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Unit 3: Capacity to Contract

z A minor cannot be a partner in a partnership firm. However, a minor may, with the consent Notes

of all the partners for the time being, he admitted to the benefits of partnership (section 36,
the Indian Partnership Act; 1932).
z 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.
z 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.
z Section 2 (d) defi nes consideration as: “When at the desire of the promisor, the promisee
or any other person has done or abstained from doing, or does or abstains from doing, or
promises to do or to abstain from doing, something, such act or abstinence or promise is
called a consideration for the promise”.

z A promise without consideration is valid if it is a promise to compensate wholly or in part
a person who has already voluntarily done something for the promisor or something the
promisor was legally compellable to do. Thus, where A finds B’s purse and gives it to him,

and B promises to give A ` 100, this a valid contract.
z A promise to pay wholly or in part a debt which is barred by the Limitation Act can be
enforced if it is in writing and is signed by the debtor or his authorised agent. A debt
barred by limitation cannot be recovered. Therefore, a promise to pay such a debt is, strictly
speaking, without any consideration. But if a written promise to pay is made by the debtor
then the same is enforceable by the creditor.
z Consideration must move at the desire of the promisor and therefore an act done by the
promise at the desire of a third party is not a consideration.
z The Act declares certain agreements to be void. Some of them (such as the following)
have already been explained: (i) agreements entered into through a mutual mistake of fact
between the parties (s. 20). (ii) agreements, the object or consideration of which is unlawful
(s. 23); (iii) agreements, part of consideration of which is unlawful (s. 24); (iv) agreements
made without consideration (s. 25).
z The seller of the goodwill of a business may agree with the buyer to refrain from carrying
on a similar business, within specified local limits, so long as the buyer or any one deriving

title to the goodwill from him carries on a like business, provided that such limits are
reasonable (s.27).

z Every person has a right to have recourse to the usual legal proceedings. Therefore, s.28
renders void an agreement by which a party is restricted absolutely from enforcing his legal
rights arising under a contract by the usual legal proceedings in the ordinary tribunals.

3.7 Keywords

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.

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