Who are Competent to Contract under Indian Contract, 1872? (Section 11): Lawcirca

Who are Competent to Contract under Indian Contract, 1872? (Section 11)

Share this

‘Competent’ as defined in English dictionaries means having the ability or skill needed for something. Section 11 of Indian Contract Act states “Every person is competent to contract who is of the age of majority, according to the law which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject”

From this section there are  three points to keep in mind

  • The person needs to be a major.
  • The person needs to be of sound mind.
  • And the person is not prohibited by law from contracting.

Minor’s Agreement

The legality of minor’s agreement has been questioned often, although the term minor has not been defined in the Indian Contract Act. Minor is understood as someone who has not attained the age of 18 years in India, regulated by section 3 of Indian Majority Act 1857.  There were two conditions stated in this act where a person is said to be major only when he attains the age of 21 these two conditions are-

  •  Where a guardian is appointed of a minor or minor’s property under the Guardians and Wards Act, 1890
  • Where superintendence of a minor’s property is assumed by a court of wards

Even if a person is 17 years and 8 months he or she will not be treated as a major in the eyes of law this is to save the minor from being manipulated and taken advantage of. It was only in 1903 that the Privy Council declared the contract entered by a minor as void ab initio, meaning void from the very beginning.

Agreement on behalf of minors?

Contracts on behalf of the minor entered by their parents or guardians have been upheld on the grounds of the custom of community, but until marriages take place it remains nudum pactum or a bare promise this was upheld in Janak Prasad v Gopi Krishna AIR 1947 Pat 132.

When we discuss with respect to contracts related to the property of minor it was upheld in such cases that the managers or guardians of the property of the minor can carry on the transaction on behalf of the minor only when it fulfills the following two conditions

Conditions

  • The transaction should be for a legal necessity
  • And for the benefit of the minor

When the contract is not for legal necessity or for the benefit of the  minor the guardian or the manager are not held to be competent to contract,  this was held in Gopalkrishna v Tukaram.

In a case Raj Rani v Prem Adib there was an agreement between a film producer and a minor girl to act in a film, the same contract was entered by the minor’s father on her behalf. On breach of agreement when the girl approached the court with her father it was held that agreement with the father of the minor was void. The consideration from the father was the minor’s promise to act and according to law, a minor cannot promise.

What happens when a minor represents his/her age fraudulently? {Mohri Bibee v Dharmodas Ghose,1903 30 Cal 539 (pc)}

Brief facts of the case

  1. Dharmodas was the respondent of the case who was a minor in the eyes of law. His mother was appointed as his legal custodian By the Calcutta High Court.
  2. The minor was the owner of an immovable property he went to the plaintiff, Brahmo Dutta to mortgage his property and did so for Rs 20,000 at the of 12% per annum
  3.  Kedar Nath who acted as attorney of Brahmo Dutta was the manager of his business and Dutta secured a loan of Rs. 20,000, the day mortgage deed took place the mother of the respondent that is Dharmodas wrote a letter to the moneylender informing about the minority of Dharmodas.
  4. The problem arose when it was found that the sum of loan actually provided was less than Rs 20,000
  5. The negotiator or representative of the defendant, who actually acted instead of on behalf of money lender has given money or sum to the plaintiff, who was a minor and he fully had knowledge about the incompetency of the plaintiff to perform or enter into contract and also that he was incompetent legally to mortgage his property which belonged to him.
  6. After this, on 10th September 1895, Dharmodas with his mother brought a legal suit claiming that when the property was mortgaged he was minor and incompetent to contract and the contract was void and therefore this contract should be revoked.
  7.  Plaintiff argued here that according to him the defendant deceitfully or fraudulently represented his age

Issues raised in the case

  • Whether the deed was void under the Indian Contract Act?
  • Whether the defendant here is liable to return the amount of loan received under such deed or mortgage?
  • Whether mortgage commenced voidable or not?

Judgement

  • The trial Court held that the mortgage deed or contract commenced was void as it was carried out with a person who was a minor at that time
  • Not satisfied with this Brahmo Dutta moved to Calcutta high court which upheld the judgment of the trial court
  • He later appealed to the Privy Council which dismissed this appeal and stated that there can be no contract between a minor and a major person.

Rationale/reasoning of the court

  1. Contract with a minor is void ab initio or void from the very beginning.
  2. Second point is as minor was incompetent to contract the mortgage or deed entered are also void in nature.
  3. Third point was the minor cannot be forced to give back the money as he was not bound by the promise made in the contract.

As the plaintiff had full knowledge of the minority of the defendant because he received the letter of his mother there was no fraudulent representation but if a mortgage or sale of his property by minor is set aside by the court may award compensation if satisfied that the minor fraudulently represented his or her age. The liability to restore lies purely and simply on his fraud.

What are the contracts executed on behalf of minor?

Contracts that are executed on the minor’s side are to operate or enforce the rights of minors and not impose liability. In Hanmant Lakhshman v. Jayarao Narsinha, Bombay High Court held that a minor can sue under a bond in his favour.

How executed contracts are different from executory contracts?

There is a difference between executed and executory contracts. we can understand it with an example, if a minor goes to buy some medicines in a shop and in order to pay for the same he gives money to the shopkeeper with knowledge that the person is a minor refuses to give medicine and bind by the contract he cannot do so as he had knowledge about his age. This is an executed contract here.

What is a contract of necessity?

The term ‘necessity’ is not defined anywhere in the Law of Contract, 1872. Section 68 of the act states that if a person who is incapable of entering into a contract, or anyone whom he is legally bound to support is supplied with necessaries and the person who has furnished with such supplies is entitled to recover the cost from the property of such incompetent person.

In a minor’s contract of necessity, although the person providing the necessity can recover the cost with the help of the minor’s property, the minor himself won’t be held liable. As the term necessity is not defined anywhere  we often turn to various judicial pronouncements to understand the same. In Peters v Fleming it was pronounced that necessity is not understood in a strict sense, it varies

  • As to fit a person’s state
  • Degree and station in life which he or she lives

For example, education and clothes for a minor can be counted as a necessity, but expensive jewellery, shoes etc cannot be counted as a necessity. A loan given to a Hindu minor to cover the expenses of his sister’s marriage was counted as a necessity and can be recovered from minor’s property but in Ramachandra v Hari it was held that the cost recovered must be done without interest. Expenses incurred in minor’s education, in minor’s sister’s marriage, to conduct the funeral of minor’s parents were all counted as necessity later on with various judicial pronouncements.

Money advanced to a minor to provide for his defense in a criminal prosecution, or for meeting the necessary costs of a civil proceeding affecting him or to save a valuable property of the minor from sale in execution of a decree, would be necessary.

Section 68 used the word necessity in a technical sense to cover all the articles that the minor would need to suit his conditions. All the ornaments and expensive articles of daily use are not counted as a necessity.

Contract with a person of unsound mind

In section 12 of the Indian Contract Act soundness is defined as “A person is 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 of forming a rational judgment as to his effects upon his interests”

Under the English laws, the contract entered by a lunatic is not void but voidable at his or her option. This also happens only when the other party has noticed insanity in the behaviour at the time of entering into the contract. In India, the case is not same minor’s agreement was held as void and the person with an unsound mind is held incompetent to contract, though a mortgage in favour of a lunatic is held valid as happened in Sheoratan v. Kali Charan.

When a person is prohibited by law to enter into a contract?

  • A contract which is entered by a statutory corporation is required to be within the powers or object of the company if it stands out of the power it becomes ultra vires meaning out of the power and therefore void.
  • When contracts take place with any government certain formalities are required to be followed, if parties entering into a contract don’t comply with these formalities the contract becomes void.
  • The rule followed when the contract was entered by the municipality.

Sunidhi Singh

Author

Sunidhi hails from Symbiosis Law School, NOIDA and spends most of her time researching, reading and debating. Her Interest areas are law and policy. For any clarifications, feedback, and advice, you can reach us at editor@lawcirca.com

Leave a Reply