Indian Contract Act 1872 Competency Of The Parties to contract

1. BUSINESS
LAW

3. Presented By:-Presented By:-
Sumit ChatterjeeSumit Chatterjee
Sneha ChouhanSneha Chouhan
Pranjali DangatPranjali Dangat
Sunny D’souzaSunny D’souza
Triveni RaoTriveni Rao

4. IntroductionIntroduction
Indian Contract Act 1872Indian Contract Act 1872 is the main source of law is the main source of law
regulating regulating contractscontracts in in Indian lawIndian law, as subsequently , as subsequently
amended.amended.
It determines the circumstances in which promise made It determines the circumstances in which promise made
by the parties to a contract shall be legally binding on by the parties to a contract shall be legally binding on
them. All of us enter into a number of contracts them. All of us enter into a number of contracts
everyday knowingly or unknowingly. Each contract everyday knowingly or unknowingly. Each contract
creates some right and duties upon the contracting creates some right and duties upon the contracting
parties. Indian contract deals with the enforcement of parties. Indian contract deals with the enforcement of
these rights and duties upon the parties.these rights and duties upon the parties.
The Indian Contract Act 1872 sections 1-75 came into The Indian Contract Act 1872 sections 1-75 came into
force on 1 September force on 1 September 18721872. It applies to the whole of . It applies to the whole of
India except the state of Jammu and Kashmir.India except the state of Jammu and Kashmir.

5. Section 10 of the Contract Act requires that the parties Section 10 of the Contract Act requires that the parties
must be competent to contract.must be competent to contract.
Section 11 of the Indian contract act states that every Section 11 of the Indian contract act states that every
person is competent to contract, who is:-person is competent to contract, who is:-
Competency of
the parties
competent to
the contract .
the age of majority,
who is of sound mind and
who is not disqualified from contracting by law.

6. MINORITY
Idiot
UNSOUND MIND
lunatic
DISQULIFIED
BY LAW
INCAPACITY
:
DRUNKED
ALIEN ENEMY CONVICTS
CORPORATION

7. Following persons are incapable Following persons are incapable
of competing to a contract:-of competing to a contract:-
A minor ,A minor ,
person of unsound mind and person of unsound mind and
person Disqualified by law cannot enter into person Disqualified by law cannot enter into
contract Any contract with any such party will contract Any contract with any such party will
be void Ab intio.be void Ab intio.

8. 1. MINORS1. MINORS

9. 1. MINORS1. MINORS
A person who has not completed 18 A person who has not completed 18
years of age is called as minor. years of age is called as minor.
In case a guardian to the person or In case a guardian to the person or
property of the minor is appointed property of the minor is appointed
by the court or the or the property of by the court or the or the property of
the minor is put under the charge of the minor is put under the charge of
a court of wards, during the period a court of wards, during the period
of his minority.of his minority.

10. Agreement with minor is VOIDAgreement with minor is VOID
decided case illustration decided case illustration
In Mohiri Bibis case ,the minor had executed a mortgage In Mohiri Bibis case ,the minor had executed a mortgage
for the sum of Rs.20,000 out of which the lender had for the sum of Rs.20,000 out of which the lender had
paid the minor only about 8,000. The mortage filed a paid the minor only about 8,000. The mortage filed a
suit for the recovery of his mortgage money and for sale suit for the recovery of his mortgage money and for sale
of recovery of his mortgage money and for sale of the of recovery of his mortgage money and for sale of the
property in case of default .The privy council held that property in case of default .The privy council held that
an agreement by a minor was absolutely void as against an agreement by a minor was absolutely void as against
him and therefore the mortage could not recover him and therefore the mortage could not recover
mortage money nor could he have the minors property mortage money nor could he have the minors property
sold under his mortgagesold under his mortgage

11. 2. Person of 2. Person of
Unsound MindUnsound Mind

12. Person of Unsound MindPerson of Unsound Mind
A person is said to be of sound mind for the A person is said to be of sound mind for the
purpose of making a contractpurpose of making a contract
if at the time when he makes it,if at the time when he makes it,
he is capable of understanding it and of he is capable of understanding it and of
forming a rational judgment as to its effect forming a rational judgment as to its effect
upon his interests.upon his interests. A person who is usually A person who is usually
of sound mind, but occasionally of unsound of sound mind, but occasionally of unsound
mind, may not make a contract when he is mind, may not make a contract when he is
of unsound mind.of unsound mind.
The idiot, lunatic and drunkards are the The idiot, lunatic and drunkards are the
person of unsound mind.person of unsound mind.

13. Meaning of idiot, lunatic and Meaning of idiot, lunatic and
drunkards and drunkardsdrunkards and drunkards
Idiot:Idiot:
A person who is devoid of any faculties of thinking or rational A person who is devoid of any faculties of thinking or rational
judgment is called an idiot . .all agreements other than those for judgment is called an idiot . .all agreements other than those for
necessaries of life, with idiots are absolutely void.necessaries of life, with idiots are absolutely void.
 Lunatics:Lunatics:
A person whose mental powers are deranged is called a lunatic. A person whose mental powers are deranged is called a lunatic.
agreement made with lunatic ,except those made during lucid agreement made with lunatic ,except those made during lucid
intervals (period in which he is in his senses ) intervals (period in which he is in his senses )
For necessaries supplied to lunatic are valid. and the property of For necessaries supplied to lunatic are valid. and the property of
lunatic can be taken.lunatic can be taken.
DrunkardsDrunkards: A person under the influence of drink or drugs stands on : A person under the influence of drink or drugs stands on
the same footing as lunatic. an agreement with drunker is void.the same footing as lunatic. an agreement with drunker is void.

14. (a) A patient in a lunatic asylum, (a) A patient in a lunatic asylum,
who is at intervals of sound mind, who is at intervals of sound mind,
may contract during those intervals.may contract during those intervals.
(b) A sane man, who is delirious (b) A sane man, who is delirious
from fever or who is so drunk that from fever or who is so drunk that
he cannot understand the terms of a he cannot understand the terms of a
contract or form a rational judgment contract or form a rational judgment
as to its effect on his interests, as to its effect on his interests,
cannot contract whilst such delirium cannot contract whilst such delirium
or drunkenness lastsor drunkenness lasts..
illustrationsillustrations

15. 3. Disqualified by law to 3. Disqualified by law to
enter in contractenter in contract

16. Following are the people Following are the people
disqualified by lawdisqualified by law
Alien enemyAlien enemy: A person who is not a citizen of : A person who is not a citizen of
India is called an alien.India is called an alien.
ConvictsConvicts: convict is incapable of entering into : convict is incapable of entering into
contract .and the incapability ends when contract .and the incapability ends when
sentence expires or punishment finish.sentence expires or punishment finish.
CorporationCorporation: A company is artificial person : A company is artificial person
created by law. it can only contract through its created by law. it can only contract through its
board of directors.board of directors.

17. Section 11 of The Indian Contract Act specifies that
every person is competent to contract provided:
 He should not be a minor i.e. an individual who has not attained the age of
majority i.e. 18 years.
 He should be of sound mind while making a contract. A person with unsound
mind cannot make a contract.
 He is not a person who has been personally disqualified by law.