Capacity To Contract


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Capacity To Contract

  1. 1. Capacity to Contract <ul><li>Section 11 </li></ul><ul><li>Only a person: </li></ul><ul><ul><li>who is of the age of majority </li></ul></ul><ul><ul><li>of sound mind, and </li></ul></ul><ul><ul><li>not forbidden under any other law </li></ul></ul>
  2. 2. Minor <ul><li>Who is a Minor? </li></ul><ul><li>Already discussed. </li></ul><ul><li>What happens to a contract with or by a minor? </li></ul><ul><li>Contract is void-ab-initio , i.e., neither the other party nor the minor can enforce. </li></ul><ul><li>Case law : Mohiri Bibi vs. Dharmdas Ghose. </li></ul>
  3. 3. Minor cannot be asked to refund the benefits received . <ul><li>However, </li></ul><ul><li>Minor can be a promisee/beneficiary. </li></ul><ul><li>Minor cannot ratify even after attaining majority. </li></ul><ul><li>What about a situation where minor represents to be of the age of majority? </li></ul>
  4. 4. Contract still void <ul><li>If benefits received can be traced in the same or altered form, Minor liable to restore. </li></ul><ul><li>Minor liable for necessaries supplied to him or any loan for necessaries to him or to any of his dependants. </li></ul><ul><li>However, only properties of the minor, if any shall be liable. </li></ul><ul><li>Case law : Nash vs. Inman. </li></ul>
  5. 5. Mental Incompetence <ul><li>Idiots </li></ul><ul><li>Lunatics </li></ul><ul><li>Intoxicated persons </li></ul><ul><li>Contract void-ab-initio except for necessaries as in the case of Minor. </li></ul>
  6. 6. Section 12 <ul><li>Person usually of unsound mind but occasionally of sound mind can make a contract when of sound mind ( Onus on the other party ) </li></ul><ul><li>Person usually of sound mind but occasionally of unsound mind cannot make a contract when of unsound mind ( Onus on the person claiming to be of unsound mind ) </li></ul>
  7. 7. Free Consent <ul><li>Coercion (Sections 15 and 19) </li></ul><ul><li>Contract voidable at the option of the aggrieved party. </li></ul><ul><li>Benefits received to be returned. </li></ul><ul><li>Undue Influence </li></ul><ul><li>One party is in a position to dominate the will of the other. </li></ul><ul><li>Uses that dominance to secure undue/unfair contractual advantage </li></ul>
  8. 8. <ul><li>In some relationships, it is presumed, e.g., Parent and Child; Spiritual Advisor and Disciple; Trustee and Beneficiary; Doctor and Patient; Lawyer and Client. </li></ul>
  9. 9. Fraud <ul><li>Contract voidable at the option of the party defrauded. </li></ul><ul><li>Claim for damages. </li></ul><ul><li>However, relief available only if party actually defrauded. </li></ul><ul><li>A fraud that does not defraud is no fraud. </li></ul><ul><li>Case of defective cannon </li></ul>
  10. 10. Misrepresentation <ul><li>Contract rendered voidable. </li></ul><ul><li>Damages cannot be claimed. </li></ul>
  11. 11. Mistake <ul><li>Of Law </li></ul><ul><li>Of Fact </li></ul><ul><li>Mistake of Indian Law doesn’t render a contract void or voidable. </li></ul><ul><li>Ignorance of law is no excuse </li></ul><ul><li>Mistake of foreign Law to be treated as mistake of fact. </li></ul>
  12. 12. Specific and General Offer <ul><li>Specific Offer: </li></ul><ul><ul><li>made to a specified person or a group of persons. </li></ul></ul><ul><ul><li>can be accepted only by the person to whom made. </li></ul></ul><ul><li>Thus, if offer is addressed to ‘A’, ‘B’ cannot accept it. </li></ul><ul><li>Case Law: Boulton vs. Jones </li></ul>
  13. 13. Mistake of Fact <ul><li>Unilateral </li></ul><ul><li>- does not render contract void except where induced by fraud </li></ul><ul><li>Case Law: Cundy vs. Lindsey </li></ul><ul><li>Bilateral </li></ul><ul><li>- absence of consent … contract is void-ab-initio </li></ul><ul><li>Case Law: Henkel vs. Pape </li></ul>
  14. 14. Consideration <ul><li>Something in return </li></ul><ul><li>Section 2(d) </li></ul><ul><li>When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or promises to abstain from doing something, such act or abstinence or promise is called a consideration for the promise. </li></ul>
  15. 15. Consideration <ul><li>Past, present or future </li></ul><ul><li>Must move at the desire of the promisor </li></ul><ul><li>May move from promisee or any other person </li></ul><ul><li>Need not be adequate but must have value in the eyes of law </li></ul>
  16. 16. ‘ No Consideration, No Contract’ <ul><li>Exceptions </li></ul><ul><li>(1)(a) Natural love and affection </li></ul><ul><li>(b) Between parties in a near relation </li></ul><ul><li>(c) Written </li></ul><ul><li>(d) Registered </li></ul><ul><li>(2)(a) Promise to compensate </li></ul><ul><li>(b) Voluntary act which promisor was legally bound to do </li></ul>
  17. 17. ‘ No Consideration, No Contract’ <ul><li>(3) (a) Written promise </li></ul><ul><li>(b) to pay time-barred debt. </li></ul><ul><li>(4) Bailment </li></ul><ul><li>(5) Agency </li></ul><ul><li>(6) Gift </li></ul>
  18. 18. Breach of contract <ul><li>Both parties are promisors as well as promisees </li></ul><ul><li>If any of the promisors refuses or fails to perform, he is said to be guilty of breach of contract. </li></ul>
  19. 19. Anticipatory Breach <ul><li>Breach before time for performance arrives </li></ul><ul><li>Promisee may proceed: </li></ul><ul><li>(a) As soon as breach is committed; or </li></ul><ul><li>(b) Wait till the time of performance arrives </li></ul><ul><li>Remedies </li></ul><ul><li>(1) Suit for injunction Brook Bond Ltd. vs. Vijay Mallya </li></ul><ul><li>(2) Claim for damages </li></ul>
  20. 20. Actual Breach <ul><li>(Refusal or failure when time for performance is due, or </li></ul><ul><li>During performance. </li></ul><ul><li>Remedies </li></ul><ul><li>Right of Rescission </li></ul><ul><li>Claim for damages </li></ul><ul><li>Suit for specific Performance </li></ul><ul><li>Suit for Injunction </li></ul><ul><li>Quantum Meruit </li></ul>
  21. 21. Claim for Damages Damages U/S Section 73 Damages U/S Section 74 Only damages naturally flowing from breach (Ordinary Damages) Special Damages (No claim for consequential loss unless in the Contemplation of the parties ( Hedley v. Baxendale) Exemplary Damages Nominal Damages Pre-fixed Damages Penalty Liquidated Damages (What can be recovered is actual loss or amount prefixed, whichever is less)