Contracts is mentioned under section 2(h). When an agreement is enforceable by law it becomes a contract. A contract has legal obligations and those legal obligations comes with certain terms and conditions which is can be defined under the capacity of a person to contract .
The most often asked questions about a person's capacity to contract According to section 11 of Indian Contract Act, 1872, every person who:
1.Is of sound mind
2.Has attained the age of majority
3.Is not otherwise disqualified from contracting.
These are the ingredients which qualifies a person competent to contract.
Is of sound mind-
According to the India contract law a person should be of sound mind for a contract to be valid. According to section 12 a person is said to be of sound mind for the purpose of making a contract if he is capable of understanding and forming an Intellectual decision as to its impact on his interests.
A person who is usually of an unsound mind but occasionally is of sound mind, can come into a contract when he is of sound mind.
Illustration-A person who is in a mental asylum who at intervals is of sound mind may enter a contract when he is of sound mind.
A person who normally has a sound mind but sometimes has an unsound mind cannot make a contract if he has an unsound mind.
Illustration- A sane person who is delirious with fever or an intoxicated person cannot make a contract if he is of unsound mind in order to understand the terms of the contract.
Disability at the time of agreement for the purpose of declaring an agreement to be void what is relevant is that the person was suffering from disability on the date of execution of the agreement. For illustration-appended to section 12 shows that a drunk person is in the same category as that of an unsound mind. “At the moment when the transferor was suffering from alcoholic psychosis, which was proven by the medical certificate, a selling deed of property was performed. For a platter amount, a very valuable property was sold. The sale deed was ordered to be set aside by the supreme court, which claimed that unsoundness of mind is a finding that there should be no intervention in the second appeal”.
Has attained the age of majority
The age of majority is generally 18, except when a guardian of the person has been appointed by the court in which case it is 21 a contract made by a minor is void for example-Rahul a boy who is 17 years old comes into a contract with a moneylender and takes a loan of 20000rs and montaged his laptop phone and cycle. After a year when he attains his majority, he claims his mortgage declaring that he was a minor at that point of time when the contract took place so it is void. The court relieved Rahul from the liability.
Also, even after receiving a majority, if a minor enters into a contract, he will not ratify it because the contract is void ab initio.And, it cannot be ratified by a void resolution.
Minor- a beneficiary of contract
A minor is incompetent to contract or that his contract is void so any contractual obligation cannot be put against a minor but a minor can enforce a contract which is for his benefit and under which he is required to bear no obligations. There is nothing in the contract act to prevent a minor to become a promisee the law does not regard minor as incapable of accepting a benefit. he can be admitted to the benefit of partnership.
A minor can always plead his minority for example – a minor by misrepresenting his age comes into a contract and takes money, after sometime for the non-repayment of it the plaintiff sues the minor. The minor pleaded his minority in the court and thus now no contractual obligation exists on him and he is not liable to pay any money back.
A person after attaining majority cannot ratify an agreement which was made when he was a minor. A contract which was then void cannot be held acceptable now. The consideration which was passed under the earlier contract cannot be implied into the contract into which the minor enters on attaining majority.
Liability for necessaries. - The section 68 of the contract acts provides fir liability for necessaries supplied to persons incompetent to contract. The word necessaries is not particularly defined under. But it can be understood that necessaries for a contract are those without which a person cannot reasonably exist. Claim for necessaries supplied to person incapable of contracting, or on his account – if a person incapable of entering into contract or anyone who is legally bound to support, is supplied by another person with necessaries suited to his condition in life, a person who has reimbursed such supplies is entitled to be reimbursed from the property of such incapable person.
A supplies B, a lunatic with his life-suitable necessaries. A is entitled to a refund on the property of B.
A supplies B's wife and children, a lunatic, with necessaries relevant to their living conditions. A has the right to be reimbursed for the property of B.
Contract by bargain – how is it enforceable; Although we know that a minor's agreement is void, his guardian on his behalf can enter into a valid contract. If the guardian of the minor makes a contract for the minor which is for his benefit and which is within his competence will be termed as a valid contract For instance, the guardian of a minor who is legally appointed by the court can come into contract to sell the property of the minor if it's for the minor's benefits.
Contract of disqualified person Besides a person who is of unsound mind and a minor there are people who are disqualified from their right to come into a contract for certain reasons and the contract entered into by them is termed as a void contract. Example- Like a person who is declared as a disqualified proprietor by any provisional legislation, he cannot come into a contract respect to a property.
According to me it is particularly important to know about capacity of person to contract and all the terms and conditions of it. If a person is not aware about this, he can be deceived by anyone.
Indian Contract Act 1872
Avtar Singh (second edition); and Lexis Nexis (on Indian Contract and specific relief acts)