Page 40 - DCOM103_COMMERCIAL_LAW

Unit 3: Capacity to Contract

3.3 Keywords Notes

Agreements: The meaning of which is not certain or capable of being made certain, are void.

Alien: It is a person who is a citizen of a foreign country.
Idiot: It is a person who is of permanently unsound mind.
Lunatic: It is a person who is mentally deranged due to some mental strain or other personal
experience.
Restrictive trade agreements: Trade combinations and restrictive trade practices are not treated
as void simply because they restrain some party or the other from freedom of occupation.
Service agreements: An agreement of service by which a person binds himself during the term
of the agreement not to take service with anyone else or directly or indirectly take part in or
promote or aid any business in direct competition with that of his employer is valid.

3.4 Self Assessment

Fill in the blanks:
1. A ............................. cannot be a partner in a partnership fi rm.
2. ............................. provides that a minor’s estate is liable to a person who supplies necessaries
of life to a minor, or to one whom the minor is legally bound to support, according to his
station in life, not on the basis of any contract, but on the basis of an obligation resembling
a contract.

3. A minor’s estate is ............................. not only for the necessary goods but also for the
necessary services rendered to him.
4. A person adjudicated as ............................. is incompetent to contract until he obtains a
certificate of discharge from the court.

5. An ............................. made without consideration is valid if it is expressed in writing and is
registered under the law relating to registration of documents and is made an account of
natural love and affection between parties standing in a near relation to each other.

3.5 Review Questions

1. Who is competent to contract?
2. What determines enough maturity to make a contract?
3. Can anyone enter into a contract?

4. When does mental incompetence prohibit a valid contract? Is minor competent to
contract?
5. “A minor’s estate is liable for necessaries of life supplied”. Comment.
6. For a loan of ` 15,000 to be received in three annual instalments, A (the borrower) executed
a simple mortgage of his property in favour of B (the lender) – the borrower receiving

` 5,000 towards the first instalment, at the time of executing the mortgage deed. Examine
B’s rights on the mortgage deed, and respecting the money paid over to A: (i) If B did
not know that A was a minor. (ii) If B knew that A was a minor. (iii) If A fraudulently
misrepresented his age. (iv) If the moneys paid to A were required for advanced studies
abroad.

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