Understanding Capacity to Contract in Business Law
Capacity to contract is a crucial concept in business law that determines the validity of agreements based on the mental and legal capacity of parties involved. Individuals must be of sound mind, not disqualified by law, and competent to enter into contracts. Minors and persons deemed incompetent are unable to form valid contracts, and special rules govern their interactions in legal agreements.
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Business law E.Chandra Naidu lecturer in commerce
CAPACITY TO CAPACITY TO CONTRCT CONTRCT
Capacity to contract Capacity to contract CAPACITY major sound mind Not disqualified by law. Agreements with Persons competent to contract are Valid agreement INCAPACITY minor unsound mind disqualified by law. Agreements with Persons incompetent to contract are Void agreement CAPACITY major sound mind Not disqualified by law.
Persons competent to contract Not Sound mind major disqualified by law Valid agreements Persons incompetent to contract UnSound mind Disqualified by law minor Void agreements
Minor Minor definition definition- - indian 1875 in general 18 years special case 1875 in general 18 years special case - - 21 years 21 years indian majority act majority act According to Indian majority act 1875 sec(3) minor is defined as any person under the age of 18 years . In the following cases a person is said to be minor if he does not complete the age of 21 years a) any person under the guardian & wards act ,1890 b)any person which comes under superintendence of law/legal representative
Rules governing minors Rules governing minors agreement agreement Rule 1 : judges are counselors, jury is the servant ,law is the guardian . Rule 2:in case minor entered into a contract which is unlawful , illegal , immoral he is also prosecutable & punishable under law relevant law.
Legal rules Legal rules An agreement with minor is void ab initio [Mohiri Bibi v. Dharmadas Ghase martigage house loan not valid - cancelled] Minor can be promisee [Shrafat Ali v. Noor Mohd]- minor insured goods damaged filed recovery- valid) Minor cannot ratify his agreement on attaining the age of majority [Indra Ramaswamy v. Anthiappa
Minor as a shareholder , Minor as a partner, Minor as a agent , Minor as a member of trade union , No estoppel against minor - misrepresenting his age induced the other party to enter contract no estoppel , He can plead his minority , He can enter into contract for his necessary [Robert v. Gray ] On behalf of minor his parents , guardian or any other person can enter into void contract to acquire movable property.
