Lecture 5


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Lecture 5

  1. 1. Chapter 9<br />Slide 1<br />Capacity to Contract<br />“No brilliance is need in the law. Nothing but common sense, rational decision making power.” <br />
  2. 2. Definition of Capacity<br />A person must have the ability to give consent before he can be legally bound to an agreement, thus capacity is the ability to incur legal obligations and acquire legal rights<br />
  3. 3. Section 11 of the Indian Contract Act 1872 deals with the competency of parties and provides that every person is competent to contract <br />Who is of age of majority<br />Who is of sound mind<br />Who has not been disqualified by law from entering into a contract <br />
  4. 4. Minors<br />A minor is a person who is under the age of 18 years old<br />As they have less experience, the law tries to protect minors from situations where they might enter into contracts which do not benefit them<br />
  5. 5. Effect of minor’s agreement<br />An agreement with minor is void<br />[Case: MohiriBibi v. DharmodasGhose]<br />DharmodasGhose, a minor, entered into a contract for borrowing a sum of Rs. 20,000<br /> out of which the lender paid the minor a sum of Rs. 8,000. <br />The minor executed a mortgage of property in favor of the lender. <br />Subsequently, the minor sued for setting aside the mortgage.<br />
  6. 6. Held: Mortgage was void and lender was not entitled to repayment of money<br />2. No ratification<br />[IndranRamaswamy v. AnthiappaChettiar]<br />A,a minor makes a promissory note in favor of B.<br />On attaining majority, he makes out a fresh promissory note in lieu of the old one. <br />Neither the original, nor the fresh promissory<br /> note is valid<br />
  7. 7. 3. A minor can be a promisee or a beneficiary.<br />[ Case: General American insurance co. v/s MadanLalSonuLal]<br /><ul><li>A minor insured his goods with insurance co.
  8. 8. The goods were damaged. X filed a suit for claim.
  9. 9. The insurance company took the plea of his minority.
  10. 10. The court rejected his plea and allowed the minor to recover insurance money</li></li></ul><li>4. No estoppel against minor<br />[Leslie v. Shiell]<br />S, a minor, borrowed £400 from L, by fraudulently misrepresenting that he was a major.<br /> On default by S, L sued for return of £400.<br />Held : L could not recover £400, and his claim for damages also failed. <br />It is to be noted that if money could be traced then the court would have, on equitable grounds, asked the minor for restore the money, as minor does not have a liberty to cheat.<br />
  11. 11. 5. If a minor has received any benefit under a void contract, he cannot be asked to<br /> refund the same.<br />6. A minor cannot be a partner in a partnership firm.<br />7. Minor’s parents/guardians are not liable to a minor’s creditor for the breach of<br /> contract by the minor. parents are liable where the minor is acting as an agent of the parents or the guardian.<br />
  12. 12. 8. A minor can act as an agent and bind his principal by his acts without incurring<br />any personal liability.<br />9. Liability for tort:<br />10. No insolvency<br />11. Joint contract by a minor and an adult<br />12. Surety for a minor<br />13. Minor as a shareholder<br />14. Liability for the necessaries<br />
  13. 13. Contracts for Necessaries<br />Necessaries are things necessary to maintain the minor<br />Necessaries includes food and clothes<br />It would not include things like jewellery and DVD players and other luxuries<br />Minor is only required to pay a reasonable price for necessaries<br />If the minor already has a good supply of a particular thing (eg clothes) then more of these may not be necessaries even though they are useful and within the minor’s usual income<br />
  14. 14. [Case: Nash v. Inman]<br />I, a minor, ordered 11 fancy coats for about<br />£45 with N, the tailor. <br />The tailor sued I for the price. I’s father proved that his son had already a number of coats and had clothes suitable to his condition in life when the clothes made by the tailor were delivered.<br />Held : The coats supplied by the tailor were not necessaries and, therefore, the action failed <br />
  15. 15. Minors<br />
  16. 16. Valid Contracts with Minors<br />Contracts for Necessaries<br />Beneficial Contracts of Service<br />
  17. 17. Persons of Unsound mind<br />Two tests of soundness are:<br />Capacity to understand the contract<br />Capacity to form rational judgment as to its effects upon his interests<br />
  18. 18. Persons disqualified by law from entering into a Contract<br />Alien Enemy<br />Insolvent<br />Joint stock Company incorporated under Special acts<br />Convicts<br />
  19. 19. Cases<br />Tanya, a minor, was the daughter of a construction worker. When se was 17, she bought an evening gown for $400.00 to wear to a school dance. After the dance, Tanya decided she didn’t like the dress and returned it asking for the money back. Is she legally entitled to the money?<br />
  20. 20. Yes, the gown was probably not a necessary item for Tanya.<br />
  21. 21. THANK YOU<br />11<br />