SECTION 10 AND 11, COMPETENCY TO CONTRACT

WHAT IS A CONTRACT?

The contract is an agreement between various parties which is validated and framed by Indian Contract Act, 1872. It defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. An agreement is a deliberate, mutual, legally binding between two or more competent parties. The Agreement creates reciprocal legal obligations between two private parties. Generally, contracts are written, but they may be implied or spoken. A contract is therefore a legal agreement that provides special rights (as specified by the contract itself) to the parties as well as responsibilities that all parties to the contract have created, established, and agreed upon.

SECTIONS 11 AND 12 AS GIVEN IN ICA,1872

SECTION 11: Every person is competent to contract who is of the age of majority according to the law to which he is subject,1 and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

SECTION 12: 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. 

PROVISIONS UNDER SECTION 11

  • Attaining the age of majority
  • Sound minded
  • Not a disqualified person by law from contracting

ATTAINING THE AGE OF MAJORITY

The age of majority in India is specified as 18 years, according to the Indian Majority Act of 1875. Any person who has not reached 18 years of age and is a resident of India is considered a minor.

Contract with minor is void

Because a person under the age of 18 does not have the potential to enters a contract, any agreement entered into with a minor is void or void ab-initio.  However, if a minor entered a contract, he cannot ratify it even though the majority has been reached because the contract is invalid.

Conditions when contract with minor is not void

A minor could be a beneficiary of a contract:

While a minor may not be able to enter into a contract, he may be the beneficiary of one.

A minor is always given the advantage of being a minor:

Even if a minor falsely represents himself as a major and takes a credit or enter into an agreement, he may plead a minority.  The estoppel rule will not be extended against him/her.

Contract by a guardian:

In certain conditions, the guardian of a minor may enter into a valid contract on behalf of the minor. Such a contract entered into by the guardian for the benefit of the minor.

Insolvency:

A minor cannot be declared insolvent because he cannot afford debts.

A Minor and an Adult shared contract:

In the case of a joint contract between an adult and a minor, performed on behalf of the minor by the guardian, the adult shall be held liable for the contract.

SOUND MINDED PERSON

According to Section 12 of the Indian Contract Act , 1872 describes the principle of soundness of brain as follows:

A person is said to have a sound mind if he or she is capable of comprehending the contract and its effect on his or her interests. Besides, who is typically of a sound mind, but occasionally of an unsound mind, cannot enter a contract during the period of his/her unsound mind. Similarly, a person who is normally of an unsound mind, but occasionally of a sound mind, can make a contract when he is of a sound mind.

Analogy between English law and Indian law:

In England, mere unsoundness of mind is no defense; a lunatic’s contract is binding on him, unless he can prove that he was entirely incapable of comprehending what he/she was doing at the time of entering the contract and that the other party was known to his/her lunaticism. In India, the contract of a person with an unsound mind is void.

PERSONS DISQUALIFIED BY LAW

A person who is blacklisted person by law. Grounds for disqualification by law include political affiliation, legal status, etc. Some of such people are foreign sovereigns and ambassadors, alien enemies, convicts, insolvents, etc.

Alien enemy: A person who is not an Indian citizen is called an alien or non-citizen of the Republic of India. An alien enemy is a person whose country is at war with India.

Convicts: A convict is a person, who is sentenced by a competent court to the death sentence or imprisonment.

Insolvent: There is no prohibition against a contract by an insolvent after the insolvency proceedings have commenced but before adjudication.

Foreign sovereigns and diplomats: Foreign sovereigns have some special privileges. Generally, they cannot be sued unless they, themselves surrender under the jurisdiction of the Indian court of law.

Corporations: A corporation’s ability to establish a contract varies according to the corporation’s character. A corporation is an artificial entity created by law and is capable of contracting but its contractual power is subject to the limitation.

CONCLUSION

Some of the most important conditions for making an arrangement legal and enforceable in a court of law is the integrity of the parties to contract.

A contract made by a person who does not have the intellectual capacity to understand the meaning of the contract and its effects is void ab initio. In the other hand, arrangements with lunatics can / may not be void for persons under the influence of the drug depending on the circumstances surrounding the case.

A person regains the legal capacity to contract if any of the disqualifications are removed.