Competency of Parties to Contract

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Competency of parties to contract:

S.11 of the Contract Act provides that “every person is a 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 form contracting by any law to which he is subject.”

Age of Majority:

Under S.3 of majority of act, 1875, where a guardian is appointed by court, the minority continues till the age of 21 years, and a contract entered into by the minor before he attained the age of 21 is void. In all other cases, minor is deemed to have attained his majority at the completion of the eighteen year.

Contract with a minor:

Contract with a minor is a void ab-initio and no rights and liabilities arise out of such contract. Minor cannot be burdened with liability of a void contract. Court, in a suit brought by minor to get such contract avoided. Court can validity refuse relief to him till realization of benefits received by minor from his contracting party. (2002 CLC 1006 (b)).

Faqir Muhammad Vs. Zahoor Ahmed:

Contract by minor was void and that fact did not need a declaration by a court or any incidental proceedings. One it was admitted or proved before a court that minor was a party to a contract sought to be enforced against him, same could not be enforced against him on ground that it was void agreement. (2003 YLR 874 (b)).

Contract on behalf of minor:

Contract entered into on behalf of and for benefit of minor by father valid (1990 (CLC 1755)).

Burden of proof and estoppel:

The burden of proofing minority lies on the party, who alleges that he was a minor, at the date of contract. Where a minor enters into contract by representing that he was of a full age he is not estopped from pleadings his minority in avoidance of the contract, because a deed executed by a minor is nullity and incapable of founding a plea of estoppel.

Unsound Mind:

Persons insane and person disqualified by law are treated in the section ejusdem genersis with  minors without reservation, modification or qualification of any kind. Therefore, a contract by a person of unsound mind is void ab initio and not merely voidable.

What is a sound mind for the purpose of Contracting:

Section 12 states that “a person is said to be of sound mind for the purpose of making of contract if, at the time when he makes it, he is capable of understanding it, and of forming a rational judgment as to its effect upon its interest.”

Effect:

Contract by person under disability. Void. (2005 YLR 3158).

Muhammad Bashir Vs. Walayat Begum:

In the absence of sound mind no contract can be entered at all, such a contract will be void ab initio and not merely voidable. (PLD 1967 Lah. 391)

Disqualification to contract under other laws:

Agreement by disqualified persons are void. Where a person entered into a agreement to sell while was under a statutory disability to sell and in pursuance of that void agreed he executed the sale-deed before his disability ceased, it was held that sale could not be enforced.

Law to which he is subject:

According to section 11, the age of majority as well as the disqualification from contracting is to be determined according to the law to which the party contracting is subject in this connection three rules are mentioned.

  1. Law of Domicile of the party.
  2. Lex Loci Contract.i.e; the place where the contract a made in the case of what are usually described as ordinary mercantile contracts.
  3. Lex Loci, the place where the land is situated in the case where the contract relates to land.

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