Capacity to contract

The parties who enter into a contract must have the capacity to contract ie they must be competent to enter into contract A person is competent to enter into a contract if he 1. has attained the age of majority 2. is of sound mind 3. is not disqualified by any law

 Disqualification Any person who is

disqualified by law for any reason other than that of being a minor or of unsound mind, is not competent to contract. Ex; A convict while undergoing imprisonment cannot enter into contract.

Unsoundness of mind A Person who 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 if at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effects upon his interests A contract with a person of unsound mind is absolutely void Eg: A contract with a lunatic, a person in drunken state, a person delirious from fever, an idiot, all are void. A person who is usually of unsound mind but occasionally of sound mind, may make a contract when he is of sound mind. Eg: lunatic may enter into contract durries lucid intervals. A person who is usually of sound mind but occasionally of unsound mind, may not make a contract when he is of unsound mind. Eg: A person who has drunk cannot enter into contract when he is in drunken state Where necessaries are supplied to a person of unsound mind, the estate of such unsound person shall be liable. But there shall be no personal liability of the unsound person.

Minors contracts
Who is a minor A minor is a person who has not attained the age
of majority . the age of majority is 18 years except where a guardian has been appointed for a minors property or person in which case the age of majority is 21 years. Agreement with a minor is void ab initio. This is because a child may show poor judgment in making a particular contract and this rule is a protection against his own ignorance and immaturity. Case study : Mohoribibi vs Dharamdas Ghosh.

A person under the age of 18 is presumed by law to be incapable of

understanding the consequences of his actions. He may show poor judgement.

 Some aspects of minors contracts 1. No liability of minor Minor is not liable

under a contract. -Minor cannot be saddled with liability -Minor does not have any obligations under a contract -Minor cannot be shouldered with responsibility

2. Contracts can be beneficial to minor When we say that a minor cannot enter into a contract we mean that a minor cannot be saddled with an obligation. But a minor can always take a benefit under a contract. The general rule that a minor is incompetent to enter into a contract does not debar him from becoming a beneficiary under a contract. Thus a minor can enforce a contract which is of some benefit to him and under which he is required to bear no obligation . A minor cannot make a promise. Eg : A minor may recover the price of goods already delivered to the buyer. Eg: Where a mortgage is executed in favour of a minor who has advanced the whole of the mortgage money the mortgage is enforceable by the minor.

3. No ratification An agreement made by a minor cannot be subsequently rectified by him on attaining majority. Rectification relates back to the date of making of the contract and therefore a contract which was then void cannot be made valid by subsequent rectification. Eg : Arumugam Us Duraisinga

4. No estoppel against minor Where a minor represent fraudulently that he is of the age of majority and thereby induces the other party to enter into a contract with him, then in an action founded on the contract , the mind may disclose his real age. He is not estopped from pleading minority and claiming the contract void by reason of his being incompliant. Eg: A aged 17 years fraudulently represents to B that he is a major and induces him to sell books to him .later when B sues A for the payment of money , A may plead his minority as defense and set aside the contract. The rule of estoppel does not lie against a minor.

5. Doctrine of restitution S 65 provides for the doctrine of restitution . When a contract becomes void or is discovered to be void, the person who has already received any advantage under the contract shall refund the advantage. The doctrine of restitution does not apply in the case of minors contract. For example in the famous case of Mohoribibi Vs Dharamadas Ghose , where a minor had secured a loan from a money lender by mortgaging his house, the mortgage was cancelled and the minor was not liable to refund the loan. But the law does not in all cases allow a minor to cheat others. If a minor obtains property or goods by misrepresenting his age, he can be compelled to restore it so long as the same is traceable in his possession. This doctrine of restitution shall not apply where the minor has received money or has sold, consumed or converted the goods received. He cannot be made to repay the money or the value of the goods because that would amount to enfolding a contract which is void. Restitution stops where payment begins. Eg: P a minor has taken a loan of Rs.10,000/- from Q . Q cannot compel P to repay the loan.

6. Minor is liable for supply of necessaries A person who supplied necessaries to a minor is entitled to be reimbursed from the property of such minor. Thus a minor is liable to pay out of his property for necessaries supplied to him. It is only the property for necessaries supplied to him. It is only the property of the minor and not the minor personally that can be held liable for such transactions. Liability of minors estate for necessaries arise because necessaries have already been supplied to him . Supply of necessaries is quasi-contractual in nature and hence is enforceable against the estate of the minor. What are necessaries depends upon
the status of the minor his actual need at the time of supply the goods or services supplied to him

Necessaries include food, clothing, shelter, education, medicines, etc. Also loans incurred by a minor to obtain necessaries, shall be recoverable from the minors property as if the lender himself has supplied necessaries. Eg: A supplies B, a minor with food and shelter. He is entitled to be reimbursed from Bs property. Eg: A advances Rs. 1000 to B, a minor for his school fees. A is entitled to be reimbursed from Bs estate.

7. Contracts of marriage A contract for the marriage of a minor is for his or his benefit. Thus the contract of marriage is enforceable by the minor against the other contracting party but it cannot be enforced against the minor. Eg: A the father of B aged 17 years has entered into a contract of marriage with C aged 22 years for the marriage of B and C. If later on B refuses to marry, C cannot enforce it against C. 8. Partnership- A minor can be admitted to share the profits of a partnership firm but cannot be made liable to pay the liabilities of the firm. 9. Company Minor can become a member or shareholder of a company through his guardian, but only of fully paid-up shares