Contract I

Capacity to
Contract
Pinki Mehta
Assistant Professor
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Table of
Contents
Part 1 Section 11

Part 2 Minor & Effects of Minor

Agreement

Part 3
Rules

Part 4 Other Incapacity

 Competency/Legal Ability of the
parties

Essential Element of Valid

Contract

Capacity to
Section 11

Contract
Major, Sound Mind and one who
is not disqualified from
contracting: Competent to enter
into valid contract.
 Section 11

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.
 Person Incompetent to enter into a Contract

Minor Unsound Mind Person disqualified by Law

- Lunatic/Idiot/Intoxicated - Alien Enemy, Foreign
sovereign, Convict,
Insolvent, Corporation
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Age of majority

Section 3- Indian Majority Act, 1875

18 years
If guardian appointed, Minor will
attain majority on completion of 21
years.
 Mohiri bibi vs. Dharmodas Ghose

Whether the agreement or contract entered by a minor

is void or voidable?

Effects of Such Agreement

 Effects of an agreement entered
into with a minor

Agreement A minor can

with minor are be beneficiary
absolute void: or a promisee/
void-ab- Beneficial Ratification Doctrine of
inition Contract No estoppel not possible Restitution
Srikakulam
Mohiri Bibi v. Dharmodas Subrahmanyam v. Kurra Khan Gul v. Lakha Singh Indran Ramaswamy vs. Khan Gul v. Lakha Singh
Ghosh Subha Rao Sadiq Ali Khan v. Jai Anthaoppa No person should enrich
- Flight Ticket Kishori himself at the expense of
-Education/transportation other.
and health care Section 64 & 65
 Effects of an agreement entered
into with a minor

In other Capacity
Agent Minor's
Partnership Liability for
Liability necessaries
Shareholder
Example - Tort of Deceit Section 68
 Void-ab-initio
Contract Entered into with a minor is void ab initio, i.e, Void from the very beginning.
Not Enforceable by Law. No Legal consequences.
Mohiri Bibi Vs. Dharmodas Ghosh
 Estoppel
Section 115 of the Evidence Act- One who intentionally causes another person to believe a things
should not be allowed to deny the truth of it.
If a minor claims to be a major to induce the other party to get into a contract, Whether he should be
allowed to claim that he was a minor later?
The general/ Procedural law cannot overrule the Substantive/ Special Law.
No estoppel is permitted against the minor. A minor can always plead minority.
 Doctrine of Restitution
A minor is not estopped from setting up the defence of minority. But, if a minor obtains property or
goods by misrepresenting his age, he must be compelled to restore it.
Section 64 & 65
Section 33 of the Specific Relief Act, 1963 Provides for restitution.
In Khan Gul v. Lakha Singh, the court permitted restitution by applying the rule of equity.
 Ratification
Ratification takes the agreement back to the date on the making of agreement and give effect from
the date.
Whether a minor can ratify an agreement made by him during minority?
Agreement made by minor during minority is void ab initio. It is void from the beginning and it never
came into existence. It cannot be ratified when minor attains majority. An agreement which never
came into existence cannot be made valid by subsequent ratification.
A person can always make a fresh promise after attaining majority on the same terms of the promise
made during minority. All that is necessary is that there should be some fresh consideration for it.
Suraj Narain v. Sukhu Ahir (1928)
A void agreement can never be ratified.
 Beneficial Contract
Minor's agreement is absolutely void, where a minor is charged with obligation and other contracting
party seeks to enforce those obligation against the minor.
The law does-not regard a minor as incapable of accepting a benefit.
An agreement for the benefit of a minor is enforced by the minor. If a minor is beneficiary in an
agreement, he can enforce such an agreement.
Srikakulam Subrahmanyam v. Kurra Subba Rao (1948)
 Liability
1. Contract & Tort
A minor is incapable of giving consent. As, there is no contract, no liability lies on parties. So minor
cannot be held liable under a Contract. Minor cannot be held liable which would be indirect way of
enforcing contract.
A contract cannot be converted to Tort to sue a minor. For example - Damage for Deceit. But, a minor
can be held liable is the tort committed is not connected with a contract. The liability should have
arisen independent of the Contract.
 2. Agent & Partner

Section 184 of Indian Contract Act, 1872 - Whether a minor can be appointed as agent?
Minor can be appointed as agent. His action as a agent will bind the principal. But as a minor he will
not be responsible to the minor. A
Section 30 of Partnership Act 1932 - provides that though a minor cannot be a partner in a firm, but,
with the consent of all the partners for the time being, he may be admitted to the benefits of
partnership by an agreement executed through his guardian with the other partners.. On attaining
majority or on knowing that he had been admitted to the benefits of partnership, whichever is later,
the minor must decide within 6 months whether he would like to become a partner in the firm and
give public notice of his decision. If he remains silent and fails to give such a notice, it will be
presumed that he has elected to be a partner in the firm.
 3. Necessaries
Section 68 of Indian Contract Act, 1872 - permits reimbursement to a person, who supplies
“‘necessaries” to a minor or a lunatic person. Such duty to reimburse is not there because of any valid
contract with the minor, etc. but because the law recognises this to be a ‘quasi-contractual’
obligation.
There is no Personal Liability of the minor, but only his property is liable.
Condition : 1. Goods necessary 2. Must not have already a sufficient supply of these necessaries.

4. Insolvent
A minor cannot be declared insolvent as he is incapable of Contracting debts and dues are payable
from the personal properties of minor and he shall never be held personally liable.
 Person of Unsound Mind
Section 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 and of forming a rational judgment 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 usually of sound mind, but occasionally of unsound mind, may not
make a contract when he is of unsound mind.
 Idiots

Unsoundness Lunatics

of mind may Drunkenness

arise from Hypnotised Person

 Person of Unsound mind
In English Law, A person of unsound mind is competent to contract. The contract is voidable at his
option. He have to prove not only his incapacity, but also the plaintiffs knowledge of his incapacity.
A Person is said to be of sound mind, when the two conditions are fulfilled. First, he is capable of
understanding the contract. Second, he is capable of forming a rational judgement about the effect of
such contract on his interest.
The position of a contract with people of unsound mind is similar to that of Contract with minor. He
may enforce the contract for his benefit and his estate is liable for the necessaries supplied to him.
Inder Singh v. Parmeshwardhari Singh (1959)
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Person
3. disqualified by
Law
 Alien Enemy
Foreign Sovereign and Diplomats

Disqualification Convicts

Insolvent
Corporation
Thank you!