Capacity to Contract

Meaning & Definition

According to section 11 of the
contract act:
Every person is competent to
contract who is of the age of
majority according to the law to
which he is subject to, & who is of
sound mind, and is not disqualified
from contracting by any law to
which he is subject.

Persons disqualified from

entering into the contract
Minors, who are not of the age of
majority.
Persons of unsound mind, and
Persons disqualified to contract
by any law (Insolvents)

Minor
Who is a minor According to
section 3 of Indian majority act,
1875, a minor is a person who
has not attained the age of 18
years.

Rules relating to an
agreement with a minor
First rule law protects minors
against their own inexperience &
against the possible improper
designs of those more
experienced.
Second rule the law should not
cause unnecessary hardship to
persons who deal with minors.

Minors Agreement
Agreement is void ab initio:
Case Mohori bibi vs Dharmodas Ghose
Dharmodas, a minor executed a mortgage for
Rs. 20,000 declaring himself major & received
Rs. 8,000 from mohori bibi, a mortgagee. The
minor wanted to set aside the mortgage. The
mortgagee wanted the refund of Rs. 8,000. It
was held that the agreement with the minor
was void ab initio & question of refunding
money does not arise.

1. However, the minor may enforce the agreement against the

other party if he has carried out his obligation.
2. No rectification minor cannot ratify the agreement ok attaining
the age of majority which he had entered into in the age of
minority.
3. Minor can plead minority to avoid contract.
Example: a minor borrows money by saying that he is a major.

4. Minor can be a promisee or a beneficiary Where the minors

bears no obligation & rather the agreement is for his benefit,
then such agreement is valid. ( A promissory note executed in
favour of minor is valid)
5. Minor as a partner A minor cannot become a partner in the
partnership firm but he can be admitted to benefits od the
partnership with consent of all the partners. The minor is liable
to losses but not his personal property.

Persons of Unsound Mind

According to section12:
A person is said to be of sound
mind for the purpose of making a
contract, at the time when he
makes it, he is capable of
understanding it & of forming
rational judgement as to its effect
upon his interest.

Unsound Mind may be

categorized as:
Idiots: Has completely lost his
mental powers.
Lunatics: The person losses the
capacity of thinking due to
illness of brain or mental bodily
distress
Drunkenness

Persons Disqualified From

Contracting
Alien Enemy
Foreign Sovereign (prior sanction of Central
Government)
Corporations Contract is Ultra vires is not in MOA
Insolvents all property in hand of Official
assignee. He can enter into contract when court
passes an order od discharge
Convicts a person who is sentenced to
imprisonment cannot enter into contract (during
that period)

Thank you