useful for Law & MBA students

1. Presented by:
Prasad Kulkarni
Edu.prasad.kulkarni@gmail.com
Under the guidance of:
Prof. R. R. Ramtirthkar

2.  What is contract ?
 What is capacity ?
 Competency to contract
 Incompetent to contract
◦ Minor
 Contract with minors: When can a minor contract?
◦ Persons of unsound mind
◦ Disqualified by law:
 Alien enemies
 Corporation
 Insolvents
 Convicts

3.  Ability: the quality or state of being able ;
Power to perform
 Capacity: The capacity of
both natural and legal persons determines
whether they may make binding amendments
to their rights, duties andobligations, such as
getting married or merging, entering
into contracts, making gifts, or writing a
valid will. Capacity is an aspect ofstatus and
both are defined by a person's personal law:

4.  A contract is an agreement which is
enforceable by law.
 Capacity means competence of the parties to
enter into contract.
 An agreement becomes a contract if it is
entered into between the parties who are
competent to contract.

5. Every person is competent to contract
 Who is of the age of majority according to the law
to which he is subject;
 Who is of sound mind;
 who is not disqualified from contracting by any law
to which he is subject.

6.  A minor domiciled in India is one who has
completed his 18 years of age.
 But in cases where a guardian of the minor’s
property 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 21 years.

7.  Minor’s contract is absolutely void.
 There can be no specific performance of such a
contract.
 Minor’s contract can’t be made valid by
subsequent ratification.
 A minor falsely representing his age as major
can’t be sued.
 An agreement by a guardian on behalf of minor
is valid.
 Minor can not be adjudged insolvent.
 Minor’s marriage contracted by the parents and
guardians is valid.

8.  A person is said to be of a sound mind for the
purpose making a contract if, at the time
when he makes it, he’s capable of
understanding it and of forming a rational
judgment as to its effect upon his interest.
 Soundness of mind depends on 2 facts:
1. His capacity to understand the contents of the
business concerned.
2. His ability to form rational judgment as to its effect
upon his interest.

9.  Lunatics
 Idiots
 Drunken or intoxicated person
 Mental handicap due to old age
Illustration:
• A patient in lunatic asylum
• A sane man who is delirious from fever

10.  Persons of unsound mind are liable for
necessities supplied to them or to anyone
whom they are legally bound to support.
 No personal liability attaches to them. It is
only their estate which is liable.

11.  Alien enemies
 Corporations
 Insolvents
 Convicts

12.  When a debtor is adjudged insolvent, his
property vests in the Official Receiver or
Official Assignee.
 Only Official Receiver or Official Assignee can
enter into contracts relating to his property,
and sue and be sued on his behalf.
 Insolvent also suffers From certain
disqualifications which are removed when the
court passes order of discharge.

13.  A convict when undergoing imprisonment is
incapable of entering into a contract.
 This incapacity to contract comes to an end
when the period of sentence expires or to
when he is pardoned.
 Convict can enter into a contract if he is
lawfully at large under a license called “ticket
of leave”.

14.  He can be a promisee or transferee.
 He can act as an agent, but is not liable to the
principal for his act.
 He may be admitted to the benefits of
partnership with the consent of the other
partners.
 The person who supplied necessaries to the
minor’s dependents whom minor is bound to
support, is entitled to be reimbursed from the
properties of such minor.