Meaning of capacity to contract
• According to sec. 10 of Indian law of contract, all
agreements are contracts if they are made by the
parties’ competent to contract. Thus the
competence or capacity to contract is the one of
essentials of a valid contract.
Who are competent to contract?
Section 11 reads,
” 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 sound mind and is
not disqualified from contracting by any
law to which he is subject”.
List of Non Competency
Conversely, it can be said that the persons
falling under the following categories are
not competent to contract:-
2. Persons of unsound mind
3. Person disqualified from contracting by
any other law of the land.
Who is a MINOR?
Any person, who has not attained the age of majority
prescribed by law, is generally known as Minor.
• Section 3 of the Indian majority act prescribes the
age limit for majority and says “A minor is a person
who has not completed Eighteen years of age”.
• But this same act also applies that in the following
two cases a person attains majority only after he
completes his age of 21 years:-
1. Where a court has appointed guardian of a minor’s
person or property for both (under the Guardians
and wards Act 1890)
2. Where the minor’s property has been placed under
the superintendence of court of wards.
Position of Agreement by a Minor
1. Minor’s agreement is absolutely Void from very beginning.
Therefore it will be never enforced by law . Leading case : Mohiri
Bibi V. Dharmodas Ghosh
D, a minor borrowed a sum from M by executing a mortgage .
Subsequently D, sued for setting aside the mortgage. The court held
that agreement with a minor is void therefore the mortgage was not
valid. M prayed for refund of the amount by the minor. It was held
that the money advanced to minor cannot be recovered because
minor’s agreement was void.
2. Minor can be a promise or beneficiary-
The courts regard minor is capable or accepting benefits under an
Example: - A who was a minor sold some goods to B who was a
major person, now in this case after the selling the good
A has the right to recover the price from B, even he is a minor
3. No Ratification- the term ratification means
approving or confirming a past contract. one of
the basic rule of ratification is that only valid
acts may be ratified. A minor’s agreement is
void from beginning so it cannot be ratify.
4. Generally a minor is not liable to compensate
for any benefits which he has received.
5. No Estoppel-A minor is not estopped from
setting up the plea of minority.
Example: -A, was a minor person, by
fraudulently representing he to be a major
person, and inducing B to lend him 1000Rs.
B lends the amount but now B cannot sue A for
recovery because the rule of Estoppel does not
apply against the minor.
6. The agreement made by a minor jointly with a
major person are void vis-à-vis the minor but
can be enforced against the major person.
7. A minor cannot become a partner in a
partnership firm. He can share the profits
only without incurring any personal liability.
8. A minor’s parent/ guardian/ manager can
enter into contract on behalf of the minor .
9. The parents or guardian of a minor are not
liable for agreements made by them for
10.Minor cannot appoint an agent because only
competent person can appoint agent.
However a minor can be appointed as an
agent by any person competent to contract.
PERSONS OF UNSOUND MIND
Section 11 requires that in order to be
competent to contract, a person must be of
• What is a Sound mind?
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
judgments as to its effect upon his interest.
Position of a person who is usually of
unsound mind but occasionally of
According to section 12,”A person who is usually of
unsound mind but occasionally of sound mind may make a
contract, when he is Of sound mind.
Moreover,' A person who is usually of sound mind but
occasionally of unsound mind may not make a contract,
when he is Of unsound mind.
A sane man who is so drunk that he cannot understand
the terms of a contract or form a rational judgment as to
its effect on his interest, cannot enter into a contract while
such drunkenness lasts.
Position of Agreement with persons of
• Idiot: - An idiot is a person who is of unsound mind by birth. His
incapacity is permanent. Such a person can never understand
contract and make a rational judgments as to its effect upon his
interests. Consequently the agreement with an idiot is absolutely
void from beginning.
• Lunatic: - A lunatic is the person whose mental powers are
deranged due to some disease of brain or mental strain. The lunacy
is not a disease of permanent nature and of course care able. This
type of person can make a contract at time when he sane, but if he
did some contracts during insanity they will be void.
• Delirious person- A person delirious from fever is also not capable
of understanding the nature and implications of an agreement.
• Drunken or intoxicated person: - A drunken or intoxicated person is
temporarily incompetent to contract.
• Hypnotized person: - Hypnotism produces temporary incapacity till
a person is under the effect of artificial induced sleep.
Burden of proof
Case The burden of proof lies on
1.Where a person is usually of sound
The burden of proving that he was of
unsound mind at the time of contract
lies on the person who challenges the
validity of contract.
2. Where a person is usually of
The burden of proving that he was of
sound mind at the time of contract,
lies on the person who affirms it.
3.In case of drunkenness or delirium
from fever or other causes.
The burden of proving lies on the
person who challenges the validity of
PERSONS DISQUALIFIED BY OTHER
• Alien Enemy-an alien whose country is at war with
the Republic of India is called an alien enemy.
• Foreign sovereigns and ambassadors-They can enter
into contracts and enforce those contracts in our
country but cannot be sued without the sanction of
the Central Govt.
• Convicts- A person is called a convict during his
period of sentence. He cannot enter into a contract
during that time but after that period or when he is
on parole he can enter into contract.
• Insolvents-He cannot enter into contracts relating to
his property, cannot be sue or sued.