BUSINESS LAW

CAPACITY TO CONTRACT

Group Members : Name Omkar Bansode Sagar Chavan Fazila Shaikh Kishor Kandhare Jagruti Khilari Manish Korade Ganesh Rawool Priyanka Sakat

Roll No. 04 06 12 20 22 23 38 41

CAPACITY TO CONTRACT
The parties who enter into a contract must have the capacity to do so. Capacity here means competence of the parties to enter into a valid contract. Capacity to contract refers to the legal ability of a person to enter into a valid contract. According to sec. 11, every person is competent to enter into a contract if he is of the age of majority, he is of sound mind, he is not disqualified by any law from contracting.

 Sec. 11 declares the following persons to be incompetent to contract : 1. Minors 2. Persons of unsound mind, and 3. Persons disqualified by any law to which they are subject.

1) MINOR According to Indian Majority Act,1875 a person who has not attained the age of 18 is a minor. In following two cases he attains majority after 21 years of age. I. Where a guardian of a minors person or property has been appointed under the Guardian and Wards Act, 1890, or II. Where the superintendence of a minor s property is assumed by a Court of Wards.

Law regarding minor s agreement:1) An agreement by or with a minor is void. Case:- Mohori Bibi vs. Dharmodas Ghose2) Minor is not bound to return the benefits received. 3) A minor cannot ratify his act. 4) Restitution of the property from a minor in case of fraud.

 5) Principle of estoppel is not applicable to minors. 6) A minor is liable for necessaries supplied. 7) Service rendered to a minor. 8) Minor as promisee or beneficiary. 9) Minor as agent. 10) Minor as partner. 11) minor as insolvent

 2) PERSONS OF UNSOUND MIND: According to sec.12, a person is said to be unsound mind if he is suffering from permanent or temporary mental derangement. A) Idiots- a person who has completely lost his powers & who is incapable of forming a rational judgement.

 (b) Lunatics a person whose mental powers are deranged due to some mental strain. He may suffer from intervals of sanity & insanity. (c) Drunken persons a person who is in a state of intoxication is capable of entering into contract. Any contract made during drunkenness is void.

 3) PERSONS DISQUALIFIED BY ANY LAW FROM CONTRACT: (a) Foreign sovereigns & ambassadors- they have got a peculiar privilege that they can enter into contracts & enforce them in courts. Case :- Mighell vs. Sulthan of Johore the sulthan of johore, living in England under the name of Albert Baker, had agreed to marry Mighell but he subsequently refused to marry her. She filed a case against him the court held that a foreign sovereign cannot be sued.

 (b) Alien Enemy Enemy alien is a citizen of a country which is in a state of conflict with the land in which he or she is located. Usually, but not always, the countries are in a state of declared war. (c) corporations a co. is an artificial person created by law. It is a legal existence. The powers of the corporations to contract are limited by its Memorandum of Associations. (d) Professionals in England, a barrister is incapable of entering into contract & is incapable of suing or being sued.

 (e) Convicts cannot enter into contract and cannot sue while they are undergoing arrests. (f) Insolvent or Bankrupts when a person has incurred debts more than his assets & he is not able to repay the debts he is adjudged insolvent by a competent court. (g) Women In India, a women has got every right to acquire properties & enter into a contract & her rights is guaranteed under the Indian Constitution.

Effects of Minors Agreement

Unenforceable agreements (void) No insolvency Minor s as shareholder Minor as agent Contract by parent or guardian

Effects of agreements made by persons of unsound mind