Capacity of contract

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Section 11 defines- every person is competent to contract who is of the age of majority according to law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.

Thus the following persons are incompetent to contract:

Minors.
Persons of unsound mind.
Persons disqualified by law to which they are subject.

1. Minors-
2. Age of Majority- The age of majority is generally 18 years, except when a guardian of a minor’s person or property has been appointed by the court, in which case it is 21. The age of the person is determined by the law to which they are subject.
3. Nature of Minor’s Agreement- Section 10 defines that the parties to contract must be competent Section 11 declares that a minor is not competent. But neither section makes it clear whether, if a minor enters into an agreement, it would be voidable at his option or altogether void.

Mohori Bibi Vs Dhurmodas Ghosh case solve this controversy.

It is essential that all contracting parties should be competent to contract and expressly provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of this act. The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant.

Thus a minor agreement is absolutely void.

A rule to providing the immunity to minor for the contract liability is- A child may show poor judgment in making a particular contract, and it is a protection against his own ignorance and immaturity- not merely fraudulent manipulation by others. The general presumption that every man is the best judge of his own interests is suspended in the case of children.

Effects of Minor’s Agreement- A minor’s agreement is void. If there is no contract there is no contractual obligation of either side.

I. No Estoppels against minor- the policy of the law of contract is to protect the minors form contractual liabilities. If a minor by misrepresentation his age induces another to contract with him, he will not be liable for such Estoppels.
II. No liability in contract or in Tort arising out of Contract- the minor’s agreement is, of course, in principle devoid of all legal effects. A minor is in law incapable of giving consent, and, there being consent there could be no change in the character. Calcutta High Court refuse to hold minor’s liable in tort for money lent on a bond. The court said- if the tort is directly connected with the contract and is the means of effecting it and is a parcel of the same transaction, the minor is not liable in tort. Thus where a minors borrowed a mare for riding only, he was held liable when he lent her to one of his friends who jumped and killed.
III. Doctrine of Restitution- if a infant obtains property or goods by misrepresenting his age, he can be compelled to restore it, but only as long as the same is traceable in his possession. This is known as the equitable doctrine of restitution. Where the infant sold the goods or convert it , he cannot be made to repay the value of the goods, because that would amount to enforcing a void contract. Again the doctrine of restitution is not applied where the infant has obtained cash instead of goods.
IV. Contract of Marriage- A contract for the marriage of a minor is also prima facie for his or her benefit.  The contract of marriage could be enforced against the other contracting party at the instance of the minor it cannot be enforced against the minor.
V. Ratification- A person can not on attaining the majority ratify an agreement made at the time of his infancy. It is necessary at the time of majority a fresh agreement should be made.

 

2.Person of Unsound Mind

In English law a person of unsound mind is competent although he may avoid the contract, if he satisfies the court that he was incapable of understanding the contract and other party knew it. If he makes a contract while drunk, he may, when sober, elect to avoid the contract or to affirm it.

While in Indian law it is absolutely void a contract with the person of unsound mind. It is the position of a drunken person in also the same.

 

Free consent-

According to section 10 Free Consent is the essential requirements of a contract. Section 14 defines the Free consent-

Consent is said to be free when is not caused by-

Coercion- S 15.
Undue influence-S.16
Fraud-S17
Misrepresentation- S18
Mistake-S19

 

Section 2(i) says that – an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

It means there must be minimum two parties who provides their free consent for a contract, when a contract which is enforceable at the option of any of only one of the parties, namely the party whose consent was not free, it is a voidable contract.

 

Section 15- Coercion– coercion is the committing or threatening to commit, any act forbidden by the IPC or the unlawful detaining, or threatening to detain any property, to prejudice or any person whatever, with the intention of causing any person to enter into an contract.

Explanation- It is immaterial whether the IPC is or is not force in the place where the coercion is employed.

Illustration-

A on board an English Ship on the high sea, causes B to enter into an agreement by an act amounting to criminal intimidation under the IPC.

Techniques of causing coercion-

Coercion is said to be caused by coercion when it is obtained by pressure exerted by either of the following techniques-

Committing or threatening to commit any act which is forbidden by IPC.
Unlawful threatening or threatening to detain any property.

Madras High Court provide their view- that Threat of Suicide a Hindu induced his  wife and son to execute a release in favor of his brother in respect of certain properties which they claimed as their own, is amount to coercion under section 15 of this act.

Detention of Property-

Deference between Indian and English Law on Coercion-

What Indian law call coercion English law defines it Duress or Menace.

Duress is said to consist in actual or threatened violence or imprisonment of the one party or any one else on his behalf to get the advantage.

But coercion defines S.15 is much more wider and includes the unlawful detention of property also.

Undue influence-

It happens when one party is at the dominate position.

Contract with one whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.

 

Ability to dominate will of other

Some time the parties of a contract are so related to each other and one of them are in a position to dominate.

Allahabad High Court- In Mannu singh V Umadat Pandy held that

The plaintiff induced his devotee, to gift him the whole of his property to secure benefits to his soul in the next world. Such a consent is said to be undue influence. No reasonable man transfer his full property to any one else. This is clearly show the case of undue influence.

Where there is active trust and confidence between the parties or the parties are not on equal footing, the one party would be in a dominate position.

Real or Apparent Authority-

A person in authority is definitely able to dominate the will of the person over other who is a real or apparently authority like an Income Tax officer in relation to an assesses, a magistrate or a police officer in relation to a accused. And also a person who is not a real or apparently authority but with a show or color of authority.

Every relation of trust and confidence is a fiduciary relation.

Mental Distress

A person is suffering from mental distress, can also be undue influence by other party.

Urgent Need of Money no distress-

Statutory compulsion no distress-

Contract with Pardanashin Woman.

A contract with pardanashin woman is presumed to have been induced by undue influence. She can avoid the contract unless the other party proves that it was her intelligent and voluntary act.

 

Misrepresentation S.18

A contract the consent to which is induced by misrepresentation is voidable at the option of the deceived party. misrepresentation means misstatement of a fact material to the contract.

Ingredient of Misrepresentation-

Unwarranted (unnecessary Statement) Statement-
Breach of Duty.
Inducing mistake about the subject matter.

Unwarranted Statement- when a person positively asserts that a fact is true when his information does not necessary it to be so, he believe it to be true.

Breach of Duty- any breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is a misrepresentation.

Inducing mistake about the subject matter.- causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement is also misrepresentation.

Mistake S.19- where the mistake does not consent, but only misleads the parties

Illustration- A agrees to buy from B a certain horse. it turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact the agreement is void.

Ingredient of Section –

Both parties are in a mistake in a agreement.
Mistake is the matter of fact.
Fact about which they are mistaken are essential for agreement.

Fraud under contract-

 

Intentional misrepresentation of fact, speaking broadly is called the Fraud.

Ingredient of Section 17- Fraud-  where willfully gives answer which are untrue to obtain the assent of other.

1. There should be a suggestion of fact which is not true.
2. Active concealment of a fact. ( knowingly)
3. Promise without intention to fulfill.
4. Any other form of deceive.
5. Act or omission which is declare by law fraudulent.

Explanation- mere silence as to facts likely to affect the willingness of a person to enter into a contract is not fraud unless-

the circumstances of  case are such that,
it is the duty of the person keeping silence to speak,
or unless his silence equaling to speak.

Illustration-

A sells, by auction, to B, a horse which A knows to be unsound. A says nothing to B about horse’s unsoundness. This is not fraud.

B says to A- if you do not deny it, I shall assume the horse is sound. A says nothing. Here A silence is equitant to speak.

Basis

Fraud

Misrepresentation

Nature

Intentional wrong

Quite innocent.

Knowledge

Person making it does not believe it is true.

Person making it believe it true.

 

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