One of the essentials of the valid contract mentioned in Section 10 of the Indian Contract Act, 1872 is that parties should be competent to make a contract.
According to section 11:-
Every person who has attained 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, is competent to enter into a contract.
It means that the following three categories of people are not competent to enter into a contract:–
- A person who has not attained the age of majority i.e., one who is a minor
- A person who is of unsound mind.
- A person who has been disqualified from contracting by some law.
Who is a minor?
Section 3 of the Indian Majority Act,1875 provides for 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.
The position of a person with unsound mind
Why the sound mind is important at the time of the contract is mentioned in section 12 of the Indian Contract Act, 1872. According to section 12, a person is required to be of sound mind at the time of making a contract so that, he is capable of understanding it and of forming a rational judgment as to its effect upon its interests.
The soundness of mind is required only at the time of making a contract. It is possible that a person is usually of unsound mind, but occasionally of a sound mind, so he can make a contract during lucid intervals, i.e., at such intervals when he is of sound mind. Thus, a patient in a lunatic asylum, who is at intervals of sound mind, may contract during those intervals.
The onus of proving unsoundness of mind of a person always rests upon him who alleges such a state of mind of a person.
Another important thing to be noted in this aspect is that the parties should enter into the contract with their free consent. According to section 14, consent is said to be free when it is not caused by –
Coercion according to section 15 means committing or threatening to commit, any act, or unlawful detention or threatening to detain, any property, with the intention of causing that person into the agreement.
Undue influence according to section 16 means Influence by which a person is induced to act otherwise than by his own free will or without adequate attention to the consequences thereafter.
Fraud according to section 17 means wrongful deception intended to result in that person to enter into a contract.
Misrepresentation according to section 18 means the action or offense of giving a false or misleading account of the nature of something, here terms of the contract.
A mistake is subject to provisions of sections 20, 21 and 22. It generally means an erroneous belief, at contracting, that certain facts are true.
All other persons, not falling into the above-mentioned categories, are competent to enter into a contract and thus will be legal parties to contracts.
All the provisions of the Indian Contract Act, 1872 will be legally binding on them.