Capacity to Contract under Indian Contract Act, 1872

Capacity to Contract under Indian Contract Act, 1872

Competent to Contract

Section 11 of the Contract Act requires that parties must be competent to contract. The competence of the parties to make a contract is one of the most essential elements of a valid contract.

 Competence to contract is defined in Section 11 of the Indian Contract Act, 1872:

“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.”[1]

Thus, section 11 declares the following persons to be competent to contract:

1. Who attained the Age of Majority
2. Who is of sound mind
3. Who has not been disqualified by law

Incompetent to Contract

The persons incompetent to contract are:

1. Minors
2. Persons of unsound mind, and
3. Persons disqualified by law 

1). Minors

Age of Majority

The age of majority is generally eighteen as Section 3 of Indian Majority Act, 1875 states that “Every person domiciled in India shall attain the age of majority on his completing the age of eighteen years and not before.”[2] except when a guardian of a minor’s person or property has been appointed by the court, in such case it is 21[3].

Nature of minor’s agreement is that, any agreement made with a minor in India is void-ab-intio i.e. void from the beginning.

 Effects of Minor’s Agreement

1. No estoppel against minor: There can be no estoppel against minor i.e., if a minor by misrepresenting his age induces another to contract with him , then also he cannot be made liable.

2. No liability in contract or in tort arising out of contract: A minor is incapable of giving consent, and the nature of minor’s agreement is a nullity and cannot be enforced[4].

3. Doctrine of Restitution: If an infant by misrepresenting his age, obtains property or goods, then he can be compelled to restore it, but only so long as the same is traceable in his possession, this is called as the equitable Doctrine of Restitution. Where the infant has converted or sold the goods, he cannot made to repay the value of goods as that would lead to enforcing a void contract. When the infant has obtained the cash instead of goods , then in this case again the Doctrine of Restitution is not applied[5].

Liability for necessaries (Section 68)

Section 68 of the Indian Contract Act, 1872 talks about the liability of the persons incompetent to contract for the necessaries supplied to them.

Section 68: Claim for necessaries supplied to person incapable of contracting, or on his account-“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.”[6]

2). Persons of unsound mind

The agreement with a person of unsound mind in India, is void. According to Section 12 of the Indian Contract Act, a person is said to be of a sound mind if at the time of making the contract, the person is able to understand the contract and is capable of making a rational decision considering the effects of the same. 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. Persons of unsound mind includes an idiotic, lunatic and intoxicated person.

3). Persons disqualified by law

Apart from  minors and persons of unsound mind, there are also other persons such as Foreign sovereigns, convicts, alien enemy, insolvents and so on are disqualified from contracting partly or wholly or they are not competent to contract. Therefore, contracts by such persons are void.

Case Laws

In Mohori Bibee v. Dharmodas Ghosh[7],  a minor Dharmodas Ghosh mortgaged his immovable property to Brahmo Dutt a money lender to secure a loan of Rs. 20,000. The actual amount was not paid by the plaintiff as he paid Rs. 8000 only and refused to pay the rest amount. Minor’s mother said that his son is not liable to pay the sum as he was a minor. The privy council held that the minor contract is void and accordingly the Brahmo Dutt’s appeal was dismissed.

Also Read: Discharge of Contract under Indian Contract Act, 1872

In Suraj Narain v. Sukhu Aheer[8], a person during his minority borrowed some money and after attaining the age of majority, in favour of the same person, he made a fresh promise to pay that sum. The court held that, as the agreement cannot ratified, the minor was not liable for the same.

In Kuwarlal v. Surajmal[9], a room on rent given to a boy (minor) by the plaintiff to continue his studies. The court held that according to Section 68 of the Contract Act, the boy is liable to pay the sum as that room was given to him for his studies and education is considered under the head “necessities”.

Conclusion

Thus, for a valid contract, capacity to contract is an essential element and for that, Section 11 of the Contract Act defines the persons who are eligible for contract i.e. competent to contract or who can enter into the contract. The person incompetent to contract like minor, unsound mind and persons disqualified by law are not eligible to contract and contract with such type of person is unenforceable by law.

References

• [1] Indian Contract Act, 1872 (No. 9 of 1872)
• [2] The Majority Act, 1875 (No. 9 of 1875)
• [3] Avtar Singh, Contract & Specific Relief, Page- 153, 12^th Edition, EBC Publishing (P) Ltd.
• [4] https://blog.ipleaders.in/minors-capacity-enter-contract/
• [5] Avtar Singh, Contract & Specific Relief, Page- 158, 12^th Edition, EBC Publishing (P) Ltd.
• [6] https://indiankanoon.org/doc/1164247/
• [7] (1903) 30 Cal 539 (Pc)
• [8] AIR 1928 All 440
• [9] AIR 1963 MP 58

                                       Edited By Anjuri Tyagi