OTHER ESSENTIAL

ELEMENTS OF A VALID
CONTRACT

CAPACITY TO
CONTRCT

Capacity to contract
Who is competent to contract?
Every person who
Has attained the age of majority
Is of sound mind
Is not otherwise disqualified from
contracting, by any other law.

Disqualified persons to
enter into a contract
a) Minor
b) unsound person
c)persons disqualified by any law
to which they are subject to.

Persons incompetent to contract

Minors
(Immature Mind)

Idiot

Lunatic

Alien Enemy(ies)

Persons of
unsound mind

Persons disqualified
by law

Drunkard

Convict

Foreign Sovereigns
&Ambassadors

Insolvent

Married Women

Body Corporates

Minor
According to Indian majority act sec(3) minor is
def ined as any person under the age of 18
years . In the following cases a person is said to
be minor if he does not complete the age of 21
years
a) where a guardian of minors person or property
has been appointed under Guardians and Wards
Act, 1980
b)where the superintendence of minors property is
assumed by a court of wards.

Rules governing minors

agreement

Rule 1 : judges are counsellors ,

jury is the servant ,
law is the guardian .
Rule 2:the law should not cause
unnecessary hardship to persons who
deal with minors.

Legal rules
Validity: - An agreement with a minor is
void-ab-initio
[Mohiri Bibi v. Dharmodas Ghose
(1903) 30 Cal. 539 ]
Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of
Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The
minor executed mortgage of property in favour of the lender. Subsequently,
the minor sued for setting aside the mortgage. The Privy Council had to
ascertain the validity of the mortgage. Under Section 7 of the Transfer of
Property Act, every person competent to contract is competent to
mortgage. The Privy Council decided that Sections 10 and 11 of the Indian
Contract Act make the minors contract void. The mortgagee prayed for
refund of Rs. 8,000 by the minor. The Privy Council further held that as a
minors contract is void, any money advanced to a minor cannot be
recovered.

 Minor can be promisee or a beneficiary

Example:
(a) A promissory note executed in favor of minor is valid and can be
enforced in a court. [Shrafat Ali v. Noor Mohd.,A.I.R.(1924)]
(b) Where, a minor has performed his part of the agreement and
delivered the goods, he was entitled to maintain a suit for recovery of
their price. [Abdul Ghafffer Vs. Piare Lal]
(c) A mortgage was executed in favour of the minor. Held, he could set a
decree for the enforcemnet of the mortgage.[Raghavachariah Vs.
Srinivas, (1917)40 Mad.30.]

Minor cannot ratify his agreement on

attaining the age of majority

[Indra Ramaswamy v. Anthiappa Chettier(1906) 6 M.L.J. 422]

M, a minor, borrowed Rs. 5000 from L and executes a promissory

note in favor of L. after attaining majority, he executes another
promissory note in settlement of the first note. Held, the second
promissory note is void for want of consideration.

If he has received any benefit under a void

agreement, he cannot
compensate or pay for it.

be

asked

to

Example: M, a minor, obtains a loan by mortgaging his property.

He is not liable to refund the Loan. Not only this, even his
mortgaged property cannot be liable to pay the debt.

 Minor can always plead minority.

Fraudulent representation by a minor- no difference in
the status of agreement. The contract remains void.
There can be no specific performance on
agreements entered into by him as they are void
ab initio.
But when a contract is entered into on his behalf by
parent/guardian or the manager of his estate can
specifically enforced by or against minor provided
contract is :
(a) Within the scope of the authority of
parent/guardian/manager. &
(b) For the benefit of the minor.

his
be
the
the

 A minor with the consent of all the partners, be

admitted to the benefits of an existing
partnership.
He cannot be adjudged insolvent.
There can be no specific performance on
agreements entered into by him as they are void
ab initio.
A minor can act as an agent but not personally
liable. But he cannot be principal.
Minors parents.(liable only when the minor acts
as agent of the parents).
A minor cannot become shareholder of a the
company except when the shares are fully paid
up and transfer by share.
Minors liability for necessaries

 Can enter into contracts of Apprenticeship,

Services, Education, etc:
(a) A minor can enter into contract of apprenticeship,
or for training or instruction in a special art,
education, etc.
(b) These are allowed because it generates
benefits to the Minor.
Guarantee for and by minor
A contract of guarantee in favour of a minor is
valid. However, a minor cannot be a surety in a
contract of guarantee. This is because, the surety is
ultimately liable under a contract of guarantee
whereas a minor can never be held personally liable.

 Minor as a trade union member

Any person who has attained the age of fifteen years
may be a member for registered trade union,
provided the rules of the trade union allow so. Such a
member will enjoy all the rights of a member.
Liability for tort: A minor is liable for a tort, i.e.,
civil wrong committed by him.
Example :
A, a 14 year old boy drives a car carelessly and injures
B. He is liable for the accident i.e., tort.

Unsound person
According to sec(12) a person
generally sound , occasionally
unsound can enter into a
contract when he of sound mind
A person generally unsound
occasionally sound can enter
onto contract when he is sound
mind .

Persons of unsound mind

1)Lunatic - He can enter into contract
during lucid intervals i.e., during period
when he is of sound mind.

2)Idiots - the agreement of an idiot is

absolutely void ab initio

3)Drunken or intoxicated persons . An agreement made by intoxicated

person is void

Persons Disqualified by Law

Body corporate or company or
corporation
Contractual capacity of company is
determined by object clause of its
memorandum of association. Any act
done in excess of power given is ultra
virus and hence void.

 Alien enemy
An alien is a person who is a foreigner to the land.
He may be either an alien friend or an alien enemy.
If the sovereign or state of the alien is at peace with
the country of his stay, he is an alien friend. An if a
war is declared between the two countries he is
termed as an alien enemy.
(a) During the war, contract can be entered into with alien
enemy with the permission of central government.
(b) Contracts made before the war may either be suspended
or dissolved.

 Convict
cant enter into a contract while he is undergoing
imprisonment. But he can enter into a contract with
permission of central government while undergoing
imprisonment. After the imprisonment is over, be
becomes capable of entering into contract. Thus the
incapacity is only during the period of sentence.

Insolvent
When any person is declared as an insolvent, his
property vests
in receiver and therefore, he cant
enter into contract relating to
his property. Again he
becomes capable to enter into contract when he is
discharged by court.

 Foreign sovereigns, diplomatic staff and

representative of foreign staff
can enter into valid contract. However, a suit cannot be
filed against them, in the Indian courts without the prior
sanction of the central Government.

Married Women
Can enter into contracts w.r.t their separate properties.
They cannot enter into contracts w.r.t their husbands
properties. They can however act as their husbands agent
and bind their husbands properties for necessaries supplied
to them.

FREE
CONSENT

FREE CONSENT
According to Sec 10 of the Indian
Contract Act one of the essentials of a
valid contract is Free Consent
Sec 13 defines consent as Two or
more persons are said to consent when
they agree upon the same thing in the
same sense.

Free Consent
The Consent given by the parties should be
free from

Coercion (Sec15)
undue influence (Sec16)
Fraud (sec 17)
misrepresentation(Sec 18)
Mistake (Sec 20, 21 & 22)

COERCION
Consent is said to be caused by coercion when
obtained by:
1.The committing or threatening to commit any
act forbidden by the Indian Penal Code.
2.The unlawful detaining or threatening to
detain any property.
Effect: Contract voidable at the option of the
party whose consent was so caused.

Undue Influence
1. There are two persons
2. The relations are satisfying between them
3. One must dominate the will of the other
4. There must be unfair advantage
5. It involves the moral pressure
Effect: Contract voidable at the option of the
party whose consent was so caused.

FRAUD
1. The suggestion that a fact is true when it is not true
and the person making it does not believe in itto be
true
2. The active concealment of a fact by a person having
knowledge or belief of the fact.
3. A promise made without any intention of
performing it
4. Any other act fitted to deceive
5. Any such act or omission as the law specially
declares to be fraudulent.

Effect: Contract voidable at the option of the party

defrauded.

MISREPRESENTATION
If a person makes a representation believing what he says
is true he commits innocent misrepresentation. Thus, any
false representation, which is made with an honest belief
in its truth is innocent.
The effect of innocent misrepresentation is that the party
misled by it can avoid the contract, but cannot sue for
damages in the normal circumstances

MISTAKE

Mistake of law

Of the
country

Mistake of fact

Of the foreign
country

Bilateral mistake

Mistake as to subject matter

Mistake as to
possibility

Physical impossibility

existence

identity

quality

quantity

Unilateral mistake

As to
person
contracted
with

As to
nature
of the
contract

Legal impossibility

title

price