Capacity

To
contract
Capacity To Contract
Means
Capacity to contract means a party
has the legal ability to enter into
a contract. Capacity also means a
person has to be competent as
defined by law. Someone's capacity
is determined by whether or not
they have reached the age of
majority and if they are mentally
capable of understanding the
applicable contract terms.
Contract with Minor
• . As per Section 3 of the
Indian Majority act, 1875, a
minor is a person who is
under 18 years of age. An
agreement with minor is
void and cannot be ratified
by him/her until he/she
attains majority.
 AGREEMENT WITH MINOR PARTIES

• Section 11 clearly states that a minor is not

competent to contract .if a person enters into a
contract with a minor , then such contract is void
and inoperative initio
• The law protects the minors since minor need
protection because they have no experience of legal
issue involved in a contract.
• A minor can receive benefit of action but is not
bound by any obligation or answerable for any
action . The law goes to the extent that even if a
minor enters into a contract by telling a lie ,no legal
action can be taken against him
MOHRI BIBI VS .DHRMODAS GHOSH (1930)

• A minor dharmodas mortgaged some property in

favor of brahm dutt ,husband of mohri for a loan
of Rs.20000 ,out of which brahm dutt paid the
minor a sum of Rs.8000. he become a major a few
months later and filed a suit for the declaration
that the mortgage executed by him during his
minority was void and should be cancelled . It was
held that a mortgage by a minor was void and
brahm dutt was not entitled to repayment of
money
 UNSOUND MIND
•Any person with an unsound mind is
incompetent to contract ; only a person with
a sound mind can contract

• a person is said to be of sound mind for the

purpose of making contract if, at the time
when he make it, he is capable of
understanding it and of forming a rational
judgment as to its effect upon interests.”
 UNSOUNDNESS OF MIND MAY ARISE
FROM

• idiocy

• lunatic

• Drunkard or delirious Personon

• Mental decay
 A)IDIOT

• An idiot Is a born fool who has completely

lost his mental powers . A person who can
answer simple queries about name, age etc .,
is not deemed to be an idiot . An idiot can
never into a contract
 B) LUNATIC

• a person who has lost his mental powers

because of accident illness or personal
tragedy is called lunatic.
• Lunacy denotes periodic insanity and periodic
sanity.
C)DRUNKARD OR DELIRIOUS PERSON

• A person who is intoxicated by drinking or is

under the influence of drugs or is delirious
because of pain or sickness cannot make a
rational decision and as such is incompetent
to make a contract
 E)MENTAL DECAY
D)HYPNOTISM

•It is pertinent to mention here that old age does

• Mental decay
not come under the provision of this section unless
it is proven beyond doubt that the party to the
contract was of unsound mind because of old age
when the contract was made.
 DISQUALIFIED BY ANY LAW

• It refers to statutory disqualification imposed

on certain persons in respect of their capacity

to contract.
 TYPE OF PERSON DISQUALIFIED FROM
CONTRACTING BY ANY OTHER LAW

• Alien enemy

• Foreign sovereigns and diplomatic staff

• Insolvents

• Convict
 ALIEN ENEMY

• An alien is competent to contract with

citizens of India. An alien enemy is

one with whose country India is at war.

 Foreign sovereigns and diplomatic staff

• These person are immune from the

jurisdiction of local courts , unless they
voluntarily submit to its jurisdiction . These
persons have a right to contract but can claim
the privilege of not being sued.
 INSOLVENTS

• An in Insolvent cannot enter into a contract as

his property vests in the official receiver or
official assignee. This disqualification of an
insolvent is removed after he is discharged by
the courts.
 Convict
• A convict while undergoing imprisonment is
incapable of entering into a contract . But to
his disability comes to an end on the expiry of
the sentence .