Capacity to contract

1
Chapter-02
2
Capacity to contract

• An essential ingredient of a valid is that the
  contracting parties must be competent to
  contract. Section-11 lays down 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.

3
Capacity to contract

• Thus this section provides that, a person is
  entitled to enter into a contract-
• Who has attain majority as per the Law
• Who is of sound mind
• Who is not disqualified from contracting
  according to the law of his country

4
Age of majority

• Section-3 of the Majority Act says that a
  person who is under the age of 18 is a minor.
  Accordingly every person who has completed the
  age of 18 becomes a major. However when a
  guardian of a minors person or property has been
  appointed by the court, it is 21 years.

5
Sound mind

• According to section-12 of the Contract Act a
  person is said to be of sound mind for the
  purpose of making a contract if, at the time when
  he makes it, he is capable of understanding it
  and of forming a rational judgment as to its
  effect upon its interest.

6
Sound mind( Cont)

• A person, who is usually of unsound mind but
  occasionally of sound mind, may make a contract
  when he is of sound mind.
• A person, who is usually of sound mind but
  occasionally of unsound mind, may not make a
  contract when he is of sound mind.

7
Minors agreement

• Section-10 requires that the parties to a
  contract must be competent and section-11
  declares that a minor is not competent. But
  neither section makes it clear whether, if a
  minor enters into an agreement, it would be void
  or voidable. The controversy was only resolved in
  1903 by the judicial committee of the Privy
  Council in their well-known pronouncement in
  Mohoribibi vs. Dharmodas Ghose-1903.

8
Minors agreement

• From this decision it has become a absolute rule
  that a minors contract is absolutely void. The
  main reason for holding a minors agreement void
  is that where an agreement by a minor involves a
  promise on his part or his promise is a necessary
  part of the agreement, it is void because a minor
  is incapable of giving a promise imposing a legal
  obligation upon himself.

9
Effects of minors agreement

• An agreement by a minor is absolutely void and
  inoperative as against him.
• No estoppel against a minor. Even if a minor
  misrepresent himself as a major, he can pled his
  minority as a defense.

10
Effects of minors. (Cont)

• If a minor receives some benefit from a sale or
  mortgage of property, the minor will not be
  liable to refund the money and his property will
  not be liable for that.
• A minor can not enter into a partnership
  business.

11
Minors liability for necessity

• When a minor is supplied with necessaries, he is
  liable for that only. What is a necessary article
  is to be determined with reference to the status
  and circumstance of a particular minor. Objects
  of mere luxury are not necessaries. Food and
  clothing may be taken as simple example of
  necessaries. Necessaries include articles
  required to maintain a particular person in the
  state, degree and station in life in which he is.

12
Offer

• The word proposal is synonymous in English use
  with offer. A proposal and its acceptance is
  the universally acknowledged process for the
  making of an agreement

13
According to section-2(a) of the Contract Act-1872

• When one person signifies to another his
  willingness to do or to abstain from doing
  anything, with a view to obtaining the assent of
  that other to such act or abstinence, he is said
  to make a proposal.

14
Three essentials of a proposal

• It must be an expression of the willingness to do
  or to abstain from doing something.
• The expression of willingness to do or to abstain
  from doing some thing must be to another person.
  There can be no proposal by a person to
  himself.
• The expression of willingness to do or to abstain
  from doing some thing must be made with a view to
  obtain the assent of the other person to such act
  or abstinence.

15
Example

• A asked B will you sell your car. It is not a
  proposal. It is just a mere statement. Again,
  when B says I may sell my car if I get Taka 10
  Lac. It is also not a proposal its a mere
  statement of intention. But when B says to A I
  am willing to sell my car to you for Taka 10 lac
  is a proposal. As it has been made with the
  object of obtaining the assent of A.

16
Invitation to offer

• An offer must be distinguished from an invitation
  to receive offer or as it is some times expressed
  in judicial language an invitation to treat. In
  case of invitation to offer the person sending
  out the invitation does not make an offer but
  only invites the other party to make an offer.
  His object is merely to circulate information
  that he is willing to deal with anybody who, on
  such information, is willing to open negotiation
  with him. Such invitation for offers is therefore
  not offers in the eyes of law and does not become
  agreement by their acceptance.

17
Rules regarding a valid offer

• An offer may be express or implied
• An offer must contemplate to give rise to legal
  consequence and be capable of creating legal
  relation
• The terms of the offer must be certain
• An invitation to offer is not an offer
• An offer may be specific or general
• An offer must be communicated to the offeree
• An offer may be made subject to any terms and
  condition
• Two identical cross-offers do not make a contract

18
Revocation of offer

• According to section-6 of The Contract Act a
  proposal may be revoked in any of the following
  ways
• By notice of revocation
• By lapse of time
• By the failure to fulfill the condition precedent
  
• By the death or insanity of the proposer provided
  that the fact has come to the knowledge of the
  acceptor before acceptance.

19
Acceptance

• According to section-2(b) of the Contract Act-
  1872
• When the person to whom the proposal is made
  signifies his assent thereto, the proposal is
  said to be accepted.
• Thus acceptance is the manifestation by
  the offeree of his assent to the terms of the
  offer.

20
Rules regarding a valid acceptance

• Acceptance must be given only by the person to
  whom the offer is made.
• Acceptance must be absolute and unqualified.
• Acceptance must be expressed in some usual and
  reasonable manner.
• Accepted must be communicated by the acceptor

21
Consideration

• Consideration is one of the essential elements of
  a valid contract. The term consideration may be
  defined as the price paid by one party for the
  promise of the other. An agreement is legally
  enforceable only when each of the parties is to
  give something and get something. This something
  given or obtained is the price for the promise
  and is called consideration. Only those
  considerations are valid which Lawful are.
  Subject to certain exception an agreement without
  consideration is void.

22
Definition

• Section-2(d) of the Contract Act defines
  consideration as follows
• When at the desire of the promisor, the
  promisee or any other person has done or
  abstained from doing, or does or abstains from
  doing, or promises to do or to abstain from doing
  ,something, such act or abstinence or promise is
  called a consideration for the promise.

23
Essentials of a valid consideration

• Consideration must move at the desire of the
  promisor.
• 2. Consideration may move from the promisee or
  any other person.
• 3. Consideration may be past, present or
  future.
• 4. Consideration must be of some value, i.e.
  consideration must be real need not be adequate.

24
Exceptions to the Rule No consideration, No
contract

• Agreement made on account of natural love and
  affection
• Past voluntary service
• Time barred Debt