Capacity of contract

• Capacity refers to the competence of the parties to enter into a valid contract
• According to Section 11 of the Indian Contract Act 1872, every person is competent to contract if they are of the age of majority, of sound mind, and not disqualified by any law from contracting
• Minors, individuals under 18 years old, are protected by the law to prevent them from entering into contracts that do not benefit them
• An agreement with and by a minor is void (Void ab initio) - Case: Mohiri Bibi v. Dharmodas Ghose
• No estoppel (prevention of claim by law) against a minor as they can always plead minority
• While minors cannot be held contractually liable, they can still be held liable for torts (civil wrongs) under certain circumstances
• A minor's agreement cannot be ratified by them upon attaining the age of majority - Case: Indran Ramaswamy v. Anthiappa Chettiar
• A minor's property is liable for necessaries supplied to them, but they are not personally liable
• Contracts for Necessaries: A minor is liable to pay out of their property for necessaries supplied to them
• Minors cannot enter into a contract of partnership but can receive benefits with the consent of all partners
• Minors cannot be declared as insolvent
• Persons of Unsound mind are those who lack the capacity to understand the contract and form rational judgment
• Persons disqualified by law from entering into a contract include alien enemies, foreign diplomatic staff, insolvents, convicts, and corporations
• In real estate investment, a minor or their guardian may face hurdles such as:

  • As per the Income Tax Act, a minor cannot hold more than two properties
  • Income from gifted properties cannot be taxed in the hands of a minor
  • If a minor wants to buy a property, it can be allowed only if the funds belong to the minor
• Managing the legal complexities of property ownership involving minors requires a good understanding of applicable laws and regulations
• Engaging legal professionals knowledgeable about property laws and guardianship matters is crucial to ensure compliance and protect the minor’s interests
• Under the Indian Contract Act, 1872, a minor is considered to lack the capacity to contract
• Contracts entered into by minors in India are voidable at the option of the minor
• A contract with a person of unsound mind is voidable at the option of the unsound person
• For contracts made by persons of unsound mind to be valid, consent of the guardian is necessary
• A contract with a corporation is voidable if it exceeds the corporation's objects as stated in its memorandum of association
• True: A minor can enter into a contract for necessities and be bound by it
• True: A contract with a minor is voidable at the option of the minor
• True: A person declared insolvent can enter into contracts only through their legal representatives
• The authority to contract on behalf of a corporation under the Indian Contract Act, 1872 lies with the board of directors of the corporation
• True: A contract with a minor is void ab initio
• In the case of Tom, a 17-year-old high school student, the contract for the purchase of a laptop computer may be considered valid under the necessaries doctrine
• In the case of Sarah, a 19-year-old college student, she likely possesses the necessary contractual capacity to be bound by the lease agreement for an apartment
• In the case of David, who suffers from a severe mental illness affecting his ability to make rational decisions, he likely lacks the necessary contractual capacity to be bound by the contract to purchase a luxury car
• Capacity to contract- a person's ability to enter a contract.

  as per section 11, "every person is competent to contract who is of age of majority according to law to which they are subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject"
• Capacity refers to the competence of the parties to enter into a valid contract
• According to Section 11 of the Indian Contract Act 1872, every person is competent to contract if they are of the age of majority, of sound mind, and not disqualified by any law from contracting
• Minors, individuals under 18 years old, are protected by the law to prevent them from entering into contracts that do not benefit them
• An agreement with and by a minor is void (Void ab initio), and there is no estoppel against a minor as they can always plead minority
• While minors cannot be held contractually liable, they can still be held liable for torts (civil wrongs) under certain circumstances
• A minor's agreement cannot be ratified by them upon attaining the age of majority
• A minor is liable to pay for necessaries supplied to them out of their property, but they are not personally liable
• A minor cannot enter into a contract of partnership but can receive benefits with the consent of all partners
• A minor cannot be declared as an insolvent
• Persons of unsound mind are those who lack the capacity to understand the contract and form rational judgment