Capacity of Parties: One of the most important parts of making an agreement is the parties entering into it must be capable/ in cap…
Capacity of Parties:
One of the most
important parts of making an agreement is the parties entering into it must be
capable/ in capacity to enter into agreement. If the parties are lacking in
this element then the agreement is void according to Indian Contract Act.
important parts of making an agreement is the parties entering into it must be
capable/ in capacity to enter into agreement. If the parties are lacking in
this element then the agreement is void according to Indian Contract Act.
Who is competent?
Every person is
competent to contract who has gain the age of majority i.e., 18 years in case
of natural guardianship and 21 years in case of guardianship provided by the
court, one must be of sound mind and must not be disqualified by law.
competent to contract who has gain the age of majority i.e., 18 years in case
of natural guardianship and 21 years in case of guardianship provided by the
court, one must be of sound mind and must not be disqualified by law.
Minor’s Agreements:
1. An agreement by a minor is void as
initio and inoperative as against him:
initio and inoperative as against him:
Where a minor is
charged with obligations and the other contracting party seeks to enforce those
obligations against minor, the agreement is deemed void ab-initio.
charged with obligations and the other contracting party seeks to enforce those
obligations against minor, the agreement is deemed void ab-initio.
Case Law: Mohiri Bibi
Vs Dharmodas Ghosh
Vs Dharmodas Ghosh
A minor borrowed
a sum of money after mortgaging his property. The mortgagee moved the Court for
repayment of the sum borrowed. The Privy Council held that money advanced to a
minor could not be recovered because an agreement with a minor is void ab.
Initio.
a sum of money after mortgaging his property. The mortgagee moved the Court for
repayment of the sum borrowed. The Privy Council held that money advanced to a
minor could not be recovered because an agreement with a minor is void ab.
Initio.
Note: A minor is
not liable even if he provides false information and acts fraudulently.
not liable even if he provides false information and acts fraudulently.
2. Agreement
beneficial to minors is valid contracts:
beneficial to minors is valid contracts:
In a contract, if a minor is a beneficiary, the contract is
valid and enforceable.
valid and enforceable.
Case Law :
Raghavachariar Vs Srinivasa
Raghavachariar Vs Srinivasa
In this case, a
minor was the mortgagee. The minor had lent money to an adult mortgagor. The
Madras High Court held that where a minor is a beneficiary, the contract would
be enforced in favour of the minor.
minor was the mortgagee. The minor had lent money to an adult mortgagor. The
Madras High Court held that where a minor is a beneficiary, the contract would
be enforced in favour of the minor.
3. Minor’s
Contract Cannot Be Ratified:
Contract Cannot Be Ratified:
Ratification
means subsequent acceptance or adoption of an act / agreement. Since a minor’s
agreement is void ab-initio, the minor on his attaining majority cannot
ratify the agreement entered during his minority.
means subsequent acceptance or adoption of an act / agreement. Since a minor’s
agreement is void ab-initio, the minor on his attaining majority cannot
ratify the agreement entered during his minority.
Case Law: Arumugam
Chetti Vs Duraisinga Thevar
Chetti Vs Duraisinga Thevar
A minor had
borrowed money during his minority. Upon attaining majority, he executed a
promissory note in favour of the creditor to repay the borrowed sum. It was held
that the promissory note was unenforceable, as ratification of a void agreement
was not possible.
borrowed money during his minority. Upon attaining majority, he executed a
promissory note in favour of the creditor to repay the borrowed sum. It was held
that the promissory note was unenforceable, as ratification of a void agreement
was not possible.
Note: The loan
transaction between the minor and the creditor was a void agreement.
transaction between the minor and the creditor was a void agreement.
4. Rule of
Estoppel Does Not Apply To Minors:
Estoppel Does Not Apply To Minors:
Estoppel means,
“When one person has by words spoken, written or by conduct, leads another one
to believe, certain thing to be true, and the latter acts upon such belief, he
is prevented from denying the truth of that thing.” A minor is not stopped from
setting up the plea of minority. In other words, he may plead infancy to escape
from a liability.
“When one person has by words spoken, written or by conduct, leads another one
to believe, certain thing to be true, and the latter acts upon such belief, he
is prevented from denying the truth of that thing.” A minor is not stopped from
setting up the plea of minority. In other words, he may plead infancy to escape
from a liability.
Case Law: Leslie Vs
Sheill
Sheill
A minor boy
borrowed funds, falsely representing that he was of full age. Later, he pleaded
before the court he was only a minor and hence not in a position to repay. The
court held that the rule of Estoppel does not apply to minors and held that the
boy was not liable.
borrowed funds, falsely representing that he was of full age. Later, he pleaded
before the court he was only a minor and hence not in a position to repay. The
court held that the rule of Estoppel does not apply to minors and held that the
boy was not liable.
5. Minor’s
Liability for Necessaries:
Liability for Necessaries:
When a minor is
supplied with the necessaries of life, by another person, the who so supplied
is entitled to be reimbursed from the property of the minor.
supplied with the necessaries of life, by another person, the who so supplied
is entitled to be reimbursed from the property of the minor.
Note: The above
rule is applicable to a person of unsound mind also.
rule is applicable to a person of unsound mind also.
Note: A minor is
not personally liable even for necessaries supplied.
not personally liable even for necessaries supplied.
6. Minor as a
Partner:
Partner:
A minor cannot
become a partner as the partnership agreement requires the persons entering
into it should be competent in accordance with law.
become a partner as the partnership agreement requires the persons entering
into it should be competent in accordance with law.
Minor, being
incapable of contracting, cannot become a full-fledged partner. However, Sec.30
of the Indian Partnership Act permits a minor to be admitted to the benefits
partnership firm.
incapable of contracting, cannot become a full-fledged partner. However, Sec.30
of the Indian Partnership Act permits a minor to be admitted to the benefits
partnership firm.
7. Position of
Minor’s Parents:
Minor’s Parents:
The parents of a
minor are not liable for agreements made by a minor unless the minor acts on
behalf of the parents. The parents are liable only if they are acting on behalf
of the minor for a particular agreement otherwise no liability.
minor are not liable for agreements made by a minor unless the minor acts on
behalf of the parents. The parents are liable only if they are acting on behalf
of the minor for a particular agreement otherwise no liability.
8. Minor and
insolvency
insolvency
A minor cannot be
declared insolvent, as he is not personally liable for his debts. A minor can
not be held personally liable even in case of necessaries.
declared insolvent, as he is not personally liable for his debts. A minor can
not be held personally liable even in case of necessaries.
9. Minor and
agency
agency
A minor can be
appointed as an agent. The principal will be responsible to third parties for
the acts of his minor agent. However, the principal cannot hold the minor agent
personally liable for any wrongful acts.
appointed as an agent. The principal will be responsible to third parties for
the acts of his minor agent. However, the principal cannot hold the minor agent
personally liable for any wrongful acts.
10. Minor as a
member of a company
member of a company
To become a
member of a company it requires buying of shares of company and he cannot buy
shares as it requires entering into agreement so a minor cannot become a member of a company, as he is incompetent
to contract. He cannot purchase shares in the company. Where he inherits
shares, the name of the guardian will be entered in the Register of Members.
member of a company it requires buying of shares of company and he cannot buy
shares as it requires entering into agreement so a minor cannot become a member of a company, as he is incompetent
to contract. He cannot purchase shares in the company. Where he inherits
shares, the name of the guardian will be entered in the Register of Members.
Who is not competent
to contract?
to contract?
1. Alien
enemies:
enemies:
A person cannot
enter into contracts with alien enemies. When a country is declared enemy
character then the people of the country is called as alien enemies. Generally
a country is declared enemy character at the time of war.
enter into contracts with alien enemies. When a country is declared enemy
character then the people of the country is called as alien enemies. Generally
a country is declared enemy character at the time of war.
2. Convict:
During the period of imprisonment, a convict is incompetent
·
to enter into contracts
to enter into contracts
·
to sue on contracts made before
conviction
to sue on contracts made before
conviction
3. Insolvent
person
person
An insolvent person is incompetent to contract with respect
to his property.
to his property.
4. Foreign
Sovereigns and Ambassadors
Sovereigns and Ambassadors
They can enter
into contracts and enforce them, but they cannot be sued in our courts without
the permission of the Central Government.
into contracts and enforce them, but they cannot be sued in our courts without
the permission of the Central Government.
Note: If a person gets attacks of insanity
and otherwise behaves like a sound mind person. In such cases what was his
state of mind while entering into the agreement. If it is proved that he was of
sound mind when he entered into contract. The contract is valid otherwise it
would be void.
and otherwise behaves like a sound mind person. In such cases what was his
state of mind while entering into the agreement. If it is proved that he was of
sound mind when he entered into contract. The contract is valid otherwise it
would be void.
Practice Exercise:
1. Sec. 10 of The Indian
Contracts Act deals with
Contracts Act deals with
A. Valid contract
B. Capacity to contract
C. Void contract
D. None of the above
Ans: B
2. The following people are
incompetent to contract
incompetent to contract
A. Minors
B. Persons of unsound mind
C. Persons disqualified by law
D. All of the above
Ans: D
3. A person without a court
appointed legal guardian attains majority at
appointed legal guardian attains majority at
A. 16
B. 17
C. 21
D. 18
Ans: D
4. Akash has a guardian appointed by the court. He attains his majority
at
at
A. 16
B. 18
C. 21
D. None of the above
Ans: C
5. 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. Which Sec. of the Indian Contract Act has been
mentioned above?
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. Which Sec. of the Indian Contract Act has been
mentioned above?
A. 10
B. 11
C. 12
D. None of the above
Ans: B
6. Agreement with a minor is
A. Valid
B. Void ab initio
C. Voidable c
D. None of the above
Ans: B
7. A minor borrowed a sum of
money after mortgaging his property. This is
money after mortgaging his property. This is
A. Void
B. Voidable
C. Valid
D. None of the above
Ans: A
8. A contract, where the minor is a beneficiary is
A. Void
B. Voidable
C. Valid
D. None of the above
Ans: C
9. Can a minor on attaining majority ratify the contract?
A. No
B. Yes
C. Maybe
D. None of the above
Ans: A
10. A minor boy borrowed funds, falsely representing that he was of full
age. Will the boy be held liable?
age. Will the boy be held liable?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: B
11. Supplying necessities to a minor or lunatic would require them to
reimburse the other party.
reimburse the other party.
A. Yes
B. No
C. Maybe
D. None of the above
Ans: A
12. Can a minor become a partner?
A. Maybe
B. Yes
C. No
D. None of the above
Ans: C
13. If a minor, acts on behalf of the parents will they be held liable?
A. No
B. Yes
C. Maybe
D. None of the above
Ans: B
14. A minor can be appointed as an agent. Can the principal hold the
minor liable for any wrongful acts?
minor liable for any wrongful acts?
A. No
B. Yes
C. Maybe
D. None of the above
Ans: A
15. Will the parents be liable if they are acting for the minor?
A. No
B. Yes
C. Maybe
D. None of the above
Ans: B
16. Can a minor become a member of a company?
A. Yes. He can buy and sell shares
B. No. He cannot buy shares as it requires entering into a contract
C. Yes. Many minors are members in a company
D. all the above
Ans: B
17. A contract with X whose is a member of a country declared to be of
enemy character. Is he competent to contract?
enemy character. Is he competent to contract?
A. No
B. Yes
C. Maybe
D. None of the above
Ans: A
19. A convict cannot enter into contracts:
A. During his lifetime
B. During the time of imprisonment
C. Never
D. None of the above
Ans: B
20. Sec.12 of The Indian Contract Act deals with
A. Acceptance
B. Fraud
C. Sound mind
D. None of the above
Ans: C
21. A person who is usually of sound mind, but occasionally of unsound
mind may not make the contract when he is of
mind may not make the contract when he is of
A. unsound mind
B. sound mind
C. never
D. None of the above
Ans: A
22. A makes an offer to B a person who is usually of unsound mind. At
the time he was of sound mind. Will this be valid?
the time he was of sound mind. Will this be valid?
A. Yes
B. No
C. Never
D. Maybe
Ans: A
23. Maya marries Charlie when he is intoxicated. Is this valid?
A. Yes
B. No
C. Maybe
D. None of the above
Ans: B
24. N sells his property to M for Rs.1. N is said to be of sound mind.
This is
This is
A. Valid
B. Void
C. Voidable
D. None of the above
Ans: A
25. A drunken person is said to be in the same category as
A. A person of sound mind
B. Superhero
C. A person of unsound mind
D. None of the above
Ans: C
