The document discusses the concept of 'capacity to contract' as defined in the Indian Contract Act, 1872, which states that only competent parties can enter into valid contracts. It outlines conditions under which individuals, including minors and persons of unsound mind, are considered incompetent to contract, and explains the legal implications of contracts involving such parties. Additionally, the document highlights various legal restrictions on specific groups, such as alien enemies and convicts, while noting that marital status does not impair a woman's contractual capability.

1. Capacity to contract
Introduction :-
Section 10 of the Indian Contract Act, 1872
Provides That “All Agreements Are Contract If They Are Made By The
Parties Competent To Contract” Therefore Capacity To Contract Is An Essential
Element Of A Valid Contract. The Term Capacity To Contract Means And Includes
The Legal Capacity Of The Parties To Enter Into A Contract. In Other Word, It Is
Capacity Of Parties To Enter Into A Legal Binding Contract.

2. Competency To Enter Into Contract :-
 Section 11 of the Indian contract Act, 1872:
Provides That Every Person Is Competent To Contract Who Is
The Age Of Majority According To The Law To Which He Is Subject, And Who
Is Of Sound Mind And Is Not Otherwise Disqualified From Contracting By
Any Law To Which He Is Subject.
Thus, the section declares that a person is incompetent to contract under the
following circumstances:
1) Minority : if he is a minor, according to the law to which he is
subject
2) mental incompetence: if he is unsound mind
3) status: if he is disqualified from contracting by any law to which he is
subject

3. MINOR: -
A person who is not a major person (above 18 years) is an infant or a minor.
According to section 3 of Indian contract Act, 1875, a person domiciled in
India, who is under 18 years of age, is a minor. Accordingly every person who
has completed the age of 18 is years become a major. But minors of whose
person or property or both a guardian is appointed by a court of wards, attain
age of 21 years.
DETERMINATION OF MINORITY: -
Section 11 expressly provides that the age of majority of a person is to be
determined “according to the law to which he is subject”.

4. RULES RELATED TO MINORS AGREEMENT:-
LAW ALWAYS PROTECTS THE MINOR’S
1) Agreement Entered Into By A Minor Is Altogether Void:
EX:- ‘A’ a minor borrowed a sum of 35000/- from ‘B’ and as a security for the
same executed a mortgage in his favour. He become major few months later and failed
a suit for declaration that mortgage executed by him during his minority was void and
should be cancelled. It was held that a martgage by a minor was void ‘B’ was not
entitled to repayment of money.
2) MINOR CAN BE BENEFICIARY:
EX:- ‘A’ (major) executed promissory note in favour of ‘B’ (minor). The minor can
enforce the promissory note.
3) NO ESTOPPEL AGAINST A MINOR:-
EX:- where a minor b misrepresentig his age has include the other party to
enter into a contract with him, he cannot make liable on the contract since there can
be no estoppel against a minor.

5. 4) RATIFICATION ON ATTAINING MAJORITY IS NOT ALLOWED
[SECTION 68]:-
EX:- a minor borrowed a sum of money executed a simple bond for it and
after attaining majority executed a second bond in respect of original loan
and interest. It was held that suit upon second bond is not maintainable.
5) LIABILITY FOR NECESSARUES:- Under Section 68 Any Person Would Be
Entitled To Reimbursement Out Of The Minor’s Estate, For Necessaries Supplied To
Him Or To His Family. Necessaries is also include goods and service.
6) minor and insolvency [section 68] :- a minor cannot be adjudicated as an
insolvent, for he is incable of contracting debts. Even for necessaries supplies to him,
he is not personally liable, only his property is liable.
7):- minor partner
8) :- Minor Agent [Section 184]
9):- Contract by minor and adult jointly
10):- Position of minor’s parents
11):- Minor shareholder

6. Person of unsound mind
Section 12 of the Indian contract Act, 1872 lays down a test of soundness of mind it
defines the term ‘sound mind’ as follows: “ A person is said to be of sound mind for
the purpose of making a contract, and of forming a rational judgment as to its effects
upon his interest”.
According to this section, therefore, the person entering into the contract must be a
person who can understand what he is doing and is able to form a rational judgment
as to whether he is about to do is to his interest or not.
UNSOUNDNESS OF MIND MAY ARISE FROM:-
1) Idiocy: it is god given and permanent, with no intervals of saneness. The mental powers of an
idiot are completely absent because of lack of development of the brain.
2) Lunacy or insanity: it is a disease of the brain. Of course he may have lucid intervals of sanity.
3) Drunkenness: it produces temporary incapacity, till the drunkard is under the effect of
intoxication.
4) Hypnotism: It is also produces temporary incapacity, till the person is under the impact of
artificially induced sleep
5) Mental Decay: on account of old age, etc.

7. Disqualified persons by law
1) Alien enemies: An Alien living in india can enter into a contract with citizens of
India during peace time only. “Alien friend can contract but an alien enemy cannot
contract”
2) Foreign sovereigns and Ambassadors: one has to be cautious while entering into a
contract with foreign sovereigns and ambassadors, because whereas they can sue
others to enforce the contract entered upon with them, they cannot be sued
without obtaining the prior sanction of the central government.
3) convict: a convict is one who is found guilty and is imprisoned. During the period
of imprisonment, a convict is incompetent:
i) to enter into contracts and
ii) to sue on contracts made before conviction.
4)Insolvent: an adjudged insolvent(before an order of discharge) is competent to enter
into certain types of contract, i.e., he can incurred debts, purchase property or be an
employee but he cannot sell his property which vsts in the official receiver.

8. 6)Pardanashin women:
A pardanashin women is one who lives in seclusion
having no commission except from behind the parda or screen with any male
person except a few privileged relations. She can not much interaction with
the outside world.
7) Married Women:
A women is competent to enter into a contract. Marriage
does not affect the contractual capability of a women. A married women may
sue or be sued in her own name in respect of her separate property.