Capacity to Contract

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Definition of Contract

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Competence of contracting parties
Section 10 of the Contract Act requires that the
parties must be competent to contract.

Section 11 of the Indian contract act states that every

person is competent to contract, who is the age of
majority ,who is of sound mind and who is not
disqualified from contracting by law

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 INCAPACITY

Minority Disqualified by law

(immature mind) Unsound mind (Status)

Idiot Lunatic Drunkard

Political Corporate Marital Legal

Status: Status: Status: Status:
a) Alien Enemy a) Company Married Insolvent
b) Alien Friend b) Statutory Women person
c) Foreign Sovereigns & Corporations
d) Ambassadors
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Following persons are incapable
of contracting
A minor
A minor ,person of unsound mind and person
Disqualified by law cannot enter into contract
Any contract with any such party will be void
Ab intio A person of
Unsound mind

A person disqualified
By law

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 MINOR
 A PERSON WHO HAS NOT COMPLETED HIS 18TH
YEAR OF AGE IS CONSIDERED TO BE A MINOR.
 IN CASE A GUARDIAN TO THE PERSON OR
PROPERTY OF THE MINOR IS APPOINTED BY
THE COURT OR THE PROPERTY OF THE MINOR
IS PUT UNDER THE CHARGE OF A COURT OF
WARDS ,DURING THE PERIOD OF HIS
MINORITY .

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 Agreement with minor is VOID
decided case
 In Mohiri Bibi’s case ,the minor had executed a
mortgage for the sum of Rs20000 out of which the
lender had paid the minor only about Rs8000.The
mortagagee filed a suit for the recovery of his
mortgage money and for sale of the property in
case of default .The privy council held that an
agreement by a minor was absolutely void as
against him and therefore the mortgagee could not
recover the mortgage money nor could he have
the minor’s property sold under his mortgage.

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Introducing person
of unsound
mind

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Section-12
Of Indian Person of unsound
Contract act
mind
 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 its effect upon his
interests.
 The idiot, lunatic and drunkards are the
person of unsound mind.

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 Meaning of idiot, lunatic
and drunkards
 Idiot: A person who is devoid of any faculties of thinking
or rational judgment is called an idiot .all agreements
other than those for necessaries of life,with idiots are
absolutely void.
 Lunatics:A person,whose mental powers are deranged is
called a lunatic.agreement made with lunatic ,except
those made during lucid intervals (period in which he is in
his senses )are void
For necessaries supplied to lunatic are valid.and the property
of lunatic can be taken
 Drunkards: A person under the influence of drink or drug
stands on the same footing as lunatic.an agreement with
drunker is void.

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 Introducing
person disqualified by law to enter
into
any contract
I am declared disqualified
By law to enter into any contract

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 Following are the people
disqualified by law
 Alien enemy: A person who is not a citizen
of India is called an alien.
 Convicts: convict is incapable of entering
into contract .and the incapability ends
when sentence expires or punishment finish.
 Corporation: A company is artificial person
created by law. it can only contract through
its board of directors.

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