Page 39 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes jurisdiction of our courts. In fact they cannot be proceeded against in Indian courts without the
sanction of the Central Government.
A company incorporated under the Companies Act, 1956, or a statutory corporation brought
into existence by passing a Special Act of Parliament (corporate status). A company cannot
go beyond its objects mentioned in its memorandum of association. The company’s activities
are confi ned strictly to the objects mentioned in its memorandum, and if they go beyond these
objects, then such activities are ultra vires and void, and cannot be ratified even by the assent

of the whole body of shareholders. Also, a statutory corporation cannot go beyond the objects
mentioned in the Special Act of Parliament. Similarly, Municipal Corporations (local bodies) are
disqualified from entering into contracts which are not within their statutory powers.

Insolvent persons (legal status). A person adjudicated as insolvent is incompetent to contract

until he obtains a certificate of discharge from the court.
3.2 Summary

Any one cannot enter into a contract; he must be competent to contract according to the
law. Every person is competent to contract if he (i) is of the age of majority, (ii) is of sound
mind, and (iii) is not disqualified from contracting by any law to which he is subject (s.11).

Thus, there may be a flaw in the capacity of parties to the contract. The flaw in capacity may

be due to minority, lunacy, idiocy, drunkenness, drug addiction or status. If a party to a
contract suffers from any of these flaws the contract may not be a valid one. If the contract

would have been allowed to be a valid one then it would result in one party being at a
disadvantage in the bargaining process.
The goods are ‘necessaries’, for that particular minor having regard to his conditions in life
(or status or standard of living) and that purchase or hire of a car may be ‘necessary’ for a
particular minor. The minor needs the goods both at the time of sale and delivery. What
is necessary to see is the minor’s actual requirements at the time of sale and at the time of
delivery, where these are different.

A minor’s agreement cannot he ratified by the minor on his attaining majority as the
agreement is void ab initio.
If a minor has received any benefit under a void contract, he cannot be asked to refund the

same (see Mohisi Bibi’s case given above).
A minor is always allowed to plead minority, and is not estopped to do so even where he
had procured a loan or entered into some other contract by falsely representing that he was
of full age.

A minor cannot be a partner in a partnership firm. However, a minor may, with the consent
of all the partners for the time being, he admitted to the benefits of partnership (section 36

of the Indian Partnership Act, 1932).
A person who is drunk, intoxicated or delirious from fever so as to be incapable of
understanding the nature and effect of an agreement or form a rational judgement as
to its effect on his interests cannot enter into valid contracts whilst such drunkenness or
delirium lasts. Thus, an intoxicated person may get out of a contract provided he did not
have mental capacity to understand what he was doing and to appreciate its effects on his
interests at the time when he made the contract.

Foreign sovereigns and accredited representatives of a foreign state or Ambassadors
can enter into contracts and enforce those contracts in our courts. However, they enjoy
some special privileges. They cannot be sued in our courts unless they choose to submit
themselves to the jurisdiction of our courts. In fact they cannot be proceeded against in
Indian courts without the sanction of the Central Government.

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