Under Section 11 of the Act, a person is competent to contract if they meet three criteria:
- They have attained the Age of Majority (18 years under the Indian Majority Act).
- They are of Sound Mind (capable of understanding the terms and making rational judgments).
- They are not disqualified from contracting by any law (e.g., alien enemies, convicts, insolvents).
1. The Absolute Status of a Minor's Agreement
What happens if an adult enters into an agreement with a minor? In India, the law is extremely protective of minors.
📜 Landmark Case: Mohori Bibee v. Dharmodas Ghose (1903)
A minor, Dharmodas Ghose, mortgaged his house to a moneylender to secure a loan of Rs. 20,000. The moneylender's attorney knew the borrower was a minor. Later, the minor sued to cancel the mortgage. The Privy Council held that a minor's agreement is void-ab-initio (void from the very beginning). The mortgage was cancelled, and the moneylender was not allowed to recover the money.
A minor, Dharmodas Ghose, mortgaged his house to a moneylender to secure a loan of Rs. 20,000. The moneylender's attorney knew the borrower was a minor. Later, the minor sued to cancel the mortgage. The Privy Council held that a minor's agreement is void-ab-initio (void from the very beginning). The mortgage was cancelled, and the moneylender was not allowed to recover the money.
2. Key Rules Protecting Minors
- No Estoppel: If a minor lies about their age to induce a contract, they are not stopped (prevented) from pleading minority in court later. The law protects the minor over the deceived adult.
- No Ratification: A minor cannot confirm (ratify) a contract made during minority after reaching 18 years of age. A fresh agreement with fresh consideration must be made.
- Necessaries Supplied (Section 68): If a person supplies a minor with "necessaries" suited to their condition in life (e.g., food, medicine, education), they can recover the cost from the minor's estate. The minor is never personally liable.
- Beneficial Contracts: A minor can be a promisee or a beneficiary (e.g., a minor can be a mortgagee or a beneficiary in a trust) because the contract does not impose any liability on them.
3. Soundness of Mind (Section 12)
A person is of sound mind if, at the time of making the contract, they can understand its consequences.
- Idiots: Permanent lack of reason. Agreements are always void.
- Lunatics: Periods of sanity and insanity. They can contract during a "lucid interval" (a period of temporary sanity).