CAPACITY TO CONTRACT Abhedya Rajeev BASICS OF LAW Wed, Jul 29, 2020, at ,10:00 AM INTRODUCTION: Section 11 of the Indian Contract Act, 1872 provides the elements for who are competent to contract. According to Section 11, “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.” Thus, the following three categories of persons are not competent to contract:- A person who has not attained majority age, i.e. one who is a minor; A person who is of unsound mind; A person who has been disqualified from contracting by any law. Though the aforementioned categories of person are not competent to contract, yet they may sometimes be making any bargains, taking some loans, or conferred with some benefits, etc. Attainment of Majority Age: According to section 3 of the Indian Majority Act, 1875, a person is deemed to have attained the age of majority when he completes the age of 18 years, except in case of a person of whose person or property a guardian has been appointed by the Court, in which the age of majority is 21 years. In J.R. Marwari v. M.P. Sahu, it was stated that the majority does not arise till the completion of 21 years of age by the ward, and it is immaterial, whether the guardian dies or removed, or otherwise ceases to act. Thus the minor is not competent to contract. An agreement with a minor is void and cannot be ratified until he/she attains majority. On the other hand, a minor can be promise or beneficiary under a contract and can enter into special types of contracts for necessaries of life. Mohiri Bibi vs. Dharmdas Ghose A minor mortgaged his house in favour of moneylender to secure a loan of Rs 20,000 of which the minor was paid Rs 8000, afterwards; the minor sued the moneylender for setting aside the mortgage on the excuse that he was underage. The mortgage was deemed null and void and cancelled. The moneylender’s contention that the minor should repay the amount was not acknowledged. Suraj Narain Vs.Sukhu Aheer.-- Facts of the case–A minor executed a promissory note in favour of a money lender while he took a loan of Rs. 11,000 from him. After attaining the age of majority, he executed a secondary note in favour of the same person. Judgment – The court held that the minor was not responsible as the agreement cannot be ratified even after the minor attains the age of majority. Both the promissory notes will not be binding on him. Principle of the case – Ratification of the contract of a minor A sound mind person: As per section 12 of the Indian Contract Act, 1875, for the purpose of entering into a contract, a person is said to be of sound mind if he is capable of understanding the contract and being able to assess its effects upon his interests. It is to be noted that a person who is usually of an unsound mind, but occasionally of a sound mind, can enter a contract when he is of sound mind. In addition, no person can enter a contract when he is of unsound mind, even if he is so temporarily. A contract made by a person of an unsound mind is said to be void. While a Lunatic and drunken individual may have lucid intermissions but an idiot is such a person who does not possess any soundness of mind and all contracts with such persons are invalid. Further, Lunatics and Drunker individuals can enter into contract only at the period of their lucidity but not otherwise. A person disqualified by law: Despite minors and people with unsound minds, there are other people who cannot enter into a contract i.e. do not have the capacity to contract. The grounds for disqualification can include political status, legal status, etc. A number of such persons are foreign sovereigns and ambassadors, alien enemy, convicts, insolvents, etc. According to the contract act, the following are said to disqualify from entering into any contract:- (a).Alien Enemy- Any person who is not a citizen of India is termed to be Alien and cannot enter into any contract. (b).Foreign Sovereign (c).Corporations- Any business is a different entity (artificial person) created by law. To enter into any contract it can enter by its board of directors. (d).Convicts-Individual is punished by the law for imprisonment cannot enter into any contract as per the Act during the imprisonment period. He can enter into the contract once his sentence completes with the prison term expiration. (e).Insolvents- Insolvents cannot enter into a contract in anticipation of the court passes an order for Discharge. (f). Pardanashin Women CONCLUSION At last, it can be concluded that the capacity to contract is the legal competence to contract. A person acknowledged as incompetent to contract is the one who is incapable of entering into a contract, and a contract with such a person is unenforceable by law. Additionally, such persons are also divided into categories such as minor, unsound mind and persons disqualified by law. Any individual if falls in any of these categories will be declared as an incompetent person to contract, making his contract void or voidable in certain circumstances. However, the court of law also provides relief to certain people, making them incapable of contracting for only a specific period of time such as convicts and insolvents. Therefore, the capacity to contract is an essential element to fulfil the requirements of a valid contract.