IMPORTANCE OF CAPACITY TO CONTRACT

 IMPORTANCE OF CAPACITY TO CONTRACT

Section 2(h) of the Indian Contracts Act 1872 describes a contract as an agreement that is admissible by law. Section 10 of the Act sets out the requirements that make the agreement enforceable. One such requirement is the competence of the parties to contract. Competency to a contract usually means competency of the parties to contract. Section 11 of the Act describes the people who are capable to enter into a contract. According to the Section, every person is capable of a contract provided the person is of the age of majority and is not disqualified as per the law to which he is subjected and he/she should be of sound mind. 

In short, people of unsound minds, minors, and people disqualified by law are incapable to contract. Competency to contract is of great prominence for lack of it renders the agreement void. Hence, the part of the capacity to contract attracts greater attention at the time of making an agreement.

1. Minors

The age of majority in India is eighteen years and when a guardian is appointed for a minor’s person and property, the age of majority for such minor is 21 years. Both Section 10 and Section 11 don't clarify whether the influence of the minor’s agreement is either void or voidable. However, the judicial committee of the privy council in the case of Mohiri Biwi vs. Damodardas Ghosh laid down that the agreement with the minor was VOID lacking all the contractual obligations on either side. The rationale propounded by the council was that a child may exhibit poor judgment in making a contract that may adversely affect its interests. Hence, deeming the agreement with the minor as void may best serve his interest. The contract which is for the benefit of the minor and within the competence of the guardian is enforceable.

 Effects of minor`s settlement: 

 a. No estoppel towards a minor: Minor isn't estopped from putting in the protection of infancy. The coverage of the regulation of agreement is to shield folks under age from contractual legal responsibility and naturally, the doctrine of estoppel cannot be used to defeat that coverage. 

b. No legal responsibility in tort springing up out of the agreement: A minor`s settlement is in precept without all prison results because of his disability to offer consent. Hence, a minor cannot be held answerable for whatever which might be an oblique manner of imposing his settlement. So consequently, if a tort is without delay linked with an agreement, the minor might now no longer be held dependable in tort as imposing it'd have the impact of suing a little one. In Burnard vs Haggis (1863), it became held that in which the tort is unbiased of the agreement, the mere reality that an agreement is concerned will now no longer absolve the minor from his legal responsibility. 

c. Doctrine of Restitution: Initially withinside the case of Leslie vs Shell in which a little one deceived the cash creditors via way of means of telling lie approximately his age and borrowed four hundred euros at the religion of being an adult, it became held that a little one became compellable to repair items or properties (however now no longer cash) received via way of means of misrepresenting his age handiest whilst the identical became traceable in his possession. Since the given case concerning financial subjects, as a result, the motion of the plaintiff to get better cash from the minor failed. 

In the case of Khan Gul vs. Lakha Singh wherein the defendant, a minor, fraudulently concealing his age, shriveled to promote a plot of land and after taking attention of Rs 17500 from the plaintiff refused to carry out a part of the obligation, the Chief Justice prolonged the precept set up in Leslie vs Sheill to financial subjects in an effort to set up fairness and held the minor vulnerable to refund the attention. Ultimately, The Law Commission of India integrated the precept of restitution via way of means of putting Section 33 withinside the Specific Relief Act 1963 as consistent with which the minors can be required to repair the blessings received via way of means of him for the duration of the direction of the agreement to the quantity of which he became benefitted thereby. 

d. Beneficial Contract: If a contract is in the interest of a minor (such as an apprenticeship, contract for marriage, etc) under which he is needed to bear no liability, then such contracts could be established by such minor as such contracts would not be an element to the interest of the minor. Minor can even claim restitution. 

It is to be observed that minors cannot on acquiring majority ratify an agreement made by him while in his minority.

2. Person of Unsound Mind:

Section 12 of the Act determines the concept of sound mind for the aim of contracting. A person is said to be of sound mind at the time getting in a contract if, he is competent of understanding it or having a rational judgment so as to influence upon its interests. A person who is generally of unsound mind and rarely of sound mind may come into contact if he is of sound mind at the time of making the contract.

In the same way, an individual who is generally of sound mind and occasionally of unsound mind might not enter into a contract if he is of unsound mind at the time of making the contract. For understanding the above proposition more, an illustration of a patient of a mental asylum. This person can enter into a contract when he is of sound mind i.e., competent at understanding the content and outcomes of the contract and having a rational judgment influencing its interests. Similarly, a drunk man who is so drunk that he is not competent in having a rational judgment or understanding the contract cannot contract until he is sober. It is to be observed that in India (unlike English law where such agreement is voidable) agreement with people of unsound mind is absolutely void.

 

Written by Parul Sharma