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Consideration
4. Completed Gift
5. Agency
6. Guarantee
4. Competent Parties
Every person who has attained the age of
majority; is of sound mind, and is not disqualified
from contracting by any law, to which he is
subject, is competent to contract. [S11]
Incompetent Parties
• Minors
• Lunatics; and
• Persons disqualified by law to which they are
subjected.
Minor
A minor is a person, being domiciled in India,
who has not attained the age of 18 years.
Accordingly, every person, male or female,
who is under 18 years of age, is a minor.
Exceptions
1. Where a guardian of a minor's person or his
property or both has been appointed by a
court of law under the Guardian and Wards
Act, 1890, and
2. Where his property has passed under the
superintendence of the court of wards.
The Legal Position of Minor's Agreements
The legal position of minor's agreements may be
studied under the following heads:
• An agreement by a minor is void altogether
• Minor can always plead minority
• No ratification on attaining the age of majority
• Contracts for the minor’s benefits
• Contract by a parent or guardian – have limited
enforceability
• Contract by minor and adult jointly
• Minor as a partner
• Minor as an agent
• Minor as a shareholder
Cont…
• Minor and Insolvency
• A minor can become a shareholder, or a member of a company in respect
of fully paid shares (e.g., in case of transfer or transmission of shares) if
the articles of the company so permit. However, if a minor is allotted
partly paid shares, he being incompetent to contract, incurs no liability.
Thus company will not be able to recover the uncalled amount from the
minor in future.
• Contract of Apprenticeship by the Guardian of a Minor
• A contract of apprenticeship entered into on behalf of the minor or by his
parent or guardian is valid and is binding upon a minor as such a contract
is protected by the Apprentices Act, 1961 provided that the minor is not
less than 14 years of age at the time of making the contract.
• Minor's liability for Supply of Necessaries
• A Minor’s liability in Tort
• A tort refers to civil wrong or breach of duty other than under the
contract leading to incurring liability for damages. A minor is liable in tort
unless his act is directly connected with the contract and is the means of
producing it.
2. PERSONS OF UNSOUND MIND
Undue Misreprese
Coercion Fraud Mistake
Influence ntation
(Voidable) (Voidable) (Void)
(Voidable) (Voidable)
I - Coercion
• ‘Coercion’ is the committing, or threatening to commit,
any act forbidden by the Indian Penal Code or the
unlawful detaining, or threatening to detain, any
property, to the prejudice of any person whatever, with
the intention of causing any person to enter into any
agreement.
• What amounts to Inducing Coercion?
• Committing any act forbidden by the Indian Penal Code
• Threatening to commit any act forbidden by the IPC
• Unlawful detaining of any property
• Threatening to detain any property
Acts outside the Purview of Coercion
1. Threat to File a Suit. A threat of civil or criminal
prosecution does not constitute coercion since the
same is not an act forbidden by the Indian Penal
Code. However, a threat to file a suit on false
charge is forbidden by the Indian Penal Code and,
therefore, amounts to coercion.
2. Threat to Commit Suicide. A ‘suicide’ and a
‘threat to commit suicide’ are not punishable under
the IPC. An attempt and abetment to suicide are,
however, offence under IPC and, therefore,
punishable under it. If a person obtains the consent
of the other by threatening to commit suicide such
consent is also said to be caused by coercion.
II - Undue Influence
‘A contract is said to be induced by ‘undue influence’ where the relations
subsisting between the parties are such that one of the parties was in a
position to dominate the will of the other and used that position to obtain
an unfair advantage over the other.’
• Presumption of Domination of Will
a) Where he holds a real or apparent authority over the other. Instances of
such relations are relations between father and son, master and servant,
police officer and culprit, etc.
b) Where he stands in a fiduciary relationship to the other. Fiduciary
relationship refers to relationship based on trust and confidence.
Doctor and patient
Trustee and beneficiary
Solicitor and client
Spiritual advisor (guru) and his devotee
Woman and her confidential managing agent
Parent or guardian and child
Transactions With Pardanashin Women
III - MISREPRESENTATION
Mistake of Fact
-Bilateral Mistake
-Unilateral Mistake
6. Legality of Object
• WHAT IS A LAWFUL OBJECT?
The consideration or object of an agreement is lawful
unless it
• is forbidden by law, or
• is of such a nature that, if permitted, it would defeat the
provisions of any law; or is fraudulent; or
• involves or implies, injury to the person or property of
another; or
• is regarded as immoral by a court, or opposed to public
policy
In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of
which the object or consideration is unlawful is void.
•
7. Certainty of Meaning
According to Section 29,"Agreement the meaning of which is not Certain
or capable of being made certain are void."
8. Possibility of Performance. If the act is impossible in itself, physically or
legally, if cannot be enforced at law. For example, Mr. A agrees with B to
discover treasure by magic. Such Agreements is not enforceable.
9. Not Declared to be void or Illegal. The agreement though satisfying all
the conditions for a valid contract must not have been expressly declared
void by any law in force in the country. Agreements mentioned in Section
24 to 30 of the Act have been expressly declared to be void for example
agreements in restraint of trade, marriage, legal proceedings etc.
10. Legal Formalities. An oral Contract is a perfectly valid contract, expect
in those cases where writing, registration etc. is required by some statute.
In India writing is required in cases of sale, mortgage, lease and gift of
immovable property, negotiable instruments; memorandum and articles
of association of a company, etc. Registration is required in cases of
documents coming within the scope of section 17 of the Registration Act.
All the elements mentioned above must be in order to make a valid
contract. If any one of them is absent the agreement does not become a
contract.