Capacity to contract - Unsound Mind and Disqualification by law

1) A person who is not of sound mind is said to be of unsound mind. That is a person who is an      Idiot,lunatic,insane person is a person of unsound mind.


2) It has to be understood that a the person has to understand the nature of the contract he is entering into.He has to make rational judgement and understand the terms and conditions of the contract,for this purpose he has to be of sound mind. A person who is an idiot,lunatic and insane cannot understand the terms of the contract. Certain types of unsoundness of minds such as idiot are aquired since birth and others such lunacy and insanity are aquired later.

3) A person who is of unsound mind can be under lucid interval at certain times. Lucid interval is a state where he is not of unsound mind and can form a rational judjement about the terms of the contract.
At this state of lucid interval he can enter into a contract but if he has entered into a contract when he is not under lucid interval then that contract is void. Eg: A who is undergoing treatment at a mental asylum escapes from there and goes back to his native where he enters into a contract to sell his ancestral property.Such a contract is totally void as he is a person who was undergoing treatment at an asylum.

4) Drunken state- Mere drinking is not an hindrance to enter into a contract. But drunken state of mind is a hindrance to enter into a contract. When a person is so drunk that he cannot form a rational judgement about the terms and conditions of the contract then such contract is a void contract.But if he is at such a state of mind where he has consumed alchohol but he can still understand the terms and conditions of the contract then that contract is valid as he could understand the terms and conditions of the contract,that is why it is said that mere drinking is not an hindrance to contract.

5) Persons disqualified by law :

Certain persons are disqualified by law from entering into a contract,they are as follows :

1) Alien enemy- Persons from a country with whom India is in a state of war or is already at war with.
2) Criminals.
3) Illegal immigrants from foreign countries who do not have a valid passport and other necessary documents.

Readers are advised that the above blog is only to let the person reading get an idea of various capacity to contract and for easy understanding of the same. For wide knowledge of the same I would advice you to read a text book as that would have more illustrations and cases than I can possibly put up here.

Capacity to contract - Minor

Minor

1) A minor is a person who is below the age of 18. Anyone who has not attained the age of 18 is a minor.
A contract with a minor is void ab initio that is void since the beginning.A minor cannot enter into a valid contract. There are exceptions to a contract with a minor,which could be discussed later in the blog.

2) Minors position in a contract was established in the famous case mohiri bibi vs D.Ghose. In this case A who is a minor misrepresented his age and obtained a certain sum from a money lender. The money lenders agent knew that A was a minor but he kept quiet. Later when the debt became due A's mother m brought a suit as guardian and next friend of the minor A for cancellation of the deed and for declaration that the transaction was void.

The defendant argued that the minor and his representative were estopped under the indian evidence act 1872 which would be voidable. The court rejected the theory of estoppel brought by the defendant,opining that the defendants agent knew the age of the minor but kept quiet, and that agreement between minor and major is purely void. It gives full protection to every minor in India.

As a general rule a minors agreement is absolutely void, but there are certain exceptions to it such as:

1) Minor can be admitted to the benefit of transfer such as sale mortgage contracts. The guardian of the minor may enter into a contract with the other on the behalf of the minor for the minors benefit.

2) Minor can be admitted to the benefits of a partnership firm.There is no personal liability in this case.

3) It is allowed in law for a minor to elect to repay the debts that have been incurred during his minority after attaining majority.

4) A contract for the benefit of the minor entered into by the guardian can be specifically enforced.

5) Minor is liable for necessaries supplied to him during his minority. Education,food,clothing,house are necessaries and not anything luxurious. The liability is not personal. It pertains to the estate of the minor.

6) A guardian of a minor can enter into a contract of insurance on behalf of the minor,but it shall only be for minors goods are property and not the person of the minor.

7) When a joint document is executed by minor and a adult only the adult is liable in the contract.The document is void in respect of the minor and valid in respect of the major.

8) Marriage : Minors marriage is a voidable marriage.

7) Contracts of apprenticeship : The Indian apprenticeship act 1850 provides for service contracts to be entered into by the guardian of a minor on behalf of the minor for the minors benefit. Such contract is binding on the minor.

Doctrine of restitution

What has to be done if a minor misrepresents his age and obtains goods from another. Such person can take the goods back from the minor if the goods are still in the possession of the minor. If the minor has already sold the goods then such person has no remedy at all. The doctrine of restitution applies only to goods and not cash as in the case of mohiribibi vs D.ghose.This doctrine enables the aggrieved lender of the goods to regain possession of the goods if the goods are intact.

Consideration

Consideration is one of the essential elements of contract. Consideration can be defined as something in return. It can be called a recompense. That is the party's to the contract must get something in return out of it. The definition of offer has the words "to do or to abstain from doing". This doing or abstaining from doing amounts to consideration. If there is no consideration then there is no contract(there are exceptions to this which would be discussed later).

Features of consideration:

1)Adequacy : Consideration need not be adequate. It should be something in return. By adequate we mean that it should be adequate to the value of the thing received. But this adequacy is not a must. Eg:A agrees to pay 500 for a horse valued at 1000. Here the consideration is not adequate but there is consideration. Whats more important is that there should be some consideration and it need not be adequate.

2)Consideration must move at the behalf of the promisor: The consideration given should always move at the behest of the promisor.That is consideration must be given at the instruction of the promisor , if consideration is given according to the instructions of a third party then the promisor is not bound by it.

3)Consideration may be past,present or future :
Past consideration : Consideration to be paid for past acts it called past consideration. It is a consideration for what has already happened.

Present consideration : Consideration payable for what is being done currently is called as present consideration. It is a consideration paid for what is currently happening.

Future consideration : Consideration that is payable for future acts is called as future consideration. It is a consideration payable for something that will be done in the future.

4)Consideration may be given by promisee or anyother person: In India it is not a must that only the promisee must give consideration, consideration can be given by a third party also.

5)Forbearance to sue amounts to consideration: A person who has agreed to not to sue is said to give a good consideration.

6)Consideration must be legal - The consideration given must be legal and not illegal. If the consideration given is illegal then the contract becomes void as legality of consideration is an essential.

7)Consideration must be real and competent- This means that consideration should not be something illusionary and should be real, that is what exists and what is capable of being performed.

8)Consideration should not be something that promisor is already bound to do - There are certain things that a promisor is already bound to do and this does not amount to a good consideration. Eg: A contracts with B to deliver the goods by 9 am . Here A delivering the goods by 9 am is not a consideration as he is already bound to that.

Exceptions to no consideration no contract:

1)Past voluntary service: Any person who has come forward voluntarily in the past to do a service need not do it for a consideration and if the person receiving such service promises to pay ,then he is bound to pay he cannot breach the promise. Eg: A is a sick person and not able to look after his faily, B comes forward voluntarily and buys them all the necessaries. A promises to pay B later. Here A is bound by the promise though B has done it for no consideration at all.

2)Love and affection : When a person gives something to another out of love and affection for this there is no necessity of a consideration. Such agreement has to be in writing and has to be registered. eg: A agrees to pay his son B 1000 rupees in writing and gets it registered.

3)Agreement to pay a time barred debt: Any one who has agreed to pay debt under the limitations act need not do it for consideration. Any debt incurred by a person has to be repaid when it is due, if the debtor fail then it results in breach of promise. In this case the creditor as an aggrieved party can insist on performance by approaching the court of law. Law allows him three years to take any action. Otherwise the debt would be treated as a time barred debt as per the limitations act and he will not be able to recover it later.

4)As per Indian contract act there is no need for any consideration to start any agency.

5)There is no requirement of any consideration for any gift actually made. There need not be any nearness between the parties, even if there is any nearness there need not be any love and affection.

Acceptance

Acceptance as said in first blog is the second part of an agreement. ( agreement = offer + acceptance)

Acceptance can be defined as " when a person signifies his assent to do or abstain from doing something,which the offeror has offered him to do or to abstain makes an acceptance". In other words acceptance is made when a person signifies his assent to a proposal. A proposal when accepted becomes a promise. Thus acceptance is giving assent to a proposal and it has the effect of converting an offer into a promise.

Following are the essentials of a valid acceptance:

1)Consenus ad idem : Consesus ad idem mean agreeing to the same thing in the same sense. Thus the person accepting a proposal should agree to the same thing in the same sense as the offeror intended him to.

2)Communication: An acceptance should be communicated back to the offeror. It is essential that a person should be aware that the acceptance has been made in order to conclude it as an agreement. Communication can be express or implied. Express communication means written communication , Implied communication means that the acceptance is implied from the conduct of the parties.Eg: A has opened a cafe and B takes a seat there. Here B's conduct implies that he has accepted to take the services of the cafe.

3)Legal relationship : An acceptance should be made with the intention of creating a legal relationship. Legal relationship means either party can claim damages if either of them breach the contract. But all agreements do not create a legal relationshp. Eg: A agrees to B that they will meet for dinner at 9 , here if A does not turn up for dinner then B cannot claim damages as its only an agreement without legal relationship.

4)Absolute and unqualified acceptance: An acceptance should be absolute and unqualified. It should be accepted as the offeror has offered and not according to the wishes of the offeree.

5)Performance of the conditions of the offer is acceptance: In certain occasions performance of the conditions amounts to acceptance its not needed to be communicated. This applies in general offers, where any one from general public can fulfill the conditions in the offer and it would amount to an acceptance.

6)Offer should be accepted within the prescribed time : If there is a time mentioned in the offer then the acceptance should be given in the prescribed time and not after that. In the case where there is no time mentioned there the acceptance should be given in a reasonable time.

7) Cross offer ,counter offer- A cross offer and a counter offer doesn't not amount to acceptance. A cross offer is when the offeree offers to the offeror the same offer than he has been offered and counter offer is when the offeree offers a new offer with new conditions rejecting the offer received by him.

Revocation of acceptance -

In India an acceptance can be revoked before the communication of acceptance is completed against the offeree but not after that.

Following are the important points regarding revocation of acceptance :

1) Before communication : The offeree has to revoke the acceptance given before the communication of acceptance is completed against him.

2) When there is time given for acceptance the offeree needs to accept the offer only within that stipulated time but not after. but once he gives his acceptance it cannot be revoked.

3)A qualified acceptance would lead to cancelling the acceptance as an acceptance should be unqualified.

4) Grumbling assent : Grumbling assent is not a qualified acceptance provided it stops short of dissent.

5) Death and Insanity : Death of either party causes the offer to lapse. In India such death has to brought to the notice of the part before acceptance and the same applies in the case of insanity.

6)In an auction sale the acceptance of a bid may be of three kinds : Conditional acceptance,provisional acceptance,absolute acceptance.

7) If the terms of the proposal depend upon third party's discretion , in such circumstances the acceptor can revoke the acceptance.Where it is an essential condition to acceptance which is left to a third party, the acceptance can be said to be only qualified.