Capacity to contract means who can enter into contract. Section 10 give us
brief description about what agreements are contracts in which competency to
enter into contract is also discussed. Parties which enter into contract must
have capacity to do so.
Who is competent?
Section 11 tell us who are competent to contract?
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
It means all persons are competent to contract except:
- Unsound mind
- Person disqualified by any law to which they subject.
A minor is a person who has not attained the age of majority and he can't enter
into contract. Age of Majority is 18 years as Indian Majority Act 1875 and if
the guardian is appointed it become 21 as per the Guardians & Wards Act 1890.
Motive behind creating this was to protect the minor from being cheated or
deceived as he was innocent and fragile. Court provides for special clock of
protection to minor.
Though we know minor is not competent but nature of agreement is not defined
anywhere whether it is void, voidable. It is 'Mohri Bibi vs Dharmodas Ghosh' which
ended this confusion and stated that Minor agreement is void ab initio.
In this case a minor misrepresenting his age mortgage his house and able to
get a loan and of which he almost takes half the payment. When the lender came
to know of this and demanded money back minor went to court and filed a case
stating that he was underage when he executed the mortgage and the same should,
therefore, be cancelled. Lender first rely on section 64 of Indian contract but
it was held that it applied to voidable contract so it can't apply here.
takes help of section 65 which provides that if contract is void then any
benefit which a person get has to restore it but he again failed as it can't be
applied to minor. Lender lastly takes help of section 41 of specific Relief act
(section 33 now) on which court said though it gives discretion to the court but
it will be injustice to minor. Therefore, lender failed to get the money and
court held that contract with minor is void ab initio and so mortgage deed is
There are some implications as to Minor agreement like:
- No estoppel against minor:
There can be no estoppel against the minor.
Estoppel is defined under section 115 of Evidence act. It means if a person
takes some stand then he can't go back but this doesn't imply to minor as he
can't be stopped from pleading minority even if he misrepresented his age.
- No liability in tort or contract:
As minor is liable under tort it doesn't
mean you can sue him there. If for contract minor will be held liable in tort,
then all effort to save minor will be ruined. This can be seen from Johnson vs
Pye . In this case minor obtain loan by misrepresenting his age. Lender bought
action in tort for deceit. It was held that minor was not held liable and case
dismissed as originally case belongs to contract and not for tort.
- Doctrine of restitution:
it means that if a minor obtains goods by
misrepresenting his stage then he can be compelled to restore it as long as good
are traceable in his hands. If he already used them, sold or converted them
then it can't be restored. It is based upon the principle of law of equity.
Leslie vs shiell
In this case and infant succeeded to get 400 from the lenders by by telling
them a lie. Unable to recover money on the principle of restitution because
it was held that Restitution stops where repayment begins it led to the
conclusion of the principle that the Restoration can be applied on in case of
goods and can't be applied in case of cash because cash can't be traced.
Khan Gul vs Lakha Singh
In this case the defendant by fraudulently concealing his age contracted to sell
a plot of land to the plaintiff and receive consideration but refused to pay for
the property. Justice Shadilal held that the principle of Leslie vs shield can't
be applied in India because it does not cover the cases of the money and he made
the minor liable in this case. On the basis of his view Law commission of India
in its 9th report introduce section 33 of the specific relief act which provides
for the principle of doctrine of unjust enrichment.
Ajhudia Prasad vs Chandan Lal
In this case sum of money was taken by two minors against mortgage deed. They
were of more than 18 but less than 21 but fraudulently concealed fact of being
guardian appointed. Now the question was that whether lender would be able to
get money but it was held that Restitution is still applicable so lender could
not get the money.
- Beneficial contract:
A minor is allowed to enforce a contract which is
beneficial to him because the law introduced this provision to protect the minor
not to restrict him.
Raghava chariar vs Srinivasa
In this case a mortgage was executed in favor of a minor who advance whole of
the mortgage money. The contract is enforceable as law does not want to deprive
minor of benefits.
Contract with a minor can't be ratified even after his attaining
majority. A new contract with a fresh consideration has to be formed.
Thus, these are some of the effects of minor agreement.
The term Sound Mind been defined in the section 12 of the Indian contract act
which says that A person is of sound mind when at the time of making contract
able to understand the term & conditions and to form a rational judgement as to
affect upon his interest.
Inder Singh vs Parmeshwardhari Dayal
- A person can enter into a contract even when he is suffering from
chronic unsoundness of a mind but at that time if he was of sound mind
similarly when the person is of usually sound mind but occasionally of
unsound mind he can enter into a contract at that time when he was of sound
- Mostly in this case's court presumes a person to be of sound mind so the
burden is on the person to prove that at that time he was of unsound mind
and was unable to understand the contents and to form rational judgement.
- Unsoundness of mind can be due to any reason like it can be due to
lunacy, drunkenness, any disease also. For example: If a person is suffering
from a fever or a highly ill disease that he is unable to understand the
fact of the case then he will be considered as a person of unsound mind at
- Agreement with a person of unsound person can't be ratified at any
- In India the contract with an unsound person is void where as in case of
English law it is voidable as one has to prove that he is incapable of
understanding the contract and the other party also knew the it, then the
contract is voidable at his option.
In this case a person sold his property of Rs.25000 for Just Rs. 1000. His
mother proved that he was a congenital idiot and used to wander around the
street. Thus the contract was set aside and held to be void.
Person disqualified by law:
There are some categories of person which are disqualified by law. Means they
don't have legal contract Person disqualified by law: There are some categories of
person which are disqualified by law. Means they don't have legal contractual
- Alien enemy:
Contract with alien enemy are not allowed specially at the time
of war. But if one is already in contract with such a person before relation
become countries then in that case either contract will be suspended till good
relation or will be dissolved.
- Insolvent person:
An insolvent can enter into contract only related to his person(body) but other than he can enter into any type of contract as he has
nothing left with him after being declared bankrupt.
A person in prison can't enter into contract till the time of
sentence. His capacity to enter into contract is suspended Except he has license
or ticket of leave.
If a company does something Outside its Memorandum of association
and against companies act then all such agreement will be considered as void.
Hence these are some of categories of persons whose capacity to contract is
restricted in one way or other for their as well as for society betterment.
Written By Khushi Jain -
First year student at Bharati Vidyapeeth New law college, Pune