re and not consensu.
QUASI CONTRACT
This is a kind of quasi contract. Under Indian Contract Act it is known as ‘ certain
relations resembling those created by contract.”
A person is under obligation to compensate another person. Even though the basis
of this is neither contract nor tort.
It is based on the principle of unjust enrichment.
Enrichment of one person at the cost of another.
PERSON OF UNSOUND MIND
Section 12- What is a sound mind for the purposes of contracting
A person is said to be of sound mind for the purposes of making 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
A person who is usually of unsound mind, but occasionally of sound mind, may
make a contract when he is of sound mind.
A person who is usually of sound mind, but occasionally of unsound mind, may
make a contract when he is of sound mind.
PERSON OF UNSOUND MIND
Like minor’s contract the agreement of a person of unsound mind is absolutely void.
It needs to be proved that the person was suffering from the disability on the date of
execute of the contract.
It is crucial to find out that whether he is entering into the contract after he has
understood it and has decided to enter into the contract after forming rational
judgement in regard to his interest.
PERSON DISQUALIFIED BY
LAW TO ENTER INTO AN
AGREEMENT
Certain classes of persons may be disqualified from contracting in respect of certain
types of contracts.
No forest officer shall as principal or agent trade in timber or forest produce.
Officers and employees of the patent office are incapable during the period in which
they hold their appointments, to acquire or take any right or interest in any patent
issued by that office.