Page 26 - DMGT407Corporate and Business Laws

Unit 1: Laws of the Contract

from the minor’s estate, the following must be satisfied: (i) The goods are ‘necessaries’, for that Notes
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.
A minor’s estate is liable not only for the necessary goods but also for the necessary services
rendered to him. The lending of money to a minor for the purpose of defending a suit on behalf
of a minor in which his property is in jeopardy, or for defending him in prosecution, or for
saving his property from sale in execution of a decree is deemed to be a service rendered to the
minor. Other examples of necessary services rendered to a minor are: provision of education,
medical and legal advice, provision of a house on rent to a minor for the purpose of living and
continuing his studies.
A minor’s parents/guardians are not liable to his creditors for the breach of a contract by him
whether the contract is for necessaries of life or not. However, the parents would be liable where
the minor is acting as their agent.

1.8.3 Mental Incompetence Prohibits a Valid Contract

A person who is not of sound mind may not enter into a contract; he must be of sound mind so
as to be competent to contract. A test of soundness of mind has been laid down by law. A person
is said to be of unsound mind for the purpose of making a contract if at the time he makes it he
is incapable of understanding it and of forming a rational judgement as to its effect upon his
interests. A person who is usually of unsound mind but occasionally of sound mind may make
a contract when he is of sound mind (s.12).

1.8.4 Alien Enemy (Political Status)

An alien is a person who is a citizen of a foreign country. Thus, in the Indian context, an alien is
a person who is not a citizen of India. An alien may be (i) an alien friend or (ii) an alien enemy.
An alien friend whose country is at peace with the Republic of India, has usually the full contractual
capacity of a natural born subject. In case of contracts with an alien enemy (i.e., an alien whose
country is at war with India) the position may be studied under two heads; (a) contracts during
the war; and (b) contracts made before the war. During the subsistence of the war an alien can
neither contract with an Indian subject nor can he sue in an Indian court except by licence from
the Central Government. As regards contracts which are against the public policy or are such
which would benefit the enemy stand dissolved. Other contracts (i.e. not against public policy)
are merely suspended for the duration of the war, and are revived after the war is over provided
they have not already become time-barred under the law of limitation. Further an Indian, who
resides voluntarily or who is carrying on business in a hostile territory, would be treated as an
alien enemy.
However, an alien friend, whose country is at peace with the Republic of India, has usually, the
full contractual capacity of a natural born Indian subject. But he cannot acquire property on any
Indian Ship, and also cannot be employed a Master or any other Chief Officer of such a ship.

1.8.5 Foreign Sovereigns and Ambassadors (Political Status)

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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