who are competent to contract

According to Section 11 of the Indian Contract Act, Every person is legally competent to contract if he fulfills the following three conditions-

  1. He has attained the age of majority or not a minor, according to the law to which he is subject;
  2. He is of sound mind; and.
  3. He is not disqualified from contracting by any other law to which he is subject.

WHO IS A MINOR: WHY MINORS ARE NOT COMPETENT TO CONTRACT

Any person, who has not attained the age of majority prescribed by law is known as minor. Section 3 of the Indian Majority Act, 1875 prescribes the age limit for majority and says a minor is a person who has not completed eighteen years of age. But the same Act also mentions that in the following two cases a person attains majority only after he completes his age of twenty one years-

  1. Where a Court has appointed guardian of a minor’s person or property or both (under the Guardians and Wards Act, 1890); or
  2. Where the minor’s property has been placed under the superintendence of a Court of Wards.

WHO IS A PERSONS OF UNSOUND MIND

According to Sec. 12 of Contract Act, 1872, a person is said to be of sound mind for the purpose of making a contract-

  1. if he is capable of understanding the terms of contract at the time of making it, and
  2. if he is capable of making a rational judgment as to the effect upon his interests.

Types of Persons of Unsound Mind:

  • Lunatic
  • Idiot
  • Delirious persons
  • Drunken or intoxicated persons
  • Hypnotized persons
  • Mental decay

According to Sec. 12, “A person who is usually of unsound mind but occasionally of sound mind may make a contract when he is of sound mind. And a person who is usually of sound mind but occasionally of unsound mind may not make a contract when he is of unsound mind.”

PERSONS DISQUALIFIED BY OTHER LAWS:

There are certain persons who are disqualified from contracting by the other laws of our country. It refers to statutory disqualification imposed on certain person in respect of their capacity to contract. They are as under:

  • Alien enemy: An alien is a person who is a citizen of a foreign country. An alien may either be an alien friend or an alien enemy. Aliens are generally competent to contract with citizens of the India. He can maintain as action on a contract enter into by him during peace time. But if a war is declared, an alien enemy cannot enter into a contract with the Indian citizen. Contract entered into before the declaration of war are either stayed or terminated but contract made during the wartime are absolutely unenforceable.
  • Foreign sovereigns, diplomatic staff etc.: These persons are immune from the jurisdiction of local courts, unless they voluntarily submit to its jurisdiction. These persons have a right to enter into contract and enforce those contracts in our courts but they cannot be sued in our courts without the sanction of the Central Government unless they choose to submit themselves to the jurisdiction of our Courts. Rules regarding suits by or against foreign sovereigns are laid down in Section 84 to 87 of Civil Procedure Code.
  • Corporations and companies: A corporation is an artificial person as recognised by law. It exists only in the eyes of law. It is competent to enter into a contract only through its agent. The contractual capacity of a company is determined by the ‘object clause’ of its memorandum of Association. The contractual capacity of statutory corporations is determined by the statute creating it.
  • Insolvents: When a person’s debts exceed his assets, he is adjudged insolvent and his property stands vested in the Official Receiver or Official Assignee appointed by the Court. An insolvent cannot enter into a contract as his property is vested in the official receiver or official assignee. This disqualification of an insolvent is removed after he is discharged.
  • Convicts: A convict while undergoing imprisonment in incapable of entering into a contract. But this disability comes to an end on the expiry of the sentence.
  • Married women: A woman is competent to enter into a contract. Marriage does not affect the contractual capacity of a woman. She can even bind her husband in cases of pressing necessity. A married woman may sue or be sued in her own name in respect of her separate property.
  • Professional persons: Doctors and advocates are included in the class. In England barristers are prohibited by the etiquettes of their profession from suing for their fees.

Also Read: CONSIDERATION UNDER INDIAN CONTRACT ACT

STATUS OR NATURE OF MINOR’S AGREEMENTS: WHO ARE COMPETENT TO CONTRACT

A minor’s agreement being void is wholly devoid of all effects. When there is no contract there should be no contractual obligation on either side.

  • An agreement with or by minor is void: Section 10 of the Indian Contract Act requires that the parties to a contract must be competent and Section 11 says that a minor is not a competent. But neither section makes it clear whether the contract entered into by a minor is void or voidable. Till 1903, court in India were not unanimous on this point the privy council made it perfectly clear that a minor is not competent to a contract and that a contract by minor is void ab initio. Minor’s agreement is absolutely void from very beginning, i.e. void ab initio. It is nullity in the eye of law. An agreement with minor, therefore, can never be enforced by law. The leading case on minor’s contract is Mohri Bibi V. Dharmo Das Ghosh (1903)
  • No ratification: An agreement with the minor is completely void. A minor cannot ratify the agreement even on attaining majority, because a void agreement cannot be ratified. A person who is not competent to authorize an act cannot give it validity by ratifying.
  • Minor can be a promisee or beneficiary: If a contract is beneficial to a minor, it can be enforced by him. There is no restriction on a minor from being a beneficiary, for example, being a payee or a promisee in a contract. Thus a minor is capable of purchasing immovable property and he may sue to recover the possession of the property upon tender of the purchase money. Similarly a minor in whose favor a promissory note has been executed can enforce it.
  • No estoppel against a minor: Where a minor by misrepresenting his age has induced the other party enter into a contract with him, he cannot be made liable on the contract. There can be no estoppel against a minor. It means he is not estopped from pleading his infancy in order to avoid a contract.
  • No specific performance except in certain cases: A minor’s contract being absolutely void, there cannot be a question of specific performance of such contract. A guardian of a minor cannot bind the minor by an agreement for the purchase of immovable property; so the minor cannot ask for the specific performance of the contract which the guardian had no power to enter into. But a contract entered into by guardian or manager on minor’s behalf can be specifically enforced if-
    1. The contract is within the authority of the guardian or manager.
    2. It is for the benefit of the minor.
  • Liability for torts: A tort is a civil wrong. A minor is liable in tort unless the tort in reality is a breach of contract. But a minor cannot be made liable for a breach of contract by framing the action on tort.
  • No insolvency: 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 is not personally liable.
  • Partnership: A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Indian Contract Act , he can be admitted to the benefits of partnership.
  • Minor can be an agent: A minor can act as an agent. But he will not to be liable to his principal for his acts. A minor can draw, deliver and endorse negotiable instruments without himself being liable.
  • Minor cannot bind parent or guardian: In the absence of authority, express or implied, an infant is not capable of binding his parent or guardian, even for necessaries. The parents will be held liable only when the child is acting as an agent for parents.
  • Joint contract by minor and adult: In such a case, the adult will be liable on the contract and not the minor.
  • Surety for a minor: In a contract of guarantee when an adult stands for a minor then he (adult) is liable to third party as there is direct contract between the surety and the third party.
  • Minor as shareholder: A minor, being incompetent to contract cannot be a shareholder of the company. If by mistake he becomes a member, the company can rescind the transaction and remove his name from register. But, a minor may, acting through his lawful guardian become a shareholder by transfer or transmission of fully paid shares to him.
  • Liability for necessaries: The case of necessaries supplied to a minor or to any other person whom such minor is legally bound to support is governed by Section 68 of the Indian Contract Act. A claim for necessaries supplied to a minor is enforceable by law. But a minor not liable for any price that he may promise and never for more than the value of the necessaries. There is no personal liability of the minor, but only his property is liable.

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