Capacity 1

CAPACITY TO CONTRACT

04/08/2023Dr. Zuraidah Ali 1

Every person who is competent to contract is free to contract upon such terms which he may think fit.

But there are some limitations. Minor Insane Person Bankrupts.


CAPACITY

Section 10 (1): All agreements are contracts if they

are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.


Who are competent to contract?

Every person is competent to contract who is of *the age of majority according to the law to which he is subject, and *is of sound mind, and *is not disqualified from contracting by any law to which he is subject


Malaysia : Section 11

• Section 11 • Does not expressly stipulate the effect of

contract entered by incompetent party.• Indian Case: Mohori Bibee v Dhurmodas

Ghose (1903) I.L.R 30 Cal 539 :• PC : Effect of section 10 & 11 of Indian

Contract Act in pari materia to sections 10 & 11 of the Malaysia Contract Actrendered the contracts void.


• Respondent : a minor executed a mortgage in favour of a money lender Dutt : to secure a repayment of RS20,000 at 12% interest on some land belong to the Resp.

• Entire transaction was executed by Dutt’s attorney, Kedar Nath : he had knowledge that the respondent was still a minor.

• Infant by his mother & guardian commenced an action for a declaration that the mortgage was void and inoperative


Mohari Bibee v Dhurmodas Ghose (1903) 30 Cal 539

• Privy Council : Considered the effect of contract entered by minor.

• Dismissed the appeal . • Indian Contract Act makes it essential that

all contracting parties should be competent.• Expressly provide that a person by reason

of infancy is incompetent to contract.• The contract entered into by the respondent

in this case is void.


Judgment

1) Section 2 of Indian Contract Act :• (e) every promise and every set of promises,

forming the consideration for each other, is an agreement;

• (g) an agreement not enforceable by law is said to be void;

• (h) an agreement enforceable by law is a contract;

• (i) an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract


Provisions involved

2) Section 10 (1) of the Indian Contract Act 1872

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.


3) Section 11 of the Indian Contract Act 1872 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.


“ Looking at these sections, their Lordships are satisfied that the Act makes it essential that all contracting parties should be competent to contract and expressly provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act.”


According to his Lordships

Rendered all contracts entered by infants to be void


Effect of the decision

Based on two principles:

1) the law must protect the minor against his experience

2) The law should not cause unnecessary hardship to adults who deal fairly with minor


Position under English Law

A contract entered by a minor is either valid OR voidable.

Valid :if SM are necessaries Voidable at the minor’s option : if SM are

not necessaries. The Minor’s Contract Act 1987.


English Law

• Voidable in two senses1) Contract in which minors acquired interest

of a permanent and continuous in nature2) Contract not continuous in nature : not

binding unless he ratified them within reasonable time after majority.


English Law

1) Tan Hee Juan v The Boon Keat [1934] MLJ 96

Hereford J : The Privy Council have held that the effect of sections 10 and 11 of the Contract Act of India is that an infant cannot make a contract within the meaning of the Act and that a contract made by an infant is not only voidable but also void.. The decision of the PC is binding on this court, and therefore there can be no doubt that those transfer are void.


Cases in Malaysia

Leha Jusoh v Awang Johari [ 1978] 1 MLJ 202 Appellant : an adminitratix Respondent : minor.


Cases in Malaysia

- A person who has not reached the age of majority

- Age of Majority Act 1971 : 18 years- All contracts entered by minor shall be void.- Served as protection for minor against any

consequences of its own action


1) Minor

Exceptions; 1) the capacity of any person to act in

matters relating to marriage, divorce, marriage, dower and adoption

2) The religion and religious rites and usages of any class of person within Malaysia

3) any other written law fixing the age of majority


- where a minor enters into a contract of necessaries, eg for food, clothing, medical services and education

Section 69 : If a person, incapable of entering into a contract, or anyone whom is legally bound to support, is supplied by another person with necessaries suited to his”condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.


Necessaries

Word necessaries was not defined in the Contract Act.

Under section 69 : what is supplied must be suited to the minor’s condition in life.


Necessaries

• Validity of a scholarship agreement entered by minor with Government of M’sia.

• Chang Min Tat : Definition of necessaries :• “In my view, the word ‘necessaries’ must be

construed broadly and in any decision involving whether what are supplied are or are not necessaries, it is incumbent to have regards to the facts of the case, the conditions and circumstances in which the supply was made and the purpose which is served,


Government of Malaysia v Gucharan Singh & Ors [ 1971] 1 MLJ 211

A minor’s liability to pay for necessaries supplied under section 69 does not arised from contract.

However, the provision for professional or vocational trainign for the minor in a Teacher’s Training Institution to enable him to qualify for and accept the appointment as teacher is a provision of necessaries.


Sec 4 (a) Contract Amendment Act 1976 “Notwithstanding anything to the contrary

contained in the principal act, no scholarship agreement shall be invalidated on the ground that

(a) the scholarship entering into such agreement is not of the age of majority

(b) Such agreement is contrary to any provisions of any law in force relating to money lenders

(c) such agreement lacks consideration


Scholarships

Section 5 : Remedy in the event of breach


Scholarships

Section 2 of English SOGA 1893 : goods suitable to the condition in life of such and infant and to his actual requirements at the date of sale and delivery.

Nash v Inman [1908} 2 KB 1


Necessary Goods

• 1) The Employment Act 1955• 2) the Children and Young Persons

(Employment) Act 1966• Section 13 : any child or young person shall

be competent to enter into a contract of service under this Act other wise than as an employer and may sue as plaintiff without his next friend or defend any action without a guardian ad litem.


Contract of Employment

Exception to the general rule Rajeswary v Balakrishnan (1958) 3 MC

178 : a contract to marry entered into by minor are distinguishable form other classes of contract and do not come with the principle laid down in Mohari Bibee


Marriage Contract

Section 4 (a) of the Age of Majority Act 1971 nothing in the Act shall effect the capacity

of any person to act in the following matters, namely marriage, divorce, dower and adoption.


Capacity 1

Documents

zuraidah ali

voidable contract

effect of contract

contract of necessaries

indian contract act

nature contract

senses contract

minors contract act