Legal Guide

Who is competent to contract under Section 11 of the Indian Contract Act?

by Bhavya Choudhary · 1 min read

Section 11 of Indian Contract Act

Section 11 of the Indian Contract Act

Under Section 11 of the Indian Contract Act, everyone is competent to contract who is

  1. A Major according to Law
  2. A person of sound mind
  3. A person who is not disqualified by any other law from contracting 

Therefore, it can be said that a person who is a minor or of unsound mind or disqualified to contract under any other law is not competent to contract under Section 11 of the Indian Contract Act.

Agreement with minor under Section 11 of Indian Contract Act

  • Although the term “minor” is not specified under the Indian Contract Act, the legitimacy of a minor’s agreement has frequently been called into doubt. Under Section 11 of the Indian Contract Act, only a major can enter into a contract. However, Section 11 of the Indian Contract Act does not define the term ‘major’.
  • According to section 3 of the Indian Majority Act of 1857, a minor is defined as a person who is under the age of 18 in India. 
  • When a guardian is appointed of a minor or minor’s property under the Guardians and Wards Act, 1890, or when a court of wards assumes supervision of a minor’s property, a person is considered to be a major only when they reach the age of 21.
  • To prevent abuse and manipulation of the minor, even if a person is 17 years and 8 months old, they will not be regarded as a major in the eyes of the law. Many Courts have interpreted Section 11 of the Indian Contract Act strictly. 
  • The Privy Council did not pronounce a minor’s contract to be invalid ab initio, or void from the beginning, until 1903.

Who can enter into an agreement on the behalf of minors?

Based on community tradition, contracts made on behalf of minors by their parents or guardians have been respected; but, until weddings take place, they remain nudum pactum or bare promises.

When we talk about contracts involving minors’ property, it was upheld that in those situations, the managers or guardians of the minor’s property can only carry out the transaction on the minor’s behalf if it satisfies the following two requirements: 

  • The transaction should be for a legal necessity 
  • And for the benefit of the minor.

The minor cannot enter into a contract as per section 11 of the Indian Contract Act. The guardian or manager is not considered competent to contract where the agreement is not required by law or is not in the minor’s best interests.

When a film producer and a young actress agreed to work together on a project, the father of the young actress signed the employment contract on her behalf. When the girl and her father went to court for a breach of the employment contract, it was determined that the agreement with the minor’s father was invalid. The minor’s pledge to act as the father’s consideration, but by law, a minor cannot make a promise as provided under Section 11 of the Indian Contract Act.

What if the minor represents himself to be a major?

The case of Mohiri Bibee v Dharmodas Ghose is an authority on this point. The Court held the following points:

  • The issue is that since the minor was unable to contract, any mortgage or deed taken into on their behalf would likewise be null and void.
  • The Minor was not competent to contract under Section 11 of the Indian Contract Act and therefore, he is not liable to return the money.
  • Because the plaintiff got a letter from the defendant’s mother, he or she was fully aware of the defendant’s minor status, therefore there was no false representation. However, if the court rules that a minor’s property was sold or mortgaged in error, the minor may be awarded damages. 
  • The dishonesty is the only factor that bears any responsibility for restoration upon the minor. If he fraudulently represents his age and the plaintiff through due diligence is not able to find it out, he is entitled to restoration. 

Is a person of unsound mind competent to contract under Section 11 of the Indian Contract Act?

Section 11 of the Contract Act clearly states that a person of sound mind only can be competent to Contract. However, Section 12 makes it clear that when a person is occasionally of unsound mind can make a contract when he is of sound mind. 

  • A person is considered to be of sound mind for the purpose of making a contract if, at the time he forms it, he is capable of understanding it and of forming a rational judgment as to its consequences upon his interests”, according to section 12 of the Indian Contract Act.
  • The contract made by a lunatic is not invalid under English law, but it is voidable at his or her discretion. Additionally, this only occurs when the other party recognized insanity in the behavior at the time the contract was signed.
  • In India, a mortgage in favor of a lunatic is accepted as lawful, despite the fact that a minor’s consent was declared void and a person with a defective mental state was deemed incapable to enter into a contract as provided under Section 11 of Indian Contract Act.

When a person is prohibited by law to enter into a contract?

Section 11 of the Indian Contract Act states that a person is not competent to contract if he is disqualified to contract under any other law. Following are the examples of disqualification under Section 11 of the Indian Contract Act:

  • When a statutory corporation enters into a masters service agreement it must be within the scope of the company’s authority or objectives; otherwise, the masters service agreement is void and becomes ultra vires, which is Latin for “out of authority”.
  • Certain formalities must be observed when contracts are made with any government; if the parties to a contract don’t fulfill these formalities, the deal is void.

Conclusion

Section 11 of the Indian Contract Act states who are competent to Contract. As per Section 11 of the Indian Contract Act, any person who is a major, of sound mind, and not disqualified to contract under any other law is considered to be competent. 

However, a minor can enter into a contract when there is a legal necessity and for the benefit of a minor. This depends on the facts and circumstances of each case. One must consult a lawyer to know all the essential features of the contract and to get the contract deed drafted. 

A minor can enter into a contract when there is a legal necessity or for the benefit of a minor. This depends on the facts and circumstances of each case. One must consult a lawyer to know all the essential features of the contract and to get the service agreement drafted.

Bhavya Choudhary

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Bhavya Choudhary

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