CONTRACTUAL CAPACITY

• DEFINITION: EVERY PERSON IS

COMPETENT TO CONTRACT WHO IS OF THE
AGE OF MAJORITY ACCORDING TO LAW,
WHO IS OF SOUND MIND AND IS NOT
DISQUALIFIED FROM CONTRACTING BY THE
LAW.
• MINORS: A MINOR IS APERSON WHO HAS
NOT ATTAINED THE AGE OF MAJORITY.
ACCORDING TO INDIAN MAJORITY ACT
1875, THE AGE OF 18 YEARS IS A MAJOR.
 EFFECTS OF MINOR
AGREEMENT
• NO ESTOPPLE AGAINST MINOR.
• NO LIABILITY ARISING OUT OF THE
CONTRACT
• DOCTRINE OF RESTITUTION
• RATIFICATION
 PERSONS OF UNSOUND MIND
• A PERSON IS SET 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 AND OF FORMING A RATIONAL
JUDGEMENT AS TO ITS AFFECTS UPON HIS
INTERESTS.
• A PERSON WHO IS USUALLY OF SOUND MIND BUT
OCCASIONALLY OF UNSOUND MIND MAY NOT
MAKE A CONTACT WHEN HE IS OF UNSOUND
MIND .
• A PERSON OF UNSOUND MIND CAN NOT MAKE A
CONTACT AND OF HIS DOING SO MAKES THE
CONTRACT VOID.
 DISQUALIFICATION BY LAW
• A PERSON WHO HAS BEEN
DISQUALIFIED BY LAW TO WHICH HE
IS SUBJECT TO , OR HE HAS BEEN
CONVICTED FOR SOME OFFENCE
CAN NOT MAKE A CONTRACT.
 FREE CONSENT
• TWO OR MORE PERSONS ARE SAID
TO CONSENT WHERE THEY AGREE
UPON SAME THING IN THE SAME
SENSE. THERE SHOULD BE
CONSENSUS OR IDENTITY OF MIND .
• THE VALIDITY OF THE CONTRACT
DEPENDS NOT ONLY ON COSENT OF
THE PARTIES BUT THEIR CONSENT
MUST ALSO BE FREE .
 COERSION
• COERSION IS THE COMMITTING OR
THREATNING TO COMMIT ANT ACT
FORBIDDEN BY THE INDIAN PENAL
CODE OR THE UNLAWFUL DETAINING
OR THREATNING TO DETAIN ANY
PROPERTY,TO THE PREJUDICE OF
ANY PERSON WHAT SO EVER, WITH
THE INTENSION OF CAUSING ANY
PERSON TO ENTER INTO AN
AGREEMENT .
 UNDUE INFLUENCE
• THE UNCONSIOUS USE OF POWER OVER
ANOTHER PERSON , SUCH POWER BEING A PAIN
BY VIRTUE OF A PRESENT OR PREVIOUSLY HELD
DOMINATING CONTROL ARISING OUT OF
RELATIONSHIP BETWEEN THE PARTIES
• “A CONTRACT IS SAID TO BE INFLUENCED BY
UNDUE INFLUENCE WHERE THE RELATION
BETWEEN THE PARTIES ARE SUCH THAT ONE OF
THE PARTIES IS IN A POSITION TO DOMINATE THE
WILL OF THE OTHER AND USES THAT POSITION TO
OBTAIN AN UNFAIR ADVANTAGE OVER THE
OTHER.”
 UNDUE INFLUENCE
• A PERSON IS DEEMED TO BE IN A POSITION TO DOMINATE
THE WILL OF THE OTHER IN FOLLOWING WAYS :
(1) WHERE HE HOLDS A REAL OR APPARENT AUTHORITY
OVER THE OTHER OR WHERE HE STANDS IN A FIDUCIARY
RELATION TO THE OTHER
(2) WHERE HE MAKES A CONTRACT WITH A PERSON WHOSE
MENTAL CAPACITY IS TEMPORARILY OR PERMANENTLY
AFFECTED BY ABRSON OF AGE , ILLNESS, OR MENTAL OR
BODILY DISTRESS.
(3) WHERE A PERSON WHO IS IN A POSITION TO DOMINATE
THE WILL OF ANOTHER, ENTERS INTO A CONTRACT WITH
HIM AND THE TRANSACTION APPEARS UNCONSCIONABLE .
 FRAUD
• DEFINITION:
“ A FALSE STATEMENT MADE
KNOWINGLY ORR WITHOUT BELIEF IN
ITS TRUTH OR RECKLESSLY
CARELESS WHETHER IT BE TRUE OR
FALSE IS CALLED FRAUD ’’
 ESSENTIALS OF A FRAUD

• MAKING A FALSE SUGGESTION

• THE REPESENTATION MUST BE OF A FACT
• CONCEALMENT OF FACTS IS A FRAUD
• A PROMISE MADE WITHOUT ANY INTENTION OF
PERFORMING IT
• ANY OTHER ACT TO DECIEVE
• ANY ACT OF OMISSION WHICH THE LAW DECLARES TO BE
FRAUDLENT
“WHILE ACTIVE CONCEALMENT OF MATERIAL FACT IS A FRAUD,
SILENCE IS NOT FRAUD EXCEPT UNDER TWO
CIRCUMSTANCES”.
(1) CIRCUMSTANCES OF THE CASE CAST A DUTY UPON THE
PERSON KEEPING SILENCE TO SPEAK
(2) SILENCE ITSELF IS EQUIVALENT TO SPEECH