Sec.10: Parties
must be competent to contract.
Competence to contract is defined in
Sec.11: Every
person is competent to contract who –
(a)
is of the age of majority;
(b)
is of sound mind; and
(c)
is not disqualified from
contracting by any law.
Minors: Indian Majority Act, 1875 – Sec.3 specifies that –
(1)
a minor is a person who has not
completed 18 years of age.
(2)
In following cases, a person
attains majority on completion of 21 years of age :
(a)
where guardian appointed for
person or property of minor under the Guardians and Wards Act, 1890, or
(b)
where superintendence of minor’s
property is under Court of Wards.
Rules regarding agreements with minors :
1.
Agreement with or by minor is void: minor cannot bind himself by contract
- such agreement is inoperative.
Mohiri Bibi Vs. Dharmodas
Ghose -
minor mortgaged his property to money-lender to secure loan of Rs.20,000 – Out
of it, Rs.10500 paid to the minor – Subsequently, minor sued for setting aside
the mortgage. Held, the mortgage was
entered into with a minor and hence voids – Request for repayment of the amount
advanced to the minor as part of consideration also turned down.
2.
Minor can be promisee or beneficiary-
can be beneficiary (payee, endorsee or promisee) – such contracts enforceable
at the option of the minor
Sharafat Ali Vs. Noor Mohd. – A promissory note executed in favour of a
minor. Subsequently, the drawer refused
to honour the note on the ground that it being drawn in favour of a minor, was
void. Held, that the contract was for
the benefit of the minor and he can enforce it.
3.
His agreement cannot be ratified by him on attaining age of majority– ratification relates back to date of making of contract –
therefore, contract which was then void cannot be made valid by subsequent
ratification - Consideration given during minority is not valid – if fresh
contract entered into after majority, fresh consideration to be paid.
Indran Ramaswamy Vs. Anthiappa Chettiar - Minor borrows
money and executes promissory note – after attaining majority, executed another
promissory note in settlement of first note -
The second note is void for want of consideration.
Smith Vs. King – K, a minor,
speculated in stock exchange and became liable to the stockbrokers for
£547. On attaining majority, he gave two
bills of £50 each in satisfaction of the original debt. Held, there was no consideration for the
bills and K was not liable on them.
However, where services rendered at desire
of minor during minority and continued after majority on same request -
forms good consideration for subsequent express promise to pay. Sindha
Shri Ganpat Singh Vs. Abraham – services rendered to a minor at his request
– continued after majority at the same request – good consideration for promise
to pay.
4.
Minor receives any benefit under a void agreement, he cannot be
asked to compensate/pay for it– if minor
mis-represented his age - can be compelled to restore it, so long as the same
is traceable in his possession - If the goods sold or converted into money,
minor not liable to pay - The doctrine of restitution not applicable, where
infant has obtained cash instead of goods.
Sec.65 which provides for restitution in case of rescission of voidable
agreements, not applicable to agreements with minor, which is absolutely void –
even no relief allowed under Specific Relief Act, 1877.
Mohiri Bibi Vs. Dharmodas
Ghose -
minor mortgaged his property to money-lender to secure loan of Rs.20,000 – Out
of it, Rs.10500 paid to the minor – Subsequently, minor sued for setting aside
the mortgage. Held, the mortgage was
entered into with a minor and hence void – Request for repayment of the amount
advanced to the minor as part of consideration also turned down.
Ajudhia Prasad Vs. Chandan Lal - two
minors borrowed money under a mortgage deed.
They were over 18 but less than 21 years of age, but fraudulently
concealed the fact that a guardian had been appointed for them. Question was whether the lender could get a
decree for the principal amount or sale of mortgaged property. Held, where
property is not traceable, granting a money decree would tantamount to
enforcing minor’s pecuniary (monetary) liability under a void contract – no
decree under cloak of restitution.
5.
No estoppel against minor-Minor can
always plead minority – Even if minor mis-represents his age, he cannot be
sued.
Leslie Vs. Shiell – A minor
succeeded in deceiving some money-lenders by lying about his age and got them
to lend him £ 400 on the faith of his being adult. On his refusal to pay, the money lenders sued
him for money. Held, where the infant
has sold the goods or converted them, he cannot be made to pay.
6.
No specific performance of agreement–
if entered into by minor, no specific performance as void ab initio – However, if contract entered into by
parent/guardian/manager within scope of authority and for benefit of minor,
such contract is enforceable.
Srikakulam Subrahmanyam Vs. Kurra Sabba Rao – to pay off promissory note and mortgage of his debt, minor son and
his mother sold a piece of land to the holders of the promissory note and to
pay off mortgage debt. He paid off the
mortgage accordingly and possession of land was given over by him. Afterwards the minor brought an action to
recover back the land. Held, the
transaction was for the benefit of the minor and the guardian had the capacity
to contract on his behalf – binding upon the minor.
7.
Cannot enter into partnership– but
can become a partner in an existing partnership for a share in the profits only
– cannot be liable for liabilities of the firm.
8.
Minor cannot be adjudged insolvent –
As minor incapable of contracting debts, he cannot be held liable for any – so
cannot be adjudged insolvent.
9.
Liable for ‘necessaries’ supplied- Minor
not personally liable – Only his estate liable for ‘necessaries’ supplied or
necessary services rendered to him - Things necessary are those without which
an individual cannot reasonably exist – articles of luxury are always excluded
though luxurious articles of utility are in some cases allowed considering the
fortune and circumstances of the particular minor – liability not on account of
contract but out of quasi-contract.
To render minor’s estate liable, the
supplier has to prove that the goods supplied are necessary for the minor. Two conditions must be satisfied – (i) the
contract must be for goods reasonably necessary for his support in his station
in life, and (ii) he must not have already a sufficient supply of these
necessaries. Also, loans incurred by
minor to obtain the necessaries binds the minor and is recoverable.
Ryder Vs. Wombwell - minor was supplied a pair of jewelled
solitaires and an antique goblet and though he moved in a high society, he was
held not liable as the plaintiff could not prove that the articles were
specially necessary for the minor.
Nash Vs. Inman - an undergraduate in the Cambridge University
Roberts Vs. Gray - G, a minor, entered into a contract with R,
a renowned billiard player, to pay him certain sum of money to learn the game
and play matches with him during his world tour. R spent time and money in making arrangements
for the matches. Held, G was liable to
pay as the arrangement was for necessaries as it was in effect for teaching,
instruction and employment and was reasonable and for the benefit of the minor.
10. Minor can be an agent – minor binds the principal by his acts without incurring any
personal liability.
11. Minor is liable in tort
(civil wrong) – but
where tort arises out of a contract, minor is not liable, as it would
indirectly tantamount to enforcing an invalid contract.
Persons of unsound mind : Sec.12 – Person said to be of sound mind for the purpose of
making a contract if, at the time when he makes it, he is capable of
understanding it and forming a rational judgement as to its effect upon his
interest. There is a presumption in
favour of sanity.
Soundness
of mind depends on –
(a)
capacity to understand the
contents of business concerned, and
(b)
ability to form a rational
judgement as to its effects on own interest.
Person usually of unsound mind, may enter
into contract when of sound mind – but person usually of sound mind, may not
make a contract when of unsound mind.
Example:
1.
Patient in lunatic asylum - may
contract during intervals of soundness of mind.
2.
Sane man – delirious from fever
or drunk – incapable of forming a rational judgement as to its effects on his interest
– cannot contract whilst such delirium (fever or restlessness) or drunkenness
lasts.
Inder Singh Vs.
Parmeshwardhari Singh - property worth Rs.25,000 agreed to be sold
for Rs.7,000 – seller’s mother proved that he was congenital (hereditary) idiot
and mostly wandered about – incapable of understanding the transaction – Held,
person may to all appearances behave in a normal fashion, but he may be
incapable of forming a judgement of his own as to the effects of the act on his
interest – in present case, in capable of exercising own judgement.
Sec.68
– estate of persons of unsound mind liable for necessities supplied to them –
however, no personal liability.
Persons debarred by law:
1.
Alien enemies: During war, contracts
made before stand suspended or dissolved – no new contracts during the ward.
2.
Foreign sovereigns, diplomatic staff and accredited representatives: require prior permission of Central Government.
3.
Corporations: authority regulated by memorandum and articles – cannot enter into
contracts of strictly personal nature.
4.
Insolvents: Property vests in
Official Receiver or Official Assignee - deprived of power to deal in that
property – may contract on discharge by Court.
5.
Convicts: cannot enter into contract
during imprisonment – gets power to deal only on discharge or completion of
sentence or pardon – Limitation held in abeyance during period of sentence.
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