Legal Framework: Section 11 of the Indian Contract Act, 1872
Introduction
In order to enter into a valid contract, it is essential that the parties involved have the legal capacity to do so. Capacity to contract refers to the competence of parties to enter into a binding agreement. A contract with a person not competent to contract is void ab initio (from the beginning).
Who is Competent to Contract?
According to Section 11 of the Indian Contract Act, the following persons are competent to contract:
- A person who is of the age of majority
- A person of sound mind
- A person who is not disqualified from contracting by any law
Let’s explore these three criteria in detail:
1. Age of Majority
- A person must have attained the age of 18 years.
- If a guardian is appointed or the property is under court supervision, majority is attained at 21 years.
- A minor (under 18 years) cannot enter into a valid contract.
Legal Position of Minor’s Agreement:
- An agreement with a minor is void ab initio (as held in Mohori Bibee v. Dharmodas Ghose, (1903) 30 Cal 539).
- A minor cannot ratify the contract upon attaining majority.
- However, a minor can be a beneficiary in a contract.
2. Sound Mind
As per Section 12, a person is of sound mind if:
- He is capable of understanding the contract
- He can form a rational judgment as to its effects on his interests
Persons considered of unsound mind:
- Lunatics
- Idiots
- Drunken or intoxicated persons at the time of the contract
Such contracts are void if made during the period of unsoundness.
3. Disqualified Persons
Some individuals are disqualified from contracting under specific laws, including:
- Alien enemies
- Foreign sovereigns and diplomats
- Insolvents
- Convicts (during their imprisonment)
Contracts with such persons are either void or subject to special conditions.
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Legal Consequences
- Void agreements: Contracts with incompetent persons are void.
- Restitution: If any benefit is obtained by a minor, courts may order restitution (return of property or compensation), provided the minor still possesses the benefit.
- Estoppel: A minor is not estopped from pleading minority.
Important Case Laws
- Mohori Bibee v. Dharmodas Ghose, (1903) 30 Cal 539 – Minor’s contract is void ab initio
- Nash v. Inman, [1908] 2 KB 1 – Minor is liable for necessaries
- Indian Contract Act, 1872, Sections 11 and 12 – Competency and sound mind
Mind Map
Capacity to Contract
→ Section 11 – Who is competent
→ Majority – Above 18 years (21 in some cases)
→ Sound Mind – Understand & judge contract
→ Not Disqualified – Alien enemy, foreign diplomats, convicts, insolvents
→ Section 12 – Soundness criteria
→ Understands & rationally judges
→ Lunatic/intoxicated – Unsound at time = void
→ Legal consequences
→ Minor: Contract void ab initio
→ No ratification on majority
→ Estoppel does not apply
→ Can be a beneficiary
→ Key Case: Mohori Bibee v. Dharmodas Ghose
Situation-Based Questions
Q1. Can a minor enter into a contract for a scholarship?
Yes. A minor can enter into a contract as a beneficiary. Such contracts are valid.
Q2. A minor buys a car and refuses to pay. Can the seller sue?
No. The contract is void. However, if the car is still with the minor, the seller may seek restitution.
Q3. A drunken person signs an agreement. Is it valid?
If the person was so intoxicated that he couldn’t understand the nature of the contract, it is void.
FAQs
Q. Is a contract with a minor always void?
Yes, it is void ab initio and cannot be enforced by law.
Q. Can a minor be sued for breach of contract?
No. Since the agreement is void, there is no legal remedy against a minor.
Q. Are contracts for necessaries valid with minors?
Minors are not personally liable, but the supplier can be reimbursed from the minor’s property.
