Presentation Transcript

CAPACITY OF PARTIES:
CAPACITY OF PARTIES ‘Capacity of parties means that the parties concerned must be legally competent to bind themselves by promises.
According to section 11 of the indian contract act 1872 , “ every person is competent to contract: Who is the of age of majority according
to the law to which he is subject Who is of sound mind Is not disqualified from contracting by any law to which he is subject

CAPACITY OF PARTIES:
CAPACITY OF PARTIES PARTIES IMCOMPETENT TO ENTER INTO A CONTRACT MINOR A PERSON OF UNSOUND MIND PERSON
DISQUALIFIED BY LAW MINOR :- A minor is a person who has not attained the age of majority. ( i ) An agreement with a minor is void
ab initio (from the very beginning):- It is established rule in india that an agreement with a minor is void ab initio, namely, since its
conception and inception, it is a nullity.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES II) No Estoppel against a minor :- According to section 115 of the indian contract act 1872, ‘ estoppel ’ means
that if a person causes or permits another person to believe a thing to be true and to act upon such belief, then he will not be allowed to
deny the truth of that thing in any suit or proceeding between himself and such other person. When minor misrepresent his age and
leads the other party to believe that he is major, and on such belief the party enters into a contract with him, the minor is not estopped
from denying his majority. The minor can plead minority and avoid his liability under the contract. The contract will be void ab – inition
.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES Example :- In a case where Mr. A , a minor borrowed Rs. 50,000 from Mr. B by fraudulently representing himself
to be a major. When Mr. A failed to return the money Mr. B filed a suit for recovery . Mr. A took the defence of minority. The court set
aside the suit. III) No restitution against minor :- a minor is not liable to restore the property or goods received under the agreement
even though he fraudulently misrepresented his age. In such cases, the minor can be asked to restore such property or money so long as
the same is traceable in his hands. For example Mr A , a minor misrepresented his age, and gets an activa honda scooter on credit, on his
failure to pay the installment, the scooter can be recovered from him if it is still in his possession. But there is no personal liability of the
minor.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES IV) Minor may enforce beneficial contracts :- The law does not regard a minor as incapable of accepting a benefit.
If an agreement is made for his benefit, he can bind the other party and can claim such benefit. For example Raj Rani vs Prem Abid 1949 ,
Miss R, a minor was allowed the role of an actress in a film by Mr. P, a film producer. The agreement was made with father of miss R. Mr
P cancelled the contract and allotted the role to another artist. It was held that agreement was not enforceable.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES (V) Ratification on attaining majority is not allowed : the term ‘ratification’ means confirmation of some pervious
act. A minor cannot ratify a promise entered into during his minority, after attaining majority. A person can always make a fresh
promise after attaining majority in terms of the promise made during the minority. All that is necessary is that there should be some
fresh consideration for it. For example mr. x a minor borrowed Rs 100000 from mr y. On attaining majoirity , mr x persuades mr. y to
give a further advance of Rs 50000 and gives him a fresh promissiory note of Rs. 150000. Promissory note is valid as a fresh contract
based on fresh consideration and mr x is liable for Rs 150000 ( even though Rs 100000 was taken when he was a minor).

CAPACITY OF PARTIES:
CAPACITY OF PARTIES VI) Minor’s liability for Tort (Civil Wrong) : The term ‘tort’ means any wrong for which a civil suit can be
brought. Minors are liable for negligently causing injury or damage to other’s property. For example Burnard vs Huggis (1863) mr A
minor hired a mare from Mr B for the purpose of riding, he was given strict instruction ‘not to jump’ . Mr A lent the mare to his friend Mr.
C, who killed the mare by making it to jump. On action for damages in tort, mr. A was held liable.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES (VII)Minor and Joint Agreement : The agreement made by a minor jointly with a major person are void but such
agreement can be enforced against the major who is a joint promisor . (VIII) No specific performance against minor :- The court is
usually asked to order for specific performance which means directing the other party for actual performance as agreed. The agreement
with the minor is void ab -initio, so such an agreement cannot be enforced specifically. In other words, no specific performance relief can
be given to other party where defendant is minor.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES (IX) Minor as a partner :- Since he is not eligible to contract, a minor cannot be a partner in a partnership firm.
However , a minor may, with the consent of all the partners, be admitted to the benefits of an existing partnership. He will not be liable
for the losses of the firm. (X) Minor as a shareholder:- A minor cannot become a member of the company, since he is not competent to
enter into a contract. But if the articles of the company permit , the full paid up shares may be transferred to a minor.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES POSITION OF PERSONS OF UNSOUND MIND Section 12 of the contract act lays down that “a person is said to be
of sound mind for the purposes of making a contract if, at the time when he makes it, He is capable of understanding it, and He is capable
of forming a rational judgement as to its effect upon his interests.” 1. Lunatics : Lunatic is a person whose mental faculties of thinking
and decision making are deranged or disordered due to some mental stress or strain or other personal experience. It is kind of disease
of brain as such, his/her mental powers may not be completely lost.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES 2. Idiots :- an idiot is a person who is permanently of unsound mind. Such a persons do not understand even
ordinarly matters of the daily routine, therefore, a contract with an idiot is void. For example: A property worth Rs 25000 was agreed to
be sold by a person for Rs 7000 only. His mother proved that he was a congenial idiot. (i.e., idiot from birth), incapable of understanding
the transaction. It was held that sale deed executed by him was void. Inder singh vs permash-wardhari singh 1957.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES 3. Drunkard Persons :- a person whose is under influence of drinks or drugs is called a drunkard. A drunkard
person suffers from temporary incapacity to contract, i.e. at the time when he is drunk, so that he is incapable of forming a rational
judgement . PERSON DISQUALIFIED BY LAW The following persons are debarred from making any agreement. Allien /Foreign Enemy :-
A person of foreign country, which is enemy to another country, cannot make a contract. Foreign Soverign , State, Ambassador or
Representative : these persons enjoy a special priviledge that can enter into contract and enforce those contracts in our courts. But
under section 86 of the civil procedure code (CPC), previous sanction of the central government must be obtained in order to sue them.
Where the foreign sovereign enters into a contracts through their agents residing in India, such agent is personally become liable for the
performance of the contracts.

CAPACITY OF PARTIES:
CAPACITY OF PARTIES 3. Convicts: A convict person, during the period of imprisonment, cannot enter into contracts. A convict can
however , enter into a contract or sue on a contract if he is released on bail or under a ticket of leave. 4.Insolvent : All the assets and
property of an insolvent vests in the hands of an official receiver. So, an insolvent cannot contract against his property. 5. Married
Women: Married women can contract against their property. Married women are hindu , muslim , christian and persian ladies. If the
husband of a married women fails to provide necessary articles of living, then she can pledge the credit of her husband for which he
shall be liable for payment. A married women may sue or be sued in her own name is respect her separate property ( Stridhan ). 6. A
Joint Stock Co. : A company has its artificial existence. But it can contract through its share holders and directors under a common seal .
Only the contracts enter into by the corporation through its agent will be valid if they are within powers conferred on it by the object
clause of Memorandum of Association. Any contract beyond the powers conferred by the memorandum of association is void.