This article is written by Sharat Gopal, studying BA LLB in Delhi Metropolitan Education. The Indian Contract Act of 1872 is a codified law which deals with contracts. Before discussing who all can enter into a contract, it is important to discuss about contract law and its provisions.
Indian Contract Act, 1872
Section 2 of the Indian Contract Act, 1872, gives the definitions of certain terms, which are important for understanding the law of contracts.
- Section 2(a) – This clause explains what a proposal is. It states that, when one person expresses his willingness to do or abstain from doing something, to another person, with a view of getting assent from that person on the particular act or abstinence, this is known as making of a proposal.
- Section 2(b) – This clause explains what a promise is. It states that when the person to whom the proposal is made, accepts the proposal and gives his assent on the proposal, then that proposal becomes a promise.
- Section 2(c) – This clause states who is a “promisor” and who is a “promisee”. It states that the person who makes the proposal is the “promisor” and the person who accepts the proposal is the “promise”.
- Section 2(d) – This clause explains what consideration is. Consideration that the benefit that promisee gets for accepting the promise.
- Section 2(e) – This clause explains what an agreement is. It states that every promise and set of promises, with consideration for each, is an agreement.
- Section 2 (h) – This clause states what a contract is. It states that every agreement, which can be enforced by the law, becomes a contract.
These are the terms defined under section 2 of the Indian Contract Act, 1872.
How is contract made?
Now for a contract to come into existence, certain essentials must be fulfilled. These essentials are-
- Now the first and the foremost step to come into a contract is intention. Both the parties must have an intention to come into contact. It is the most important factor for the contract.
- The second essential is making an offer. One party must make a proposal to another party for doing an act or abstain from doing an act. The proposal has been defined above.
- The third step is acceptance of the proposal made by the promisor. Once the proposal is accepted by the promisee, the proposal becomes a promise.
- Now, this acceptance must be done within a specified time limit.
- This acceptance must be communicated to the promisor.
- Now, this promise must have a consideration with it. Now with consideration to the promise, the promise becomes an agreement.
- Now, this agreement must be enforceable by law. When this agreement becomes enforceable under law, it becomes a contract. There cannot be a contract formed for an unlawful event.
Parties who can enter into a contract
Section 11, of the Indian Contract Act 1872, explains who all can enter into a contract. It states that every person can enter into a contract that is-
- A person who is major by age according to the Indian Majority Act, which is 18 years of age.
- A person who is of sound mind.
- A person who is not disqualified by law for coming into contracts.
According to the Indian Contract Act, 1872, only the above-mentioned persons can enter into contracts.
Non-competent parties entering into contracts-
Contract with a minor (below 18 years of age) – Any agreement made with a minor will be void-ab-initio or void from the beginning itself. According to the Indian Contract Act, a minor cannot enter into contracts; therefore, any agreement made with a minor cannot be enforced with law.
Mohori Bibee v. Dharmodas Ghosh was a landmark case held in 1903 for the matter of child entering a contract. This case held that any agreement with a minor (below 18 years) will be void-ab-initio. Privy Council held that according to section 10, an agreement with a child cannot be enforced.
Consequence of coming into an agreement with a child
- Ratification – An agreement with a child (18 years of age) cannot be ratified even after the child becomes a major as the agreement made with a minor is void from the beginning itself.
- Estoppel- If a child (below 18 years of age) misrepresents his age and induces a person to enter into a contract, and then also the minor cannot be held liable for it. There cannot be estoppel against a minor.
- No performance- As contact with a minor is void, he cannot be asked to for specific performance.
If the contract is made for the benefit of the child, then such a contract is valid and enforceable under law. There also few essentials for this too-
- Doctrine of Restitution– Section 33 of the Special Relief Act of 1963, states that even the court cannot compel a minor to restore the property, until and unless the property is in recoverable position or the property is in the possession of the child.
- Necessary essentials – The person supplying basic necessities like food, water, shelter, clothes etc, to the child is entitled to get compensation out of the properties of the child. The provided essentials must items which are required for survival and it should only be provided when the child does not have sufficient supply of it.
- Minor as Partner– A minor cannot be made a partner in a partnership firm, but he can be made a beneficiary of the partnership firm. Section 30 the Indian Partnership Act of 1932, states this.
- Minor as an Agent– A minor can be an agent, but he won’t be liable for his acts.
In the case of Suraj Narain v. Sukhu Aheer it was held that a contract made with a child cannot be ratified and in the case of Kuwarlal v. Surajmal it was held that for the supply of necessities to a minor, the person is entitled to get his compensation from the minor’s property.
Person of Unsound Mind
Section 12 of the Indian Contract Act, states that a person is said to be of sound mind if, at the time of making the contract, he is capable of understanding the contract and able to give a rational judgement on its effects.
It also states that person can enter into a contract, if-
- The person is usually of unsound mind but occasionally become sound mind. In this case, he can enter into a contract during the time when he is of sound mind.
- The person is usually of sound mind but occasionally become unsound. In this case, he can enter into a contract during the time when he is of sound mind.
From the above explanations, the unsound mind can be classified into 3 types-
- Intoxicated person
Idiot– These are the people who are incompetent to their thinking capacity and cannot make rational judgements. They don’t have the capacity to understand what is right or wrong. They are not considered as a rational person. They cannot enter into contracts.
Lunatic– These are the people who are not completely or permanently unsound. They come to their senses during certain intervals of time. They are allowed to enter into contracts when they are in their senses and are capable of using their thinking capacity.
Intoxicated person– These are people who are under the influence of drugs and alcohol. They have the same status as a lunatic person. They can enter into contracts while they are not intoxicated and are capable of using their thinking capacity.
People Disqualified by Law
Section 11 of the Indian Contract Act, clearly mentions that a person who is disqualified by law cannot enter into a contract. The people disqualified by law can be classified under-
- Alien enemy
- Foreign sovereign
Alien Enemy– A person who is an outsider to our country and our country is at war with that person’s country, he is an alien enemy. A contract with such a person can only be made with the permission of the central government.
Foreign Sovereign – No person can enter into a contract with a foreign sovereign without the permission of the central government. Only after the permission of the central government, it becomes enforceable in Indian Courts.
Convicts– Convicts cannot enter into contracts with other people during his time of imprisonment. But if the central government allows, then he can enter into contracts.
Insolvent– A person who is declared insolvent by the court cannot enter into a contract.
There are certain essentials that are necessary for entering into a contract. There are certain people who cannot enter into a contract and if they form an agreement it won’t be enforceable under the law until and unless it falls into the exceptions discussed in the above article. For a lawful contract to come into existence, it is important that all the essentials of a valid contract are fulfilled.
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