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Unit 3: Capacity to Contract

signified either in writing or by words of mouth or by performance of some required act of the Notes
offeree. This unit provides you a brief description of capacity to contract.

3.1 Capacity to Contract (Ss. 10-12)

3.1.1 Persons who are Competent to Contract

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.
3.1.2 Capacity of a Minor to enter into a Contract

Age of a person determines enough maturity to make a contract. The contract law defi nes
maturity as the age of majority. That usually is 18 years. Does this mean that a minor is not
competent to contract? No, a minor may make a contract, but he is not bound by the contract;
however the minor can make the other party bound by the contract. Thus, a minor is not bound
on a mortgage or a promissory note, but he can be a mortgagee, a payee, or an endorsee. He can

derive benefit under the contract. However, an agreement with a minor cannot be ratified by him

on his attaining majority so as to make himself bound by the same. Further, if he has received

any benefit under the contract, the minor cannot be asked to refund the same. In fact he is always
allowed to plead minority and is not stopped 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. It is to be noted
that if money lent to him or an item sold to him could be traced then the court may, on equitable
grounds, ask the minor to return the same to the lender or the seller, as the case may be as a minor
does not have the liberty to cheat. In the case of a fraudulent misrepresentation of his age by the
minor, inducing the other party to enter into a contract, the court may award compensation to the
other party under Ss.30 and 33 of the Specific Relief Act, 1963.

Further, a minor cannot be a partner in a partnership firm. However, he may with the consent

of all the partners for the time being, be admitted to the benefits of partnership (s.36, the Indian
Partnership Act, 1932). Also, a minor can act as an agent and bind his principal by his acts without
incurring any personal liability.
Section 68 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. However, there is
no personal liability of a minor for the necessaries of life supplied. The definition of a “necessary

of life” depends entirely on the person and the situation. It probably will always include food
and probably will never include a car. In order to entitle the supplier to be reimbursed from the
minor’s estate, the following must be satisfi ed:
(i) 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;
(ii) 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.

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