The document discusses the competency of parties to form contracts under Indian law. It states that to be competent, one must be of age of majority, of sound mind, and not disqualified by any law. It then examines specific cases such as minors, persons of unsound mind, and those disqualified like insolvents or convicts. Contracts with minors are void, while those with persons of unsound mind may be void depending on mental state at time of agreement.

2.  Competence:
 Infant:
 Immature:
 Exploitation:
 Hardship:
 Ratification: ,
 Estoppel:
 Insolvency:
 Necessaries:
 Saneness: (Of sound mind; mentally healthy)
 Lunatic:
 Hypnotism:
 mental decay:
 Intoxication:

3. Who are Competent to Contract ?
Section 11 of the Contract Act deals with the
competency of parties and provides that
“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 of sound mind and
is not disqualified from contracting by any law to
which he is subject.”
In Brief,
Every person is competent to Contract:
1) Who is of the age of majority;
2) Who is of sound mind; and
3) Who is not disqualified from contracting by any
law.

4. 1.Minor
 An infant or a minor is a person who is not a major.
 According to the Indian Majority Act, 1875, a
minor is one who is not completed his or her 18th
year of age.
 Why should minors be protected ?
A minor has an immature mind and cannot think
what is good or bad for him. Minors are often
exploited. So he must be protected by law from
any exploitation.

5. 1) An agreement with or by a minor is void: Sec 11 says
that a minor is not competent. So any contract with
or by minor is void-ab-initio.
2) No ratification: As any agreement with minor is
completely void and hence cannot be ratified even
on attaining majority, because a void agreement
can’t be ratified.
3) No estoppel against a minor: (false representation
by a minor) A minor who falsely represents himself
to be a major and thereby induces another person to
enter into a contract with him, can plead minority as
a defence. A minor can’t be sued on the ground that
he falsely represented that he is a major.

6. 4) Minor can be a promisee or beneficiary: If a
contract is beneficial to a minor it can be
enforced by him. There is no restriction on a
minor from being a beneficiary.
5) Surety for a minor: (liability of guardian) An
agreement by minor is void, but an agreement
by a guardian on his behalf is valid, provided it is
for his benefit or for legal necessity.
6) No insolvency: A minor cannot be declared
insolvent as he is incapable of contracting debts
and dues payable from the personal properties
of minor.
7) Minor cannot be a shareholder of a company:

7.  Promisee or beneficiary: A minor is allowed to enforce a
contract which is of some benefit to him and under which
he has to bear no obligations.
 Agency: A minor can act as an agent. He can bind his
principal by his acts, but he is not liable to his principal for
his acts.
 Partnership: A minor being incompetent to contract
cannot be a partner in a partnership firm, but under
Section 30 of the Partnership Act, he can be admitted to
the benefits of partnership.
 Necessaries: If a person supplies necessaries to a minor, or
to minor dependents, which he actually needs, is entitled
to be reimbursed from the properties of such a minor.
Note- minor is not liable for any price which is more than
the value of necessaries, also there is no personal liability
for the minor. Only his property is liable.

8. Contracts made by persons of unsound mind are
void. The reason is that a contract requires assent
of two minds but a person of unsound mind has
nothing which the law recognises as a mind .
According to Section 12,
“ A person is said to be of sound mind if at the
time of making a contract, he is capable of
understanding it and of forming a rational
judgment as to its effect upon his interests.”

9. The question whether a party to contract is of sound mind or
not has to be decided by the courts.
Unsoundness of mind does not mean weakness of mind or
loss of memory. It means lack of capacity to understand the
terms and the effects of the contract.
Unsoundness of mind may arise from:
1) Idiocy: An Idiot is a person with no intervals of saneness.
It is permanent. It is due to the lack of development of
brain.(always void)
2) Lunacy or Insanity: It is a disease of the brain. Such
persons can enter into contract during that period when
he is of sound mind.
3) Drunkenness: It produces temporary incapability till
the man is under the effect of intoxication.
4) Hypnotism: It is caused under the impact of artificially
induced sleep.
5) Mental Decay: It is caused due to old age.

10. 1) Alien enemies: An alien can contract with the citizens of
India only in case of peace between the both countries.
Not in case of war.
2) Insolvents: An insolvent cannot enter into a contract as
his property belongs to the official receiver.
3) Convict: A convict while undergoing imprisonment is
incapable of entering into a contract.
4) Married women: A woman married or single whether
under Hindu or Mohammedan Law can enter into a
contract if she is a major and of a sound mind. For a
contract , the consent of her husband is not required. She
may sue or be sued in her own name in respect of her
separate property.(in old laws married women were
totally disqualified from contracting)