Capacity to Contract

Category: Bank
Posted on: Monday, September 18, 2017


Who can make a valid contract? Discuss the validity of agreements made by a minor.
Ans.: According to Section 11, “Every person is competent to contract who is of the age of majority according to law to which he is subject and who is of sound mind and is not disqualified from contracting by any law to which he is subject.” Hence, the following persons can make valid contract :

 (i) Who is major

(ii) Who is of sound mind or sane

(iii) Who is not disqualified from contracting by any law of the land to which he is subject.

 Validity of Agreement made by a Minor :

 (i) Agreements with or by a minor is absolutely void. Ruling was given in Mohri Bibee vs. Dharmodas Ghose.

(ii) No ratification of minor’s contract.

(iii) A minor can be a promisee or beneficiary.

(iv) Restitution/compensation is possible in case of minor under (section 33, specific Relief Act, 1963).

(v) The rule of estoppel does not apply for minor, he can plead his minority.

(vi) No specific performance is possible in case of minor because contract made by him is void {(Mirsarawarjan vs. Fakhruddin 1912) 3 Col. 232)}

(vii) Contract by parents/guardian/manager may be made on behalf of theminor, provided they had authority and benefit to minor

(viii) Minor may be given share in existing partnership business by theconsensus of the partners.

(ix) Minor may be appointed as Agent but principal will be personally liable for his acts.

(x) Acts done by minor is parents will not be liable.

(xi) Guarantee for and by the minor is valid.

(xii) Insolvency Act does not apply on minor; hence, minor cannot be adjudicated insolvent.

(xiii) Minor may be joint promisor under Law of contract.

(xiv) Minor cannot apply for allotment of shares in company, but he can apply for fully paid up share on behalf of his guardian.

(xv) Minor is allowed to make, draw and endorse negotiable instrument but he is not liable for dishonour.

(xvi) Minor cannot enter into service agreement but he can be beneficiary if he has performed his promise.

(xvii) Minor can enter into the contract of Apprenticeship at the age of 14 years if he is physically fit.

(xviii) Minor can become trade union member if he has attained the age of 15 years.

(xix) Marriage contract of minor on behalf of parents is allowed on the ground of the customs of the  community.

(xx) Minor is held responsible for torts or civil wrong committed by him

(xxi) Liability of necessaries of life supplied to him or his legal dependents. His property is liable; he is personally not liable.