Capacity to Contract: Competency and Minors

Capacity to Contract
DR. SUNANDA MITRA GHOSH
Capacity to Contract
Who is competent to contract

Chapter
TITLE 1
As per section 11 of the Indian

Contract Act :-
(a) Every person who has attained the

age of majority,
(b) Who is of sound mind and

(c) is not otherwise disqualified from
contracting
Disqualified persons to enter into a contract

a) Minor b) unsound person c)others alien enemy, insolvent, convict, company/corporation against MOA / AOA .
Contracts are not legally binding for :
minors people with mental disability people with impaired judgment

illness disability Alcohol / drugs
Competent to Contract
(a) Age of majority

In India, the age of majority is
regulated by the Indian Majority Act Every person domiciled in India attains
majority on the completion of 18 years of age.
(b) Sound mind

As per section 12 A person is of sound mind if at the time
when he makes it, he is capable of understanding it & of forming a rational judgement as to its effect upon his interests.
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 cannot make a contract when he is of unsound mind.
(A) position of Minors agreement
MINOR
1.
An agreement made with minor altogether void

Minor
According
to Indian majority act sec(3) minor is defined as any person under the age of 18 years . In the following cases a person is said to be minor if he does not complete the age of 21 years a) any person under the guardian & wards act ,1890 b)any person which comes under superintendence of law/legal representative
Rules governing minors agreement
Rule
1 : judges are counsellors , jury is the servant , law is the guardian . Rule 2:in case minor entered into a contract which is unlawful , illegal , immoral he is also prosecutable & punishable under the relevant law.
Legal rules
An agreement with minor is void ab initio [Mohiri Bibi v. Dharmadas Ghase] Minor can be promisee [Shrafat Ali v. Noor Mohd] Minor cannot ratify his agreement on attaining the age of majority [Indra Ramaswamy v. Anthiappa Chettier]
The word void means void as against the minor. .
Contract with or by
a minor is altogether void The Act provides that a person who is a major is competent to contract.
An agreement by a minor involves a promise on his part and he is incapable of giving

a promise imposing a legal obligation. Therefore, the agreement with the minor is
v o i d
ab initio
Mohri bibi V Dharmodas Ghose

In 1903 the Privy Council in the leading case of Mohiri Bibi v. Dharmodas Ghose (190,30 Ca. 539) held that in India minor's contracts are absolutely void and not merely voidable. The facts of the case were: Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed mortgage of property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. The Privy Council had to ascertain the validity of the mortgage. Under Section 7 of the Transfer of Property Act, every person competent to contract is competent to mortgage. The Privy Council decided that Sections 10 and 11 of the Indian Contract Act make the minor's contract void. The mortgagee prayed for refund of Rs. 8,000 by the minor. The Privy Council further held that as a minor's contract is void, any money advanced to a minor cannot be recovered. DR. SUNANDA MITRA GHOSH
(1903)
Privy council which decided the case

held that the minors agreement is void. There is no question of refunding the amount. In this case B who advanced money was aware that A was minor. Court held that if A the minor is directed to refund the amount, then this is tantamount to enforce an agreement which is void.
Minor can be promisee or beneficiary

can be beneficiary (payee, endorsee or promisee) such contracts enforceable at the option of the minor
Sharafat Ali Vs. Noor Mohd

A promissory note executed in favour of a minor. Subsequently, the drawer refused to honour the note on the ground that it being drawn in favour of a minor, was void. Held, that the contract was for the benefit of the minor and he can enforce it.
His agreement cannot be ratified by him on attaining age of majority ratification relates back to date of making of

contract therefore, contract which was then void cannot be made valid by subsequent ratification Consideration given during minority is not valid if fresh contract entered into after majority, fresh consideration to be paid.
Indran Ramaswamy Vs. Anthiappa Chettiar -
Minor borrows money and executes promissory note after attaining

majority, executed another promissory note in settlement of first note The second note is void for want of consideration.
No estoppel against minor-
Minor can always plead minority

Even if minor mis-represents his age, he cannot be sued.
Leslie Vs. Shiell
A minor succeeded in deceiving some

money-lenders by lying about his age and got them to lend him 400 on the faith of his being adult. On his refusal to pay, the money lenders sued him for money. Held, where the infant has sold the goods or converted them, he cannot be made to pay.
RULE 1
AGREEMENT BY MINOR IS ABSOLUTELY VOID
Law acts as a guardian of minor CaseMohri bibi vs dharmo das ghosh
No restitution except in certain cases

The law of restitution is the law of gains-based recovery
Minor can not be

ordered to make compensation
But there are certain exceptions
As per sec 64 & 65 Which deals with restitution - competence of

parties
Jager nath singh vs lalata prasad
He who seeks equity must

do equity
A minor sells a house for ` 50000 Later files a suit to set aside the contract On ground of minority May be directed by the court to refund the money Section 33 of specific relief act 1963 Based on
Rule 2
Beneficial agreement
Raghava chariar vs Srinivasa

.
A transfer through
sale In favour of a minor Who has paid the whole consideration Is enforced by him
. Where minor purchase A property Subsequent to his purchase Disposed by third party Minor could recover possession From his vendor
Rule 3
Contract of apprenticeship and service by a minor
Rule 3

Contract of apprenticeship stand on different footing From agreement of service by minor Contract of apprenticeship is valid and binding upon a minor Because contract is protected
1961 Must not be less than 14 years

By Apprentices Act
Rule 4
No ratification on a attaining the age of majority
No ratification on a attaining the age of majority
Minors agreement being

nullify Has no existence in eye of law Can not ratified By a minor On attaining the age of majority
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Capacity to Contract

DR. SUNANDA MITRA GHOSH

Who is competent to contract

As per section 11 of the Indian

DR. SUNANDA MITRA GHOSH

(a) Every person who has attained the

(b) Who is of sound mind and

DR. SUNANDA MITRA GHOSH

Disqualified persons to enter into a contract

Contracts are not legally binding for :

minors people with mental disability people with impaired judgment

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

(a) Age of majority

majority on the completion of 18 years of age.

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

(b) Sound mind

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

A person who is usually of

DR. SUNANDA MITRA GHOSH

(A) position of Minors agreement

DR. SUNANDA MITRA GHOSH

An agreement made with minor altogether void

Rules governing minors agreement

DR. SUNANDA MITRA GHOSH

The word void means void as against the minor. .

An agreement by a minor involves a promise on his part and he is incapable of giving

DR. SUNANDA MITRA GHOSH

Mohri bibi V Dharmodas Ghose

Privy council which decided the case

Minor can be promisee or beneficiary

Sharafat Ali Vs. Noor Mohd

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

Indran Ramaswamy Vs. Anthiappa Chettiar -

Minor borrows money and executes promissory note after attaining

DR. SUNANDA MITRA GHOSH

No estoppel against minor-

Minor can always plead minority

DR. SUNANDA MITRA GHOSH

Leslie Vs. Shiell

A minor succeeded in deceiving some

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

AGREEMENT BY MINOR IS ABSOLUTELY VOID

Law acts as a guardian of minor CaseMohri bibi vs dharmo das ghosh

DR. SUNANDA MITRA GHOSH

No restitution except in certain cases

Minor can not be

But there are certain exceptions

As per sec 64 & 65 Which deals with restitution - competence of

Jager nath singh vs lalata prasad

He who seeks equity must

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

Raghava chariar vs Srinivasa

DR. SUNANDA MITRA GHOSH

DR. SUNANDA MITRA GHOSH

Contract of apprenticeship and service by a minor

DR. SUNANDA MITRA GHOSH