CAPACITY OF

PARTIES
INTRODUCTION
For a valid Contract the parties to a
contract must have capacity that is
competence to enter into a contract.
Section 11 of the Contract Act deal
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 .
It follows that the following persons
are incompetent to contract :

1. Minor
2. Person of unsound mind, and
3. Persons disqualified by any law to
which they are subject .
Contracts enter into by persons
mentioned above are void .

Minor
According to Indian Majority act ,1875, a minor
is one who has not completed his or her 18
th

year of age .
WHY SHOULD MINORS BE PROTECTED ?
A minor has a 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 but at the same time, the law
must not cause unnecessary hardship to the
persons who deal with minors.
Effects of minors agreement
1. An agreement with or by a minor is void :

MOHORI BIBI V. DHARMO DAS GHOSE [1903]
A a minor borrowed rs.20000 from B and as a
security for the same executed a mortgaged in
his favor. He became a major a few months later
and filed a suit for the declaration that the
mortgage executed by him during his minority
was void and should be cancelled. It was held that
a mortgage by a minor was void and B was not
entitled to repayment of money.
2. No ratification: A minor cannot ratify the
agreement even on attaining majority ,
because a void agreement cannot be ratified .

ARUMUGAN V. DURAISINGA [1914]
A minor borrowed a sum of money executing
a simple bond for it, and after attaining
majority executed a second bond in respect of
the original loan and interest .It was held that
suit upon the second bond was not
maintainable .

3. Minor can be a promisee or beneficiary :

The General American Insurance Co. Ltd. V.
Madan Lal Sonu Lal [1935]59 Bom 656

X, a minor insured his goods with an insurance
co. The goods were damaged .X filed a suit for
claim .The insurance co. Took the plea that the
person on whose behalf the goods were insured
was the minor . The court rejected the plea and
allowed the minor to recover the insurance
money.

4.NO ESTOPPEL AGAINST A MINOR: Where a minor
by misrepresenting his age has induced the
other party to enter into a contract with him
, he cannot be made liable on the contract
.There can be no estoppels against a minor.
It means he is not estopped from pleading
his infancy in order to avoid a contract . The
court may direct minor to restore property .
No doubt, minor has got protection but he
has no liberty to cheat others .
5. No specific performance except in certain cases : A
minors contract been absolutely void, there can
be no question of the specific performance of
such a contract. A guardian of a minor cannot
bind the minor by an agreement for the purchase
of immovable property; so the minor cannot ask
for the specific performance of the contract
which the guardian had no power to enter into.
But a contract enter into by the guardian or
manager on minors behalf can be specifically
enforced by
1.The contract is within the authority of the
guardian or manager
2.It is for the benefit of the minor
6. Liability for torts : A tort is a civil wrong . A
minor is liable in tort unless the tort in
reality is a breach of contract . But a minor
cannot be made liable for a breach of
contract by framing the action on tort . You
cannot convert a contract into tort to enable
you to sue an infant.

7. No insolvency: A minor cannot be declared
in solvent as he is incapable of contracting
debts and dues are payable from the
personal properties of minor and he is not
personally liable .
8. Partnership : A minor being incompetent to
contract cannot be a partner in a partnership
firm , but under section30 of the Indian
Partnership Act, he can be admitted to the
benefits of partnership.

9.Minor can be an agent : A minor can act as an
agent. But he will not be liable to his principal
for his acts . A minor can draw, deliver and
endorse negotiable instruments without
himself being liable .
10. Minor cannot bind parent or guardian : In the
absence of authority, express or implied ,an
infant is not capable of binding his parent or
guardian, even for necessaries . The parents
will be held liable only when the child is acting
as an agent for parents .
11. Joint contract by minor and adult : In such a case,
the adult will be liable on the contract and not
the minor .
12. Surety for a minor: In a contract of guarantee
when an adult stands surety for a minor then
he [adult] is liable to third party as there is
direct contract between the surety and the
third party.

13. MINOR AS SHAREHOLDER: A minor, being
incompetent to contract cannot be a shareholder
of the company . If by mistake he becomes a
member the co. can rescind the transaction and
remove his name from register .

14. LIABILITY FOR NECESSARIES: A claim for
necessaries supplied to a minor is enforceable by
law . But a minor is not liable for any price that
he may promise and never for more than the
value of the necessaries . There is no personal
liability of the minor but only his property is
liable .
PERSONS OF UNSOUND MIND
As per section 11 of Contract Act , for a valid
contract each party to the contract must have a
sound mind . 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 recognizes as a mind . Unsoundness of mind
does not mean weakness of mind or loss of
memory . It means not only lack of capacity to
understand the terms of the contract but also
lack of understanding to realize the effect of the
terms of the contract.
Unsoundness of mind may arise from :
1. Idiocy : An idiot is a person with no intervals
of saneness . He is incapable . His mental
powers of understanding even ordinary
matters are absent because of lack of
development of brain . The agreement with an
idiot is void .
INDERSINGH V. PARMESHWARDHARI SINGH
[1957]
A property worth about Rs.25000 was agreed
to be sold by a person for Rs. 7000 only . His
mother proved that he was a congenital idiot ,
incapable of understanding the transaction .
The sale was held to be void .
2. Lunacy or insanity : It is a disease of the brain. A
lunatic loses the use of his reason due to some
mental strain or disease . He may have lucid
intervals of sanity . He can enter into contract
during that period when he is of sound mind .
3.Drunkenness : It produces temporary incapacity
till the man is under the effect of intoxication
creating impotence of mind . He stands on the
same footing as a lunatic .
4. Hypnotism : It also produces temporary
incapacity till the person is under the impact of
artificially induced sleep.
5.Mental decay : It is on account of old age etc.
PERSONS DISQUALIFIED FROM
CONTRACTING BY ANY OTHER LAW
1. Alien enemies : An alien is competent to contract with
citizens of India living in India . He can maintain an
action on a contract entered into by him during peace
time . But if a war is declared , an alien enemy cannot
enter into any contract with an Indian citizen .
2. Foreign sovereigns and Amy minors : These persons are
immune from the jurisdiction of local courts , unless
they voluntarily submit to its jurisdiction . These
persons have a right to contract but can claim the
privilege of not being sued . The rules regarding suits
by or against foreign sovereigns are laid down in
sections 84 to 87 of Civil Procedure code .
3. Insolvents : An insolvent cannot enter into a
contract as his property vests in the official
receiver or official assignee . This
disqualification of an insolvent is removed after
he is discharged .
4. Convict : A convict while undergoing
imprisonment is incapable of entering into a
contract . But this disability comes to an end
on the expiry of the sentence .
5. Corporations : A corporation is an artificial
person recognized by law . It exists only in the
eyes of the law . It is competent to enter into a
contract only through its agents .
6. Professional persons : Doctors and advocates are
included in this class . In England barristers are
prohibited by the etiquettes of their profession from
suing for their fees. In India these personal
disqualifications do not exists . According to the Bar
Council Act 1927 an advocate of the High Court can
enter into a contract with his client and can also bring
a suit against him for his fees .
7. Contractual capacity of married women : A woman is
competent to enter into a contract . Marriage does
affect the contractual capacity of a woman . She can
even bind her husband in cases of pressing necessity
. A married women may sue or be sued in her own
name in respect of her separate property .