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Competency of Parties - Topic 5

The document discusses the competency of parties to enter into a contract. It outlines three requirements for competency: [1] being of the age of majority, [2] being of sound mind, and [3] not being disqualified from contracting by any law. It then discusses specifics regarding minors and agreements with minors, as well as agreements by persons of unsound mind. The document also covers burden of proof and disqualified persons.

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Abdullah Hanif
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193 views

Competency of Parties - Topic 5

The document discusses the competency of parties to enter into a contract. It outlines three requirements for competency: [1] being of the age of majority, [2] being of sound mind, and [3] not being disqualified from contracting by any law. It then discusses specifics regarding minors and agreements with minors, as well as agreements by persons of unsound mind. The document also covers burden of proof and disqualified persons.

Uploaded by

Abdullah Hanif
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Competency of Parties

Week 4
Business Law
CAPACITY OF PARTIES:
According to Section 11 of contract act 1872,

Every person is competent to contract:

 who is of the age of majority according to the law


to which he is subject, and
 who is of sound mind, and
 who is not disqualified from contracting by any
law to which he is subject.
MINOR
Minor is a person who has not attained
18 years of age. According to Majority
Act, 1875, where a guardian of minor’s
person or property is appointed or
court of wards take charge of minor’s
property, a minor will attain the age of
majority after 21 years.
Agreements with a minor
 Void agreement
 Rule of estoppel does not apply
 Ratification not allowed
 Contract by minor and adult jointly
 Minor may be admitted to benefits of partnership [Section
30 – Partnership Act]
 Minor as an agent [Section 184]
 Minor and insolvency
 Minor can be beneficiary
 Agreements on behalf of minor by parents or guardian
 Minor and necessaries [Section 68]
 Surety for minor
 Position of minor’s parents
 Minor as shareholder (member) of a company
Agreements by persons of
unsound mind [Section 12]

A person is said to be of sound mind


for the purpose of making a contract:
if at the time when he makes it,
 he is capable to understand the
terms of the contract,
to form a rational judgment as to its
effect upon his interests.
Example: S agreed to sell property worth Rs. 25,000 for Rs.
7,000. His mother proved that he was an idiot by birth. The
agreement was held to be void.
Unsound mind – reasons
 Idiocy
 Lunacy or insanity
 Drunkenness
 Hypnotism
 Mental decay
Position of agreements with a
person of unsound mind
 An agreement with a specific person/idiot is void.
 If a lunatic enters into a contract while he is of
unsound mind, an agreement during this period
is void.
 If a lunatic enters into a contract while he is of
sound mind, an agreement during this period is
valid.
 A person delirious from fever or drunken person
cannot enter into a contract while such delirium
or drunkenness lasts and he is not able to
understand the terms of the contract or form a
rational judgment.
Position of agreements with a
person of unsound mind
 A person of unsound mind can enforce a contract for his
benefits.
 A person, who supplied necessaries to a person of
unsound mind or his dependant, is entitled to be
reimbursed from the property of such person of unsound
mind. Such claim is against the property of the person of
unsound mind and not against the person personally.
 A person who is usually of unsound mind but occasionally
of sound mind may make a contract when he is of sound
mind.
 A person who is usually of sound mind but occasionally of
unsound mind may not make a contract when he is of
unsound mind.
Burden of proof
 If a person is usually of sound mind then
burden of proof, that he was of unsound
mind at the time of making contract, lies
on the person who questions the validity
of contract.
 If a person is usually of unsound mind
then burden of proof that he was of sound
mind at the time of making the contract
lies on the person who wants to enforce
the contract.
DISQUALIFIED PERSONS

 The third type of incompetent


persons is those who are
‘disqualified from contracting by any
law to which they are subject.
Thank you.

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