CAPACITY TO CONTRACT

WHO ARE COMPETENT TO CONTRACT

 Sec 11. Who are competent to contract: Every person is competent to contract
who is of the age of majority according to 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.
 1. MINOR

AGE OF MAJORITY:

The age of majority is generally 18, except when a guardian of a minor’s person or
property has been appointed by the court, in which cases it is 21.
 NATURE OF MINOR’S AGREEMENT

section 10 requires that the parties to a contract must be competent to contract and
section 11 declares that a minor is not competent.

But neither section makes it clear whether, if a minor enters into an agreement, it would be
voidable at his option or altogether void.

These confusions had been resolved in 1903 by the Judicial Committee of the Privy Council
in their well-known pronouncement in Mohiri Bibi vs. Dharmadoss Ghose.
 MOHIRI BIBI VS. DHARMADOSS GHOSE
(1903)
 Dharmadoss Ghose, who was a minor at the time, obtained a loan from
Bhramodutt, a lender in Calcutta, by claiming to be an adult and signing a
mortgage deed in his favour.
 At the time the mortgage was being considered for advance money, Kedarnath,
his attorney, had received information that the respondent was a minor, he
could not execute the deed.
 Subsequently the infant commenced this action stating that he was underage
when he executed the mortgage and the same should, therefore, be cancelled.
 It was held that such mortgage deed or contract that was commenced between
the plaintiff and the defendant was void as it was accomplished by the person
who was an infant at the time of execution of mortgage.
 The ruling of the Privy Council in the Mohiri Bibi case has been generally
followed by the courts in India and applied both to the advantage and
disadvantage of minors.
 In today’s society it does not seem to be possible, much less desirable, for law to
adhere to the categorical declaration that a minor’s agreement is always
“absolutely void”.
 The Privy Council had, therefore, to modify its earlier decisions. This trend is
evidenced by the decision of their Lordships in Srikakulam Subramanyam vs.
Kurra Subba Rao (1947).
 SRIKAKULAM SUBRAHMANYAM VS. KURRA
SUBBA RAO (1947)
 In order to pay off the debts of his father, which were promissory notes owing to
the appellants and a mortgage to another, a minor son and his mother sold a
piece of land to the appellants in satisfaction of the notes, requiring that the
appellants pay off the mortgage debt.
 The appellants accordingly paid off the mortgagee and took possession.
 Afterwards the minor brought an action to recover back the land.
 It was held that Section 11 and the Mohiri Bibi case leave no doubt that a minor
cannot contract and that if the guardian and the mother had taken no part in
this transaction it would have been void.
 EFFECT’S OF MINOR AGREEMENT

1. NO ESTOPPEL AGAINST MINOR

The infant is not estopped from setting up the defence of infancy.

There can be no estoppel against the minor.

The policy of the law of contract is to protect person below age from contractual
capacity and naturally the doctrine of estoppel cannot be used to defeat that policy.
 2. NO LIABILITY IN CONTRACT OR IN TORT

 A minor’s agreement is devoid of all legal effects.

 If the tort is directly connected with the contract and is the means of effecting it
and is a parcel of the same transaction, the minor is not liable in tort.
 In 1665, in Johnson vs. Pye, it was held that a minor cannot be responsible for
anything which would be an indirect way of enforcing his contract. It was also
pointed out that “you cannot convert a contract into a tort to enable you to sue
an infant”.
 But where the tort is independent of the contract, the mere fact that a contract
is also involved, will not absolve the infant from liability.
 BURNARD VS. HAGGIS (1863)

 The defendant who was a Cambridge undergraduate and an infant, hired a

horse for the purpose of going for a ride, expressly stating that he did not want a
horse for jumping.
 The defendant let the horse to a friend, who used it for jumping, with the result
that it fell and was injured.
 The defendant was liable on the ground that the act resulting in injury to the
horse was one which was quite outside the contract, and could not be said to be
an abuse of the contract.
 JENNINGS VS. RUNDALL (1799)

 The defendant, an infant, had hired a horse to be ridden for a short journey and
took it on a much longer journey, with the result that it was injured, the court
held the defendant not liable upon the ground that the action was founded in
contract and that the plaintiff could not turn what was in substance a claim in
contract to one in tort”.
 3. DOCTRINE OF RESTITUTION

 If an infant obtains property or goods by misrepresenting his age, he can be

compelled to restore it, but only so long as the same in traceable in his
possession.
 This is known as the equitable doctrine of restitution.
 Where the infant has sold the goods or converted them, he cannot be made to
repay the value of the goods.
 The doctrine of restitution is also not applied where the infant has obtained
cash instead of goods.
 LESLIE (R) LTD. VS. SHEILL (1914)

 An infant succeeded in deceiving some money-lenders by telling him a lie about

his age, and so got them to lend him 400 pounds on the faith of his being an
adult.

 Their attempt to recover the amount of principal and the interest as damages
for fraud failed.
 KHAN GUL VS. LAKHA SINGH (1928)

 The defendant, while still a minor, by fraudulently concealing his age,

contracted to sell a plot of land to the plaintiff.
 He received the consideration of Rs. 17,500 and then refused to perform his part
of the bargain.
 The plaintiff prayed for recovery of possession or refund of consideration.
 There could be no question of specific enforcement, the contract being wholly
void.
 RATIFICATION

 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 and,
therefore, a contract which was then void cannot be made valid by subsequent
ratification.
 If it is necessary a fresh contract should be made on attaining majority and a
new contract also requires a fresh consideration.
 PERSONS OF UNSOUND MIND

 In English law a person of unsound mind is competent to contract, although he may avoid
his contract if he satisfies the court that he was incapable of understanding the contract
and the other party knew it.

 The contract is voidable at his option.

 The position of a drunken person is also the same. If he makes a contract while drunk, he
may, when sober, elect to avoid the contract or to affirm it.
 POSITION IN INDIA

 In India, on the other hand, the agreement of a person of unsound mind is, like that of
minor, absolutely void.
 Sec 12. What is a sound mind for the purposes of contracting: 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 or of forming a rational judgement 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 of usually of sound mind, but occasionally of unsound mind, may not
make a contract when he is of unsound mind.
 ILLUSTRATIONS

1. A patient in a lunatic asylum, who is at intervals of sound mind, may contract during
those intervals.

2. A sane man, who is delirious from fever, or who is so drunk that he cannot
understand the terms of a contract, or form a rational judgement as to its effect on
his interests, cannot contract whilst such delirium or drunkenness lasts.
 INDER SINGH VS. PARAMESHWARDHARI
SINGH (1957)

 A property worth about Rs. 25,000 was agreed to be sold by a person for Rs. 7,000 only.

 His mother proved that he was a congenital idiot, incapable of understanding the
transaction.

 It was held that the sale to be void.

 LIABILITY FOR NECESSARIES

 Section 68. Claim for necessaries supplied to person incapable of contracting, or on

his account: If a person is incapable of entering into a contract, or anyone whom he is
legally bound to support, is supplied by another person with necessaries suited to his
condition in his life, the person who has furnished such supplied is entitled to be
reimbursed from the property of such incapable person.
 ILLUSTRATIONS

1. A supplies B, a lunatic, with necessaries suitable to his life. A is entitled to be

reimbursed from B’s property.

2. A supplies the wife and children of B, a lunatic, with necessaries suitable to their
condition in life. A is entitled to be reimbursed from B’s property.
 NASH VS. INMAN (1908)

 Where an undergraduate in the Cambridge University, who was amply supplied with
proper clothes according to his position, was supplied by the plaintiff with a number of
dresses, including eleven fancy waistcoats, the price was held to be irrevocable.
 To render an infant’s estate liable for necessaries “two conditions must be
satisfied, namely:
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.