The Contract Act-1872

Capacity of parties

1.Definition:

Section 11 of the contract act states that “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”. 

 

From section 11 it follows that a person is incapable of entering into contracts under the following circumstances:

i)(i) If he is not attained the age of majority

ii)(ii) If he is not sound mind; and

iii)(iii) If he is disqualified from contracting by any law to which he is subject. 

 

Minority: Who is a minor?

According to the Indian Majority Act, 1875, a minor is one who has not completed his or her 18th year of age. So a person becomes a major after the completion of 18th year of life.

To this rule there are 2 exceptions:

i)When a guardian of the minor’s person is appointed by a court of law and

ii)When a minor’s property is taken over by the court for management. In either cases minority continues up to the completion of the 21st year.

 

The law regarding minor’s agreement:

i)(i)Minor’s agreement is void

ii)(ii) A minor can be a promisee

iii)(iii) Minor is liable for necessaries

iv)(iii) A minor can not be declared insolvent

v)(iv) A minor can not enter into a contract of partnership

vi)(iv) A minor can be an agent

 

Sound mind:

Section 12: “ a person is said to be a 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 is of sound mind, but occasionally of unsound mind may make a contract when he is of sound mind. 

 

The test of soundness of mind is-

i)Capacity to understand the business concerned and

ii)Ability to form a rational business judgment as to its effect on a person’s interest.

Unsoundness of mind may arise from-insanity or lunacy; idiocy; drunkenness and similar factors.

Idiocy-is applied to a person whose mental powers are completely absent. Idiocy is a congenital defects caused by lack of development of the brain. 

Lunacy or insanity-is a disease of the brain. A lunatic is one whose mental powers are deranged so that he can not form a rational judgment on ant subject.

Drunkenness-produces temporary incapability.

A person ‘agreed’ to sell a property worth about Tk 25 lack for Tk 7 lack. His mother proved that he was a congenital idiot and she pleaded for cancellation of the contract. The court held the agreement to be null and void. ( Inder Singh v. Parmeshwardhari Singh-1957)