Capacity to contract ppt @ bec doms


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Capacity to contract ppt @ bec doms

  1. 1. CAPACITY TO CONTRACT <ul><li>An agreement becomes a contract if it is entered into between the parties who are competent to contract (Sec. 10). </li></ul><ul><li>Everyone is competent (i) who is of the age of majority; (ii) who is of sound mind; and (iii) who is not disqualified from contracting by any law. </li></ul>
  2. 2. Contracts by a Minor <ul><li>A ‘minor’ is a person who has not completed the age of 21 years. Under the Indian law a minor in not competent to contract. </li></ul><ul><li>A minor’s contract is absolutely void ab initio : In other words, a minor is neither liable to perform what he has promised under an agreement, nor liable to repay money received under it. </li></ul><ul><li>Principle behind this ruling is that a minor is incapable of judging what is good for him. </li></ul>
  3. 3. <ul><li>Specific performance of a minor’s contract is absolutely void: Guardian has no power to bind a minor by a contract for buying of immovable property. </li></ul><ul><li>Ratification of a minor’s contract: It means consenting to a past contract, made by a minor, of a future date on attaining majority. No question of ratification. </li></ul><ul><li>False representation by a minor – Estoppel: Estoppel means rule of evidence. A minor cannot be charged even if he represents falsely to enter into a contract. </li></ul>
  4. 4. <ul><li>Agreement by Guardian on behalf of minor is valid: In this case it is valid provided it benefits the Guardian or for legal necessity. </li></ul><ul><li>Insolvency: Minor cannot be insolvent. </li></ul><ul><li>Relinquishment: Not applicable to a minor. </li></ul><ul><li>Service Contracts: Contract for personal service is void. </li></ul><ul><li>So, when can a minor contract? (Exceptions) </li></ul><ul><li>As a Promisee. For example, promissory in minor’s favor can be enforced by him. </li></ul>
  5. 5. <ul><li>As an Agent. Can bind his principal by his acts, but is not liable to the same. </li></ul><ul><li>As a partner in a partnership firm. Not liable to any obligations of the firm. </li></ul><ul><li>Necessaries: Minor is bound to support the supplier of necessaries. Supplier can be reimbursed from property of minor. </li></ul>
  6. 6. Contracts by Persons of Unsound Mind <ul><li>Contracts by Lunatics. </li></ul><ul><li>Example: A patient in a lunatic asylum who is at intervals of sound mind, may contract during those times. </li></ul><ul><li>Contracts by Drunkards. Contract by such a person is absolutely void and cannot be ratified. </li></ul>
  7. 7. Contracts with Parda-Nishin Women <ul><li>Such women, who by custom of the country or by usage of the particular community to which she belongs is obliged to observe complete ‘seclusion’. </li></ul><ul><li>In order to make a valid contract with such a woman, it should be established that the deed was not only executed by her but was explained to and understood by her. </li></ul>
  8. 8. Contracts by Married or Single Women <ul><li>Can enter into contract if she is a major and does not suffer from any disability. </li></ul><ul><li>A married woman can enter into a valid contract w/o her husband’s consent. </li></ul><ul><li>A married woman can even bind her husband’s property and pledge his credit for pressing necessities. </li></ul>
  9. 9. Other Contracts <ul><li>By Corporations </li></ul><ul><li>It is competent to contract. </li></ul><ul><li>It cannot enter into contracts of a strictly personal nature. </li></ul><ul><li>By Insolvents </li></ul><ul><li>Such persons cannot enter into contracts as his property vests in the hands of the Official Assignee, who can enter into contract on behalf of the insolvent. </li></ul>
  10. 10. FREE CONSENT <ul><li>Sec. 13: “Two or more are said to consent when they agree upon the same thing in the same sense.” </li></ul><ul><li>Agreeing upon the same thing in the same sense means ad-idem . </li></ul><ul><li>Sec. 14: “Consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.” </li></ul>
  11. 11. Coercion <ul><li>It is committing, or threatening to commit, any act forbidden by the IPC, </li></ul><ul><li>or the unlawful detaining, or threatening to detain any property, </li></ul><ul><li>to the prejudice of any person whatever, </li></ul><ul><li>with the intention of causing any person to enter into an agreement. </li></ul>
  12. 12. <ul><li>Ashok threatens to shoot Brijesh if he does not let out the house to him. Brijesh agrees to do so. This agreement has been brought about by coercion. </li></ul><ul><li>Ajay and Bittu are negotiating on a Contract, but Ajay are unwilling. A third party threatens to assault Ajay if he does not enter into contract with Bittu, who is unaware of these threatening. Ajay, thereupon out of fear, enters into a contract with Bittu. Does the contract become binding on Ajay? </li></ul>
  13. 13. <ul><li>It is observed here that the consent of Ajay has not been freely obtained as he was threatened with assault. </li></ul><ul><li>Coercion may proceed from anybody, even a person who is not a party to the contract. </li></ul><ul><li>Ajay’s consent as such is caused by coercion and therefore, the consent is not binding on Ajay. </li></ul>
  14. 14. Undue Influence <ul><li>Sec.16(1): “A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.” </li></ul>
  15. 15. When is a person deemed to be in a position to dominate will of another? <ul><li>Real or apparent authority, or </li></ul><ul><li>In a fiduciary relation, or </li></ul><ul><li>Mental capacity temporarily or permanently affected by reason of age, illness, or mental/bodily distress. </li></ul><ul><li>Relationships of father & son, guardian & ward, husband & wife, doctor & patient, trustee & beneficiary, solicitor & client, pardanishin women, etc would fall within the ambit of undue influence. </li></ul>
  16. 16. Fraud <ul><li>Sec.17: Fraud means and includes any of the following acts committed by a party to a contract; or with his connivance; or by his agent, with intent to deceive another party thereto or his agent, or to induce him to enter into the contract – </li></ul><ul><li>(1) the suggestion, as to a fact, of that which is not true by one who does not believe it to be true; </li></ul>
  17. 17. <ul><li>(2) the active concealment of a fact by one having knowledge or belief of the fact; </li></ul><ul><li>(3) a promise made w/o any intention of performing it; </li></ul><ul><li>(4) any other act fitted to deceive; </li></ul><ul><li>(5) any such act or omission as the law specially declares to be fraudulent. </li></ul>
  18. 18. Essentials of Fraud <ul><li>There must be an intention to deceive. </li></ul><ul><li>Act done by a party to a contract, or with his connivance or by his agent. </li></ul><ul><li>There must be false representation of facts, eg, suggestio falsi . </li></ul><ul><li>There must be an active concealment of a fact of which he has the knowledge and duty to disclose, eg, suppressio veri . </li></ul>
  19. 19. <ul><li>There must be a false promise. </li></ul><ul><li>Any other act or omission which the law considers it to be fraudulent. </li></ul><ul><li>Or fitted to deceive which is done with the obvious intention to commit fraud. </li></ul><ul><li>The party so induced must have acted upon it and suffered loss. </li></ul>
  20. 20. When is a contract not voidable? (Exceptions) <ul><li>Deceit which does not deceive is no fraud. </li></ul><ul><li>Negligence is no fraud. </li></ul><ul><li>Ignorance is not fraud. </li></ul><ul><li>If there is a Waiver (pardon) of the fraud. </li></ul><ul><li>Silence w/o any duty to speak does not amount to fraud. </li></ul><ul><li>Silence likely to affect willingness of contracting by a person is not fraud. </li></ul>
  21. 21. When is silence fraudulent? <ul><li>Where the circumstances of the case are such that it is the duty of the person keeping silence to speak; or </li></ul><ul><li>Where silence is in itself equivalent to speech. </li></ul><ul><li>X says to Y: “If you do not deny it, I shall assume that the horse is sound.” Y says nothing. Here Y’s silence is equivalent to speech. </li></ul>
  22. 22. Misrepresentation <ul><li>Consent given under misrepresentation of facts is no consent at all. </li></ul><ul><li>A statement made which in fact is not true, under the belief that it is true, is misrepresentation. </li></ul><ul><li>X says to Y that Z’s horse is of a very good breed & can run 40kms at a stretch. X believes it to be true and Y buys the horse from Z. It turns out that the horse can run only 4kms. This is misrepresentation. </li></ul>
  23. 23. Mistake <ul><li>An erroneous belief about something is called “mistake”. </li></ul><ul><li>When an agreement is entered into under a mistake, consent is not free. </li></ul><ul><li>Mistake is of two kinds – (i) mistake of fact; and (ii) mistake of law. </li></ul>
  24. 24. Mistake of Fact <ul><li>Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void (Sec.20). </li></ul><ul><li>X agrees to buy from Y a certain breed of dog. It turns out that the dog was dead at the time of the bargain though neither party was aware of the fact. The agreement is void. </li></ul>
  25. 25. Mistake of Law <ul><li>Sec.21 provides that a contract is not voidable because it was caused by a mistake as to any law in force in India; </li></ul><ul><li>but a mistake as to a law not in force in India has the same effect as a mistake of fact. </li></ul>