In the ongoing phase of development and modernisation, people are more aware
of their surroundings. They are particularly, in know, of the products and
services that could help in their everyday life or in many occassions products
and services are acquired simply because that their colleagues or acquaintances
have acquired them.
To acquire these products or Services, the companies (Sellers) formulate a
contract between the Seller and the Buyer, which binds both the parties to
perform their part of the promise. On the same side of the discussion of a
contract, comes the issue of parties who are contracting. Since, a contract is
enforced by the power of law.
It is the law that specifies the qualifications required for the parties to
contract. Every party to a contract must keep in consideration these legal
requirements, if they desire enforceability, otherwise, there will be no
contract but a mere agreement. This raises the fundamental question, which this
article attempts to answer as to Who is competent to enter into a Contract?
Competency for Contract
The question of competency of parties is essential in the way that it assumes
certain people to be incapable to fulfil their part of consideration to form a
contract, and hence they are declared 'incompetent' to enter into a contract, by
the law. Since, people desire to enter into a contract, to bind one another to
fulfil their respective promises and to secure legal enforceability, law ensures
the same and thus, lays down certain criteria according to which, people are
considered to be able to complete the contract and hence, are competent parties
to the contract.
The consideration of competency of parties is essential in the way that it very
much ensures that the people participating in a contract are sound/sane and
capable to form a contract and subsequently fulfil their promises as well. Thus,
its importance arises from the fact that people come into a contract, to secure
their position by making other party act in accordance of the agreement entered
into, and to get legal enforceability.
For this, law requires the parties intending to form a contract, to make certain
that each of them is in a position where they are fully prudent to understand
the terms of the contract and satisfy their respective promises and
Factors Deciding Qualifications And Competency Of Parties:
Section 11 of the Indian Contract Act, 1872 details as to which parties are
competent to contract- a person who has attained majority, who is of sound mind
and lastly, is not disqualified by the law to enter into a contract. The
subsequent sections of the act details about each of these requirements as
mentioned by the law.
The Details Of Each Of These Is As Under:
- Minor's Agreement
As per the Indian Majority Act, a minor is someone who is below the age of
eighteen. Hence, the law makes a person of the majority age, i.e. age above
eighteen to be qualified to enter into a contract. However, earlier the case
was that if there is an appointed guardian, majority age was fixed at twenty
one years, which eventually changed through an amendment, and majority age
was fixed at eighteen years.
The Indian Contract Act declares all agreements
of minor to be void-ab-initio, i.e. void from the beginning, as it assumes
people below the majority age to be less capable of fully understanding the
terms and conditions of the contract. It is to be noted that a person cannot
enforce the contract that was entered during his minority, when he attains
the age of majority, since the agreement entered earlier was itself void
from the very initial. Also, a minor's agreement cannot be ratified later,
as an agreement which is void is not capable of ratification at a later
point, as there is no contract formed in the first place.
There are several cases decided, which furthers this principle of law. The
first case where the Privy Council decided upon this principle was, Mohori
Bibee VS Dhramodas Ghose, wherein a minor, for the reasons of securing a
loan amount, mortgaged his property in favor of the moneylender. The court
held the entire transaction to be void, as it was entered with a minor.
There was no relief provided to the moneylender as it would mean enforcing
the agreement not recognized by the law. Nevertheless, there is an exception
to this general rule, which points out that if in an agreement entered into
with a minor, he completed his part of the promise, law can enforce the
other party to abide by the contract as well. Another interesting case law
named Raj Rani VS Prem Adib, involves a promise on the part of a minor girl
with a film producer to act in a film.
There was another agreement that was
entered with the minor's father as an assurance to the first agreement. The
court held the first agreement to be evidently void, as it was entered with
a minor. However, the second agreement was also declared void as the
father's consideration for the daughter to act, is in itself something not
recognized by the law, hence it is a situation of no flow of consideration
from one side of the party.
A contract entered into by the minor's guardian is a valid one, if it
satisfies the following two conditions:
In any agreement, it may be observed that the law weighs lighter for a minor as
certain principles like estoppel, do not apply on a minor. The minor can refute
his earlier claim of being a major in the court.
- Guardian is a competent party
- Contract entered into, is for the minor's advantage or for their legal
Also, law allows minor to enter into agreements which benefit them with certain
basic necessities of life, and the person helping the minor with such goods can
claim their return from the minor's property, but not in any monetary form.
- Unsoundness Of Mind
Law restricts people who are not of sane mind or are lunatics to enter into a
contract and declares it void. A person with an unsound mind is not capable to
fully understand the agreement in its true sense and thus there will be no
meeting of minds when one person is unaware of what the contract entails with
itself. Lunatics are people who are generally of sound mind but occasionally of
The duration in which they are of unsound mind, they are
restricted to enter into a contract because of their mental conditions, which
limits their understanding ability. It is on the person who is of unsound mind
to prove that he was not capable of understanding the agreement. This was
established as per the case of Sudama vs. Rakshpal Singh.
- Disqualification by law
There are some classified group of people who are considered to be
disqualified by the law to enter into contracts. These include alien
enemies, convicts, persons against whom insolvency proceedings are filed and
some foreign diplomats. These includes:
- Alien enemies include citizens of the country, India is at a war with. No
person is permitted by law to make agreements with an alien enemy, during
the subsistence of a war, which will be declared to be void.
- Convicts are prohibited to enter into any contract during the period of
their sentence. However, they may enter into an agreement once their
sentence is completed.
- Insolvent persons are not allowed by law to enter into contractual terms
as they do not have the assets to fulfil the terms of the contract. But a person
may enter into a contract if the insolvency proceedings against that person is
- Foreign sovereigns including diplomats are immune from any suit with
respect to contractual law, till they do not surrender themselves to the
Indian court's jurisdiction.
These are the major conditions as listed by the law, to minimise the cases of
breach of contracts and to make certain of the fact that the agreements entered
by the parties are properly honoured by them. This becomes an essential step to
establish contractual stability and worth of the terms of an agreement.
way, law makes certain of the fact that all the legal agreements to be
enforceable should pertain to some pre-decided norms, such that only competent
parties engage into meaningful agreements.