Capacity to contract is one of the most important aspects of a valid contract. Everyone who enters into a contract must be competent. Age of majority, sound mind are the main elements for a valid contract. Section 11 of the Indian contract act deals with the capacity to contract.
for a valid contract, the parties to the contract must be competent to contract.
Capacity to contract under Indian contract act
Main Aspects for a valid contract
- Age of Majority
- Sound Mind
- Contract by disqualified persons
Age of Majority
Capacity To Contract – According to The Indian Majority Act, 1875 age of majority is 18 years of age and not before it. Any person who is Indian domiciled and not completed 18 years of age is termed as “minor”. Therefore a valid contract must attain the age of majority. Here one question arises if any minor came into the contract then what will be the status of that contract.
The answer to that question is the contract which is made with the minor is void but the agreement made with a minor is void ab-initio.
Minor can be beneficiary
As the minor is not competent to contract but he/can be the beneficiary of a contract. According to section 30 of the Indian Partnership act 1932, The minor can not become the partner in the partnership firm but he can be the beneficiary of the firm with the consent of all partners.
Capacity to contract under Indian contract act – Contract by guardian
Contract by a guardian on behalf of the minor is a valid contract under some circumstances. The contract made by the guardian on behalf of the minor must be for the benefit of the minor and the valid contract which can also be enforced by the minor.
Capacity To Contract – A person who is unsound mind is incapable of entering into a contract. According to section 12 Indian contract act, a person who is entering into a contract must be a sound mind at the time he makes it. He/she must be capable to understand it and able to make rational decisions about how it will affect his interests.
Where a person is generally sound mind, the burden is on him, who challenges the validity of the contract to prove that he was of unsound mind at the time of execution of the document. A person who is an unsound mind but sometimes of a sound, He can make a contract when is of sound mind.
Contract by Disqualified Persons
Capacity To Contract – Some persons are disqualified by law for entering into a contract so the contract made by the disqualified persons is void. The purpose of this disqualification is the interest of the nation and the general public at large.
e.g – Alien enemy, convicts, insolvents, etc are some examples of disqualified persons.