Competent Parties To Contract.

  INTRODUCTION

A competent person is someone who is of legal age. The person must have the mental capacity to enter into a contract knowingly. They must also understand it is enforceable by law.

Section 10 of the Contract Act requires that the parties must be competent to contract.

Section 11 of the Indian Contract Act states that every person is competent to contract, who is :-

ü The age of majority

ü Who is of sound mind and

ü Who is not disqualified from contracting by law

 OVERVIEW OF COMPETENT PARTIES

 

A competent person is someone who is of legal age. The person must have the mental capacity to enter into a contract knowingly. They must also understand it is enforceable by law. Some parties are not contractually competent. These include:

· Minors

· Persons influence by alcohol

· Persons influenced by drugs

· Mentally ill persons who are not declared insane

· Those with a limited capacity to contract

A person who is incompetent and has a limited capacity to contract is allowed to back out of a contract. This is a legal right called disaffirmance.

Others who are completely incompetent have no legal capacity to contract. This includes persons declared insane by a court due to mental illness.

1.MINORS

                                     Who is Minor?

According to section 3 of the Indian Majority Act,1857 a minor is someone who is below the age of 18 years however there are some special cases also where the guardian of the minor is not available and he/she is below 21years then in this case

(i) The guardian of the minor is appointed under the Guardian and Wards Act 1890

(ii) The property of minor is under the supritendence of court of wards. 

First and Foremost thing which we need to understand is that any agreement with the minor is void ab-initio that means void from the starting.

If a competent party chooses to deal with incompetent parties, such as minors, they do so at their own risk. This is because minors may disaffirm or avoid ordinary contracts, usually, any time before they reach the age of majority and a reasonable time after reaching the age of contractual competence. Adults do not have the avenue to disaffirm and are bound by the agreements they've made.

One other thing which we need to know is that whether a minor has fraudulently or otherwise represented that he is of age and thereby induces another to enter into a contract with him,he is in an action founded on the contract,is not estopped from setting up infancy.  

A minor cannot become a partner in a partnership firm.However,According to Section 30 of Indian Partnership Act 1932,He can share the profits without incurring any personal liability.

Minor’s Liability in Tort:- A minor may be held liable in Tort but cannot be held liable in Contract but If in doing a contract he is found guilty of negligence he cannot be made liable on Tort if he is not liable on the contract.

Minors in many states cannot disaffirm an agreement for the following:

· The sale of real estate

· A loan

· Agreements involving life insurance

· Selling stock

· A contract involving the minor's business

· If the minor lies about their age

2. Person of Unsound Mind

According to section 12 of the Indian Contract Act “A person is said to be of sound mind for the purpose of making contract,if at the time when he makes it,is capable

(a) To understand the terms of the contract,

(b) To form a rational judgement as to its effect upon his interests.”

 

 

PERSONS UNDER THE INFLUENCE OF ALCOHOL OR DRUGS

There are some situations where agreements made by a person under the influence of drugs or alcohol are voidable. Once the person is sober, the agreement made while under the influence may be disaffirmed. This may happen only if the other party was responsible for the person to be under the influence or they knew the person was incapacitated and unable to understand the terms and consequences of the contract. There is a reasonable timeframe for the sober person to disaffirm or they will lose the right to do so.

 

MENTAL ILLNESS

An agreement made with a person declared legally insane by a court is considered void. Agreements made by persons with mental illness, but a court has not declared them legally insane, are voidable only if the disability can be proven.

When this person understands what they did, the contract may be disaffirmed or ratified, provided the consideration they received under the contract is returned to the other party. All persons, whether they've been declared legally insane or not, are liable for the reasonable value of necessaries/considerations furnished to them.

 

 

 

3. Persons Disqualified By Law

Besides Minors and Person of Unsound mind there is a third category which is incompetent to contract that is a person who is disqualified by law.Now the question arises that who are those persons who are disqualified by Law ,For this we first need to understand a term Alien Enemy

An alien enemy is  a person who is the citizen of a foreign country which is at war with Republic of India.

His contractual capacity can be summarised as uder

 

 However there may be some other persons also who can be disqualified by law like Vijay Mallya,Nirav Modi etc,A person now cannot make a contract with them  because they  are already disqualified by the law..

COMPETENT PARTIES

Each party must be competent to contract legally binding agreements. The parties must exist and be identifiable and have the authority to contract.

 

In situations where there is a contracting person appointed to handle contractual dealings, proof should be attained validating that the person signing has the authority to do so. Examples of when this may occur would be someone appointed as a personal representative of an estate, a corporate assignee, someone with a power of attorney, or a court-appointed trustee or receiver.