Transcript
Capacity to Contract
Chapter 4
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Capacity to contract
Means Competence to enter into a contract Persons incompetent to contract
a) Minor
b) Person of unsound mind and
c) Persons disqualified by any law to which they are subject
Contracts entered into by persons mentioned above are void.
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Capacity to Contract
Section 11
Only a person:who is of the age of majorityof sound mind, andnot forbidden under any other
law
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Minor Who is a Minor?
Indian Majority Act, 1875, a minor is a one who has completed his or her 18th year of age.In the following cases a person continues to be a minor until he completes the age of 21 years :
a) Where a guardian of a minor’s person or property has been appointed under the Guardians and Wards Act, 1890; or
b) Where the superintendence of a minor’s property is assumed by a Court of Wards.
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Why should minors be protected ?
A minor has an immature mind and can’t think what is good or bad for him.
Minors are
often exploited.
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What happens to a contract with or by a minor?
Contract is void-ab-initio, i.e., neither the other party nor the minor can enforce.
Case law : Mohiri Bibi vs. Dharmdas Ghosh.
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Minor cannot be asked to refund the benefits received.
However, Minor can be a promisee/beneficiary. Minor cannot ratify even after attaining
majority. What about a situation where minor
represents to be of the age of majority?
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Contract still void
If benefits received can be traced in the same or altered form, Minor liable to restore.
Minor liable for necessaries supplied to him or any loan for necessaries to him or to any of his dependants.
However, only properties of the minor, if any shall be liable.
Case law : Nash vs. Inman.8J J Maini, MIMIT Malout
Effects of Minor’s agreement
1. An agreement with or by a minor is void Case Mohiri Bibi vs. Dharmdas Ghosh.
2. No Ratification
3. Minor can be a promisee or a beneficiary
4. No estoppel against minor
5. No specific performance except in certain cases
6. Liability for torts – a tort is a civil wrong.
7. No insolvency9J J Maini, MIMIT Malout
Effects of Minor’s agreement
8. Partnership
9. Minor can be an agent
10. Minor cannot bind parent or guardian
11. Joint contract by minor and adult
12. Surety for minor
13. Minor as Shareholder
14. Liability for necessaries
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Section 12
Person usually of unsound mind but occasionally of sound mind can make a contract when of sound mind (Onus on the other party)
Person usually of sound mind but occasionally of unsound mind cannot make a contract when of unsound mind (Onus on the person claiming to be of unsound mind)
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Mental Incompetence
Idiots Lunatics Intoxicated persons
Contract void-ab-initio except for necessaries as in the case of Minor.
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Persons of unsound mind
1. Idiocy – an idiot is a person with no intervals of saneness. He is incapable and his mental powers of understanding even ordinary matters are absent because of lack of development of brain. The agreement with an idiot is void.
Case Inder Singh vs. Parmeshwardhari Singh A property worth about Rs.25000 was agreed to be sold by a person for Rs.7000 only. His mother proved that he was a congenital idiot, incapable of understanding the transaction. The sale was held to be void.
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Persons of unsound mind
2. Drunkenness – temporary incapacity till the man is under the influence of intoxicants creating impotence of mind. He stands on the same footing as a lunatic.
3. Lunacy or insanity – It is a disease of brain. A lunatic loses the use of his reason due to some mental strain or disease. He may have lucid intervals of sanity. He can enter into contract during that period when he is of sound mind.
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Persons of unsound mind
4. Hypnotism - it also produces temporary incapacity till the person is under the impact of artificially induced sleep.
5. Mental Decay – it is on account of old age etc.
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Persons disqualified from contracting by any other law1. Alien Enemies
2. Foreign sovereigns
3. Insolvents
4. Convict
5. Corporations
6. Married women
7. Professional persons
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Free Consent
Coercion (Sections 15 and 19) Contract voidable at the option of the
aggrieved party. Benefits received to be returned.
Undue Influence One party is in a position to dominate
the will of the other. Uses that dominance to secure
undue/unfair contractual advantage 17J J Maini, MIMIT Malout
In some relationships, it is presumed, e.g., Parent and Child; Spiritual Advisor and Disciple; Trustee and Beneficiary; Doctor and Patient; Lawyer and Client.
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Fraud
Contract voidable at the option of the party defrauded.
Claim for damages.
However, relief available only if party actually defrauded.
A fraud that does not defraud is no fraud. Case of defective cannon
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Misrepresentation
Contract rendered voidable. Damages cannot be claimed.
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Mistake
Of Law Of Fact Mistake of Indian Law doesn’t render a
contract void or voidable. Ignorance of law is no excuse Mistake of foreign Law to be treated as
mistake of fact.
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Specific and General Offer
Specific Offer: made to a specified person or a group of
persons. can be accepted only by the person to
whom made.
Thus, if offer is addressed to ‘A’, ‘B’ cannot accept it.
Case Law: Boulton vs. Jones
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Mistake of Fact
Unilateral
- does not render contract void except where induced by fraud
Case Law: Cundy vs. Lindsey Bilateral
- absence of consent … contract is void-ab-initio
Case Law: Henkel vs. Pape
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Consideration
Something in return Section 2(d) 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 promises to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.
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Consideration
Past, present or futureMust move at the desire of the
promisorMay move from promisee or any
other personNeed not be adequate but must
have value in the eyes of law
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‘No Consideration, No Contract’
Exceptions
(1)(a) Natural love and affection
(b) Between parties in a near relation
(c) Written
(d) Registered(2)(a) Promise to compensate
(b) Voluntary act which promisor was legally bound to do
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‘No Consideration, No Contract’
(3) (a) Written promise (b) to pay time-barred debt.
(4) Bailment
(5) Agency
(6) Gift
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Breach of contract
Both parties are promisors as well as promisees
If any of the promisors refuses or fails to perform, he is said to be guilty of breach of contract.
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Anticipatory Breach
Breach before time for performance arrives
Promisee may proceed:(a) As soon as breach is committed; or
(b) Wait till the time of performance arrives
Remedies(1) Suit for injunction Brook Bond Ltd. vs. Vijay Mallya
(2) Claim for damages29J J Maini, MIMIT Malout
Actual Breach
(Refusal or failure when time for performance is due, or
During performance.Remedies Right of Rescission Claim for damages Suit for specific Performance Suit for Injunction Quantum Meruit
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Claim for Damages
Damages U/S Section 73
Damages U/S Section 74
Only damages naturally flowing
from breach (Ordinary
Damages)
Special Damages(No claim for
consequential loss unless in the
Contemplation of the parties
(Hedley v. Baxendale)
ExemplaryDamages
Nominal Damages
Pre-fixed Damages
Penalty
Liquidated Damages(What can be recovered
is actual loss or amount prefixed, whichever is less)
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