Competent to Contract

One of the essential elements of a valid contract is that the parties to the contract must be competent to contract.

An agreement becomes a contract if it is entered into between the parties who are competent to contract. Every person is competent to contract (1) who is of the age of majority according to the law to which he is subject; (2) who is of sound mind; and (3) who is not disqualified from contracting by any law to which he is subject.

Let us examine specifically who are competent to contract and who are not.

Contracts by Minor – Rules relating to a Minor’s contract

According to section 3 of the Indian Majority Act 1875 a minor domiciled in India is one who has to complete his eighteen years of age. But in cases where a guardian of the minor’s person or property (or both) is appointed or where a minor’s property is taken over by a Court of Wards, the minority continues up to the completion of his age of twenty one years. Age of majority is to be determined by the law to which the minor is subject. A minor is not competent to contract.

Minor’s contact is absolutely void: In Mohori Bibee v Dhurmodas Ghose (1903-30 Cal. 539) Privy Council had held that minor’s contract is void ab initio and not merely voidable. A minor’s agreement being absolutely void, neither he nor the other party acquires any right or incurs any liability under the agreement. So a minor is neither liable to perform that he has promised too under a agreement nor is he liable to repay money that he has received under it. The principle behind this ruling is, a minor is incapable of judging what is good for him. Even if a minor has received any benefit, he cannot be asked to compensate or pay for it. A minor is incapable of giving promise imposing a legal obligation upon himself.

In Mohori Bibee v Dhurmodas Ghose, a minor executed a mortgage for the sum of Rs 20,000 out of which he received Rs 8,000. Minor filed a suit subsequently for setting aside the mortgage. The money lender clamed refund of Rs 8,000 from the minor. It was held that minor’s contract is altogether void and the money lender therefore cannot recover the amount. A minor’s contract being absolutely void, he can neither sue nor be sued upon it.

Specific performance of a minor’s contract: As a minor’s contract is absolutely void, there can be no specific performance of such a contract Even a minor cannot enforce specific performance as there is no mutuality. However, when such a contract is entered into by a guardian on behalf of a minor, for minor’s benefit it can be specifically enforced by or against the minor.

Ratification of a minor’s contract: Ratification means consenting to a past contact entered into during minority at a future date on attaining majority. It relates back to the date of the making of the contract. Since a minor’s contract is void, there can be no question of ratifying it as the consideration given during the minority is held to be no consideration at all. It cannot be made valid by a subsequent ratification. A fresh contract can be entered into by a minor on attaining majority with a fresh consideration

False representation by a minor-Estoppel: A minor cannot be stopped by a false representation as there can be no estoppel against a statute. A minor who falsely represents him self to be a major and thereby induces another person to enter into a contract with him, can plead minority as a defense. The infant is not stopped from setting up infancy.

A minor cannot be sued on the ground that he falsely represented that he is of full age thereby induced other persons to enter into a contract because to allow an inured person to sue a minor person, would be giving him a indirect means of enforcing a void contract.

However, it has been held by Andhra Pradesh High Court that equity requires a minor who seeks to avoid a contract which he induced the opposite party to enter into with him by a fraudulent misrepresentation as to his age to return the considerations which he received under it and this equitable principle is also fond statutorily embodied in section 39 and 41 of the Specific Relief Act. Therefore, the Court should not grant the relief to the minor without at the same time imposing conditions that he should return what he received under the contract.

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