Competent to Contract

Every person is competent to contract if they have the legal capacity to do so. This includes:

Age of Majority: The person must have reached the age of majority according to the law.
Soundness of Mind: The person must be of sound mind at the time of making the contract.
Not Disqualified by Law: The person must not be disqualified from contracting by any law to which they are subject.

These requirements ensure that the contract is not voidable or unenforceable due to the incapacity of one or more parties involved.

Who are Competent to Contract?

According to Sections 11 and 12 of the Indian Contract Act, the following persons are competent to contract:

Age of Majority: Any person who has reached the age of 18 years is competent to contract.
Soundness of Mind: A person of sound mind is competent to contract. A person who is of unsound mind at the time of making the contract is not competent to contract.
Not Disqualified by Law: Any person who is not disqualified by law is competent to contract.

Agreement with a Minor

Who is a Minor? According to Section 3 of the Indian Majority Act, 1875, a person below 18 years of age is considered a minor. However, if a guardian has been appointed by the court for the person or property, the individual remains a minor until the age of 21 years.

Mohiri Bibi v. Dharmodas Ghosh

This landmark case established that a minor's agreement is completely null and void from the beginning. The court held that a minor is not competent to contract or provide any consideration. The decision emphasized that a minor's agreement is void ab initio, meaning it is null and void from the outset.

Summary of Mohiri Bibi v. Dharmodas Ghosh

A minor's agreement is void ab initio.
The doctrine of estoppel does not apply to minors if the plaintiff is aware of the minor's status.
Sections 64 and 65 of the Indian Contract Act do not apply, as a minor's agreement is void ab initio.
The court can order compensation under Section 41 of the Specific Relief Act if justice requires it, but it was not applicable in this case.

The Effect of a Minor’s Agreement

No Estoppel Against a Minor: The principle of estoppel does not apply to minors. Even if a minor falsely represents themselves as having attained the age of majority, they can still plead minority to avoid liability under the agreement.

No Liability in Contract or Tort Arising Out of Contract: A minor cannot be held liable in contract or tort if the tort is directly connected to the contract and is a means of enforcing it. However, if the tort is independent of the contract, the minor may be held liable.

Doctrine of Restitution

Section 33 of the Specific Relief Act, 1877, provides for compensation in cases involving minors. The court can require a minor to compensate the other party for any benefits received if the minor initiates a suit to cancel an instrument or resists enforcement as a defendant.

Contracts Beneficial to Minors

Contract of Service and Apprenticeship: Only contracts for apprenticeship are binding under the Indian Apprenticeship Act, 1960. Contracts for service are not binding on minors.
Contract of Marriage: Minors can enforce a contract of marriage against the other party, but it cannot be enforced against them.
Minor and Partnership: Minors cannot enter into partnership agreements, as they lack the capacity to contract.

Minor’s Liability for Necessaries [Section 68]

Under Section 68 of the Indian Contract Act, a person who supplies necessaries to a minor is entitled to reimbursement. This provision is based on a quasi-contractual obligation rather than a regular contractual one.

Definition of Necessaries

The term 'necessaries' includes goods or services essential for a person's reasonable existence, such as food, clothing, shelter, and education. To establish liability, the goods or services must be necessary for the minor’s maintenance, considering their lifestyle and status, and the minor must not already have an adequate supply of these necessities.

Persons of Unsound Mind

Section 12 of the Indian Contract Act outlines the rules regarding the contractual liability of persons of unsound mind. A person is deemed to be of sound mind if, at the time of making a contract, they can understand the terms and form a rational judgment about its effect on their interests.

Key Provisions

Sound Mind Requirement: A person must be of sound mind at the time of making the contract to be competent to enter into it.
Fluctuating Mental States: A person who is usually of unsound mind but occasionally of sound mind can make a contract during lucid intervals, and vice versa.

Case Law Interpretations

In Inder Singh v. Parmeshwar Dhari Singh and Rajinder Kaur v. Mangal Singh, the courts emphasized that it is the court's responsibility to determine whether a person is of unsound mind, considering the evidence and circumstances.

Persons Disqualified by Law

According to Section 11 of the Indian Contract Act, certain categories of individuals are disqualified from entering into contracts, including:

Disqualified Persons

Alien Enemy: Citizens of a country with which India is at war, or Indian citizens residing in an enemy country, cannot contract during the war.
Convicts: Cannot contract while serving a sentence but regain capacity after completing it.
Insolvents: Cannot contract as they have no control over their assets.
Foreign Sovereigns: Cannot be sued in Indian courts unless they voluntarily submit to the jurisdiction.

Conclusion

Competency to contract is a crucial aspect of contract law, ensuring that parties involved have the legal capacity to enter into binding agreements. The Indian Contract Act, 1872, specifies that only individuals of the age of majority, of sound mind, and not disqualified by law can enter into contracts. Understanding the competency of the parties is essential to determine the legality and enforceability of a contract.