Unit – Parties competent to

contract-EC-8
EC- Electronic content

Law of Contract-I
BA.LL.B.(Hons.) IIIrd Semester
Session 2020-21

Dr. Sonal Shankar

Assistant professor
Department of law
University of Allahabad
 Competent Parties
• One of the conditions of enforceability of an agreement is that parties must be
competent to enter into a contract( Refer to Sec.10)

• Who is competent to contract-

Section 11- Who are competent to contract-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.
• Section 11 clearly lays down three categories-
• 1.persons who are of the age of majority aacording to the law to which they are
subject( Indian Majority Act, 1875 (9 of 1875))

• 2. Persons who are of sound mind.(what is a sound mind for purpose of

contracting is laid down u/s 12)

• 3. Persons who are not disqualified by any law from contracting.

1. Persons who are of age of majority- Its clear by implication that minors i.e.
people who are not of age of majority are not competent to contract.
 Agreement with minors
• A minor is a person who is not a major. The age of majority
is provided under Section3 of the Indian majority Act 1875.
It lays down-
• Age of majority of persons domiciled in India.-(1) Every
person domiciled in India shall attain the age of majority on
his completing the age of eighteen years and not before.
• (2) In computing the age of any person, the day on which
he was born is to be included as a whole day and he shall
be deemed to have attained majority at the beginning of
the eighteenth anniversary of that day.
• Its clear that a single age of majority is provided which is 18
years. The policy of law is to safeguard minors (protection
of minors) as they are deemed not to posses sufficient
maturity.
•
Position under English law
In England too the age of majority is 18 years(Family law reforms Act 1999. In
England minors were called infants. Under common law contracts with minor
have been considered to be voidable-divided into two categories-
• Positive voidable and
• Negative voidable .
• However common law was modified by passing of Infant Relief Act in 1874 which
declared three categories of agreement with minors as absolutely void.It clearly
stated all contracts entered into by infants for the repayment of money lent or to
be lent, or for goods supplied or to be supplied (other than contracts for
necessaries), and all accounts stated, shall be absolutely void," This act however
is repealed by Minors Contracts Act ,1987.So it can be said that Common law
position is now modified by the Minors contracts Act 1987.
• Doctrine of restitution- If a minor has obtained undue benefit, he is required to
restore such benefit under equitable doctrine of restitution, However its
applicable to goods obtained by the minor, minor.. provided it’s the same
goods/property and is in possession of minor.One of the important effect of the
Infant Relief Act was on Doctrine of restitution in form of restitution of money-
Since the Act declared contract of loan as void, the view came to be that there can
be no restitution of money, restitution stops where repayment begins as a minor
can not be forced to pay money except by passing money decree which is equal to
enforcing a contract of loan. (This has been a general view-affirmed in Leslie v.
Sheill, contrary view was taken in Stocks v. Wilson(1913)]
• Sec 3- Restitution (1) Where— (a) a person (“the plaintiff”) has entered into a
contract with another (“the defendant”); and

• (b) the contract is unenforceable against the defendant (or he repudiates it)
because he was a minor when the contract was made, the court may, if it is just
and equitable to do so, require the defendant to transfer to the plaintiff any
property acquired by the defendant under the contract, or any property
representing it…..

• Now the Minors contracts are governed by the English common law and Minors
contracts Act 1987.
• Contracts of Necessaries have always been considered to be binding on Minors
under English common law. Necessaries are the things suited to ones condition in
life and the person supplying then needs to show that minor was not already in
sufficient supply of such things.( Sec 2 Sale of Goods Act,1893- Goods suitable to
the condition in life of (a minor)…and to his actual requirement at the time of sale
and delivery ) Contracts of service , apprenticeship, education have always been
considered as contracts of necessaries for minors. However such contracts must be
beneficial to minors, trading contracts are not considered to be necessaries.( See
Cowem v. Neild, Roberts v. Grey, De Francesco v. Barnum , Nash v. Inman, Peters v.
Flemming.)
 Position in India
Agreements with minors were declared void by the PC in Mohiri BiBi v.
Dharmodas Ghose.(Few points were discussed- 1. Estoppel- S115 Evidence Act-
Estoppel. —When one person has, by his declaration, act or omission,
intentionally caused or permitted another person to believe a thing to be true
and to act upon such belief, neither he nor his representative shall be allowed, in
any suit or proceeding between himself and such person or his representative,
to deny the truth of that thing.
Held- Knowledge is complete defence of estoppel.
2. Restoration of benefits u/s 64 and 65 of The Act-Section 64: Consequences of
rescission of voidable contract. —"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 promisor. The party rescinding a voidable
contract shall, if he have 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- Obligation of person who has received advantage under void
agreement, or contract that becomes void.—"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.”
Held-Both section 64 and 65 are not applicable
• 3. Minor also applied for cancellation u/s 39 of Old Specific
Relief Act, hence restoration under section 41 of SRA-Section
39 (now section 31 of the New SRA corresponds to it)-(1) Any
person against whom a written instrument if void or voidable
and who has reasonable apprehension that such instrument, if
left outstanding may cause him serious injury, may sue to have
it adjudged void or voidable and the Court may, in its
discretion, so adjudge it and order it to be delivered up and
cancelled.
• Section 41-Power to require party for whom instrument is
canceled to make compensation-On adjudging the cancellation
of an instrument, the Court may require the party to whom
such relief is granted to make any compensation to the other
which justice may require.
• Held –since the creditor knew about the real age, it was he
wanted to take advantage of the situation, hence
considerations of justice would not apply)
 Effects of Agreement with Minors in India
• 1. Restitution-Currently the Specific Relief act covers it, before
the amendments were made two divergent view came up-
• 1. Lahore high Court in Khan Gul v. lakha Singh(1928)
(departure from leslie v. Sheill)-Since in India agreements with
minors are void and not voidable, equitable doctrine of
restitution has a bigger role to play. S.39 of SRA ,1877 should
be interpreted to include minor defendant also. Minor can be
asked to repay money.
• 2. Allahabad High Court in Ajudhiya prasad v. Chandan
lal(1937)expressed entirely opposite view, agreed with leslie v.
Sheill.
• Law commission expressed agreement with the view
expressed in Khan Gul’s case .The principle of compensation
has been incorporated in section 33 of the Specific relief
Act ,1963
• Sec 33 of Sepecific Relief Act-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.
2. Estoppel.-doesn’t apply to minors.

3. Minor’s liability in tort-

a. If tort arises out of contract-no liability(see Jennings v. Rundall)
b. If tort is independent of contract- liability (see Burnard v. Haggis)

4. Contracts of service are not equated with necessaries in India.(See Raj rani v.
prem Adib)
However at present minors are increasingly entering into agreements. It must be
understood that the preposition minors agreements are absolutely void is a
general principle and is made applicable to situations where minor is charged
with obligations. However in cases where minors have furnished the entire
consideration(they have done what they were supposed to do)and have to
receive benefits but no obligation is being incurred ,minors are being allowed to
enforce.
( See Raghava Cheriar v. Srinivasa- Minor advanced whole mortgage money,
mortgage executed in his favor-held transaction enforceable)( Great American
insurance co v. Madanlal- minor paid the premium, at the time when fire
insurance was to be paid, company wanted to evade liability on basis of minority-
held- contract of insurance enforceable)

However if the consideration is executory, the ruling of Mohiri bibi would apply
 Necessaries
• Ratification- ratification relates back to previous date, hence minors cant
ratify the agreements entered into when they were minors. A new
contract needs to be enters into ,with new consideration.
• Necessaries- in India necessaries are covered u/s 68 which form part of
the chapter titled ‘Certain relations resembling those created by a
contract(Quasi contracts as called under English law) S.68-Claim for
necessaries supplied to person incapable of contracting, or on his account
• If a person, 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 life, the person who has furnished such supplies
is entitled to be reimbursed from the property of such incapable person.
• Illustrations
• (a) A supplies B, a lunatic, with necessaries suitable to his condition in
life. A is entitled to be reimbursed from B’sproperty.
• (b) 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.
 Persons of unsound mind
• S 12-What is a sound mind for the purposes of contracting-A person is said to be of
sound mind for the propose 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
interest.
• 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 not
make a contract when he is of unsound mind.
• Illustrations
• (a) A patient in a lunatic asylum, who is, at intervals, of sound mind, may contract
during those intervals.
• (b) 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 judgment as to its effect on his
interests, cannot contract whilst such delirium or drunkenness lasts.
• (See Sona Bala Bora v. Jyotindra Bhattacharjee)

• To be continued in EC-9 which would deal with Free consent.