This article is written by Abhay Pandey, student, K.S. Saket P.G. College, Ayodhya

Introduction

A contract is basically an agreement i.e enforceable by law. In order to be enforceable, the agreement must satisfy the requirements given under section 10 of the Indian Contract Act, 1872. Section 10 of Act states that all agreements are contracts if they are made

• By competent parties (S. 11, 12)
• For a lawful object and lawful consideration (S. 23)
• By the free consent of the parties (S. 14)
• Are not expressly declared to be void.

Section 11 of the Act states that 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 is not disqualified from contracting by any law to which he is subject.

From Section 11 of the act, it becomes clear that every person is competent to contract who is major, and who is of sound mind and is not disqualified by law. if we examine the section 11, so we can see that only three types of persons are not competent to contract i.e.

• minors;
• Persons of unsound mind(S. 12);
• Persons Disqualified from contracting by any law;

Minors

Section 3 of the Indian Majority Act, 1875, declares that every person domiciled in India and attain the age of 18 years, but  for person or property or both the minor, a guardian has been appointed by the court, he will be deemed to have attained his majority when he completes the age 21 years.

Nature of minor’s agreement

In India agreement with a minor is void ab initio means void from starting. In Mohri bibee v. Dhurmodas Ghose, the Privy Council held that ‘the Act makes it essential that all contracting parties should be competent to’, and the Act especially provides in Section 10 that a person who, by reason of infancy, is incompetent to contract cannot make a contract within the meaning of the Act.     

Persons of unsound mind

Section 12 of the Indian Contract Act, 1872, defines the term soundness of mind as follows:

A person is said to be of sound mind if he is capable of understanding the contract and effect of that contract on his interests. Besides, who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is unsound mind. Likewise, a person who is usually of unsound mind, but occasionally of sound mind, he may make a contract when he is of sound mind.

Illustration: A person in a lunatic asylum, who at intervals is of sound mind may contract during those intervals.

Comparison between English law and Indian law: In England, mere unsoundness of mind is no defense; the contract of a lunatic is binding upon him, unless he can show that at the time of making the same, he was utterly incapable of understanding what he was doing and that the other party knew of his lunacy. In India, a contract by a person of unsound mind is void.    

Persons disqualified by law

1. Alien enemy: A person who is an Indian citizen is called an alien or non-citizen of the Republic of India. An alien enemy is a person whose country is at war with India. In India, a contract with an alien enemy is void but a contract with an alien friend is valid under the Indian Contract Act. No contract can be made with an alien enemy during the subsistence of war, except with the prior approval of the Indian Government.
2. Convicts: A convict is a person, who is sentenced by a competent court to the death sentence or imprisonment. A convicted person cannot enter into a contract while undergoing sentence. When the period of his sentence is over or he is pardoned, then his incompetency is also over.
3. Insolvent: There is no prohibition against a contract by an insolvent after the insolvency proceedings have commenced but before adjudication. In simple words, the insolvent is disqualified from entering into a contract until he is discharged by the court of law.

For example, A executed a sale-deed, but before he could get it registered of the deed took place during the pendency of the insolvency proceedings. Under these circumstances, the sale-deed valid and binding on the parties.

4. Foreign sovereigns and diplomats: Foreign sovereigns have some special privileges. Generally, they cannot be sued unless they, themselves surrender under the jurisdiction of the Indian court of law. They cannot enter into a contract unless an Indian citizen obtained a prior sanction of the Government of India, in order to sue them in the Indian court of law.
5. Corporations: The power of a corporation to make a contract vary according to the character of the corporation. A company is an artificial person created by law and is competent to contract. But its power of contract is subject to the limitation which may be either necessary or express.

Conclusion

From the above discussion, it is very clear that only those people are competent to contract who is major, sound mind and not disqualified by law. A person who is diagnosed as being mentally ill, that prevents them from managing his own affairs may be declared mentally incompetent by a court of law. When a person is judged to be incompetent, a guardian is appointed to handle the person’s property and personal affairs.