Capacity To Contract

Capacity to contract
Who can make a contract?

SECTION 11
Who cannot make a contract?

• PERSONS DISQUALIFIED BY LAW
TO WHICH THEY ARE SUBJECT
• MINOR
• PERSONS OF UNSOUND MIND
SECTION 11 REASONS FOR INCAPACITY
1)Status 2)mental deficiency 3) unsoundness of mind
1)INCAPACITY THROUGH STATUS

Incapacity or incompetence may arise from Political status,
professional status, artifial status, marital status. Persons who
lack capacity due to status are partially or wholly disqualified
from entering into contract.
( political status)
a)ALIEN ENEMY
b)AMBASSODORS AND FOREIGN SOVEREIGNS
They cannot be sued Unless and until the govt gives permission or they
submit themselves to the court
Certain previleges and immunities are available
Protocol must be followed
Central govt may grant permission to sue a foreign ambassador
In the following cases
• When such person has instituted a suit against the person desiring to
sue him
• When he has expressly or impliedly waived his privilege
• When he himself carries on trade in jurisdiction of the court or is a
profession of some immovable property and is to be sued in
connection with that property
• Engelke V Musmann, 1928
Engelke was the consular secretary of German ambassy at London. He rented a house and he
and his landlord fell apart. Landlord instituted a suit. Engelke pleaded diplomatic privilege. Held
that he is entitled for diplomatic privilege.
c)Insolvents
d)Felons and Convicts
e)Corporations(Artificial status)
f)Married women (married

status)
2)Incapacity arising from
MENTAL DEFICIENCY
3)Incapacity arising from

UNSOUNDNESS OF MIND
Indian Majority Act 1875
Section 3 – age of
Majority of persons
domiciled in India
Sec 3(1)In computing the age of any
person, the day on which he was born is to be
included as a whole day and he shall be
deemed to have attained majority at the
beginning of the eighteenth anniversary of that
day.]
Minor under Indian law
1)An agreement with or by a minor is void
Mohiribibi v Dharmodas Ghose 1902-03
Sec 31 of specific relief Act 1963
When cancellation may be ordered.—
(1) Any person against whom a written instrument is void or
voidable, and who has reasonable apprehension that such
instrument, if left outstanding may cause him serious injury, may
sue to have it adjudged void or voidable; and the court may, in its
discretion, so adjudge it and order it to be delivered up and
cancelled.
(2) If the instrument has been registered under the Indian
Registration Act, 1908 (16 of 1908), the court shall also send a
copy of its decree to the officer in whose office the instrument has
been so registered; and such officer shall note on the copy of the
instrument contained in his books the fact of its cancellation.
Section 64 in The Indian Contract Act, 1872
64. Consequences of rescission of a voidable contract.—When a person at whose option a
contract is voidable rescinds it, the other party thereto need not perform any promise
therein contained in which he is the promisor. The party rescinding a voidable contract
shall, if he had received any benefit thereunder from another party to such contract,
restore such benefit, so far as may be, to the person from whom it was received.
65. Obligation of person who has received advantage under void agreement, or contract
that becomes void.—When an agreement is discovered to be void, or when a contract
becomes void, any person who has received any advantage under such agreement or
contract is bound to restore it, or to make compensation for it to the person from whom he
received it. —
33. Power to require benefit to be restored or compensation to be made when
instrument is cancelled or is successfully resisted as being void or voidable.—
(1) On adjudging the cancellation of an instrument, the court may
require the party to whom such relief is granted, to restore, so far
as may be any benefit which he may have received from the
other party and to make any compensation to him which justice
may require.
(2) Where a defendant successfully resists any suit on the ground
—
(a) that the instrument sought to be enforced against him in the
suit is voidable, the court may if the defendant has received any
benefit under the instrument from the other party, require him to
restore, so far as may be, such benefit to that party or to make
compensation for it;
(b) that the agreement sought to be enforced against him in the
suit is void by reason of his not having been competent to
contract under section 11 of the Indian Contract Act, 1872 (9 of
1872), the court may, if the defendant has received any benefit
under the agreement from the other party, require him to restore,
so far as may be, such benefit to that party, to the extent to
which he or his estate has benefited thereby.
2)No Estoppel against minor
3)No specific performance
4)Minor as partner and agent
Doctrine of restitution
Restitution stops where repayment begins
Johnson v Pye, 1665
A minor obtained a loan of 300 pounds by falsely representing his age. Held that he is not
liable for deceit and not to repay.
Leslie v Sheill 1914
A minor acquired a loan of 400 euros by falsely representing his age. Later they claimed
principle amount and interest as damages. Held that the contract with a minor is void ab
intio and cannot recover it.
Khangul v Lakha singh, 1928
Defendant, a minor, acquired an amount of 17500 by falsely representing his age. He
refused to give the plot of land as sale. Plaintiff sued the minor. Held that the contract with
the minor is void ab initio and consideration is refunded under section 41 of specific relief
act.
Ajudhia Prasad vs. Chandan lal,1937
A sum of money was borrowed by two mi ores who are more than 18 yrs but less than 21
yrs and concealed the fact that they have a guardian. Plaintiff claimed refund or the
property. Held that courts cannot enforce an void contract and amount can't be refunded.
Minor can be a promisee and beneficiary
Raj rani v. Prem adib
A minor was alloted a role by the defendant, producer in a movie. The agreement was with the
father. Later the produces removed the minor and placed another artist and terminated the
contract. Held that the contract with minor is a nullity and the father can't sue becoz there will
be no consideration.
Great American Insurance Ltd. V. Madanlal sonulal
X, a minor insured his goods with the insurance company. The goods were damaged. X filed a
suit. Company took aplea that person on whose behalf the goods were insured is a minor. Held
that plea is rejected and allowed to recover.
K. Balakrishnan v K.Kamalam, 2004
Mother executed a gift deed in favour of her son and daughter. Later cancelled and executed
another gift deed in favour of the daughter. Son filed a suit for cancellation of the deed and void.
Held that in a gift deed there is no need for acceptance from the minor and it can co vluded
from the conduct.
A minor contracted with undertakers to carry her dead husband funeral. Refused to pay due to
incapacity. Held that the contract is for pvt benefit and comes under necessaries and is liable to
pay the amount.
Nash v Inman 1908
A tailor applied 13 waistcoats to a minor who was an undergraduate. He refused to pay. Held
that these goods do not come under necessities and the contract is void ab initio.
Roberts v Gray 1913
Defendant, a minor agreed with plaintiff to go for world tour to play billiards game. The
plaintiff made the arrangements. The defendant repudiated the contract. Held that the amount is
recoverable since it amounts to necessaries.
Kedarnath v Ajudhia Prasad 1883
Held that money advanced to save the minors estate from execution sale amounts to
necessaries.
Shyam Charan Mal v Choudary Debya Singh
Pahraj, ILR 1894 21 cal 872
A minor was facing criminal prosecution for dacoity and court observed that the liberty of
minor being at stake, the money advanced to be considered as necessities.
Minor’s liability for torts Liable for negligence
Johnson v Pye, 1665
Homework
Tulshiram v Roopchand 2006
Raj rani v Prem Adib 1994
Peters v Flemings 1840
Campbell v Hooper 1855
Section 12
What is sound mind for the purpose of contracting
• section 12 in The Indian Contract Act, 1872

• 12. What is a sound mind for the purposes of contracting.—A
person is said to be of sound mind for the purpose of making a
contract, if, at the time when he makes it, he is capable of
understanding it and of forming a rational judgment as to its
effect upon his interests. —A person is said to be of sound
mind for the purpose of making a contract, if, at the time when
he makes it, he is capable of understanding it and of forming a
rational judgment as to its effect upon his interests." A person
who is usually of unsound mind, but occasionally of sound
mind, may make a contract when he is of sound mind. A
person who is usually of sound mind, but occasionally of
unsound mind, may not make a contract when he is of
unsound mind.
Illustrations(a) A patient in a lunatic asylum, who is, at intervals, of
sound mind, may contract during those intervals. (a) A patient in a
lunatic asylum, who is, at intervals, of sound mind, may contract during
those intervals."
(b) A sane man, who is delirious from fever, or who is so drunk that he
cannot understand the terms of a contract, or form a rational judgment as
to its effect on his interests, cannot contract whilst such delirium or
drunkenness lasts. (b) A sane man, who is delirious from fever, or who is
so drunk that he cannot understand the terms of a contract, or form a
rational judgment as to its effect on his interests, cannot contract whilst
such delirium or drunkenness lasts."
Campbell v Hooper, 1855
The mortgagor was lunatic whe he entered into a contract and mortgagee knew about it. Held
that the contract was void.
Indersingh v Parmeshswardhari Singh,1957
A property worth 25000 was being sold at 7000 only. Mother proved that the person is a
Congenital idiot and incapable of understanding the transaction. Held the contract to be void
under sec 12.
Jyotindra Bhattacharjee v Sona Bala Bora, 1994
Asfaq Qureshi v Aysha Qureshi9Nivedita Yadav), 2010

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Capacity to contract

Who can make a contract?

Who cannot make a contract?

1)INCAPACITY THROUGH STATUS

d)Felons and Convicts

f)Married women (married

3)Incapacity arising from

• section 12 in The Indian Contract Act, 1872

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