Case of Business Law

Topics: Contract, Contract law, Void Pages: 16 (6033 words) Published: June 27, 2012
Capacity to contract

One of the essentials of a valid contract, mentioned in section 10, is that the parties to the contract should be competent to make the contract. According to section 11 : “Every person is competent to contract who is of age of majority according to 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.” It means that the following three categories of persons are not competent to contract. 1. A person who has not attained the age of majority, i.e., one who is minor. 2. A person who is of unsound mind

3. A person who has been disqualified from contracting by some law.

Although the above mentioned categories of persons are not competent to contract, yet they may sometimes be making some bargains, taking some loans, or be supplied with some goods by third parties, or be conferred with some benefits etc., the position of such person in such like situations is being discussed below.

Who is a minor ?
A person who has not attained the age of majority is a minor. Section 3 of the Indian Majority Act, 1875 provides about the age of majority. It states that a person is deemed to have attained the age of majority when he completes the age of 18 years, except in case of a person of whose person or property a guardian has been appointed by the Court in which case the age of majority is 21 years.

Nature of a minor’s agreement
As noted above a minor is not competent to contract. One question which arises in case of an agreement by a minor is, whether the agreement is void or voidable? The Indian contract Act does not have any provision to answer this question. In the absence of any statutory provision there had been controversy on this point. The controversy was set at rest by the decision of the Privy Council, in the case of Mohori Bibee Vs. Dharmodas Ghose in 1903. It was held that the agreement made by a minor is void.. The facts of Mohiiri Bibee Vs. Dharmodas Ghose are as under : The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favour of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs. 20,000. The actual amount of loan given was less than Rs. 20,000. At the time of the transaction the attorney, who acted on behalf of the money lender, had the knowledge that the plaintiff is a minor. The plaintiff brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, mortgage was void and inoperative and the same should be cancelled. By the time of Appeal to the Privy Council the defendant, Brahmo Dutt died and the Appeal was prosecuted by his executors. The Defendant, amongst other points, contended that the plaintiff had fraudulently misrepresented his age and therefore no relief should be given to him, and that, if mortgage is cancelled as requested by the plaintiff, the plaintiff should be asked to repay the sum of Rs. 10,500 advanced to him. The decision of the Privy Council on the various points raised by the defendant was as follows : 1. The defendant’s contention that the minor had falsely mis-stated his age, the law of estoppel should apply against him and he should not be allowed to contend that he was a minor, was considered. The Privy Council found that the fact that the plaintiff was a minor at the time making of the agreement was known to the defendant’s agent. It was held that the law of estoppel as stated in Section 115, Indian Evidence Act, was not applicable to the present case, where the statement (about age) is made to a person who knows the real facts and is not misled by the untrue statement. It was observed : “There can be no estoppel where the truth of the matter is known to both the parties, And their Lordships hold, that a false representation, made to a person who knows it to be false, is not such a fraud as to take away...
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