Business Environment and Law-Law Of Contract (Indian Contract Act 1872)
Persons Of Unsound Mind-Law Of Contract
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According to Sec.11 only a person of sound mind can make a contract. Sec. 12 further defines the term sound mind in these words, “A person is said to be of sound mind for the purpose of making a 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 his interest…”. Thus two essentials of ‘Sound Mind’ emerge from this definition:
Persons
Of Unsound Mind
According to Sec.11 only a person of sound mind can make a contract. Sec. 12 further defines the term sound mind in these words, “A person is said to be of sound mind for the purpose of making a 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 his interest…”. Thus two essentials of ‘Sound Mind’ emerge from this definition:
(1) Capacity to understand: and (2)Capacity to make a rational judgment
There must be free and full consent of the parties so as to bind them to the contract. Consent is an act of reason accompanied by deliberations. It is due to the absence of rational and deliberate consent that conveyance and contracts of persons of unsound mind are deemed to be invalid. A person of unsound mind may be divided into two broad categories:
Idiots: An Idiot is one who has lost mental powers completely, i.e., his brain has not developed enough to enable him, at all to understand the contract or of forming a rational judgment of its effects upon his interest. Hence an agreement with him is always void. However, he can be sued for necessaries of life supplied to him or to anybody dependent upon him.
Lunatic: Lunacy arises from the illness of the brain or mental or bodies distress. The essential element of lunacy is that the mental powers of the lunatic are so deranged that he cannot make a rational judgment of any subject the period of lunacy.
An agreement made with a person who is suffering from lunacy at the time of entering into the contract, is void (Sec. 10).
Alien Enemy : A citizen of a foreign country is known as an alien.
Foreign sovereigns and their Ambassadors. Foreign sovereigns and their Ambassadors in India can enter into contracts with Indian citizens and can sue them in Indian courts but no suit can be filed against them in local courts unless the permission of the Central Government to this effect has been obtained.
Corporation: A corporation is an artificial person created by law. Being a legal person only, it cannot act by itself. It has to act through some agent. Its contractual capacity suffers from the following limitations:
(a)Natural Limitation: (b) Legal Limitation:
Insolvents: When a person is adjudged insolvent, he loses contractual powers over his property.
Convicts: A person against whom a sentence of imprisonment is passed loses the capacity to contract.
Married women: A married woman used to suffer from certain disabilities with regard to making of contracts under English Law before 1935. A woman, married or single, in Indian Law, is under no disability as regard, entering into contracts with regard to the property that belongs to her (e.g. Stridhan of a married women). Her contracts can be enforced against her husband’s property if he has failed to provide necessaries of life to her and the contract relates to necessaries of life.
“The term free consent consists of two requirements viz.: (i) There should be consent: and (ii) Consent should be free.
According to Sec.11 only a person of sound mind can make a contract. Sec. 12 further defines the term sound mind in these words, “A person is said to be of sound mind for the purpose of making a 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 his interest…”. Thus two essentials of ‘Sound Mind’ emerge from this definition:
(1) Capacity to understand: and (2)Capacity to make a rational judgment
There must be free and full consent of the parties so as to bind them to the contract. Consent is an act of reason accompanied by deliberations. It is due to the absence of rational and deliberate consent that conveyance and contracts of persons of unsound mind are deemed to be invalid. A person of unsound mind may be divided into two broad categories:
Idiots: An Idiot is one who has lost mental powers completely, i.e., his brain has not developed enough to enable him, at all to understand the contract or of forming a rational judgment of its effects upon his interest. Hence an agreement with him is always void. However, he can be sued for necessaries of life supplied to him or to anybody dependent upon him.
Lunatic: Lunacy arises from the illness of the brain or mental or bodies distress. The essential element of lunacy is that the mental powers of the lunatic are so deranged that he cannot make a rational judgment of any subject the period of lunacy.
Effects of agreements made by persons of unsound mind
An agreement made with a person who is suffering from lunacy at the time of entering into the contract, is void (Sec. 10).
Other Disqualifications
Alien Enemy : A citizen of a foreign country is known as an alien.
Foreign sovereigns and their Ambassadors. Foreign sovereigns and their Ambassadors in India can enter into contracts with Indian citizens and can sue them in Indian courts but no suit can be filed against them in local courts unless the permission of the Central Government to this effect has been obtained.
Corporation: A corporation is an artificial person created by law. Being a legal person only, it cannot act by itself. It has to act through some agent. Its contractual capacity suffers from the following limitations:
(a)Natural Limitation: (b) Legal Limitation:
Insolvents: When a person is adjudged insolvent, he loses contractual powers over his property.
Convicts: A person against whom a sentence of imprisonment is passed loses the capacity to contract.
Married women: A married woman used to suffer from certain disabilities with regard to making of contracts under English Law before 1935. A woman, married or single, in Indian Law, is under no disability as regard, entering into contracts with regard to the property that belongs to her (e.g. Stridhan of a married women). Her contracts can be enforced against her husband’s property if he has failed to provide necessaries of life to her and the contract relates to necessaries of life.
Free Consent
“The term free consent consists of two requirements viz.: (i) There should be consent: and (ii) Consent should be free.
Consent: The term consent is defined by Sec. 13 as “Two or more persons are said to consent when they agree upon
the same thing in the same sense”
Free
Consent: “Consent is said to be free when it is not caused by:
(1) Coercion, as defined in section 15, or: (2) Undue influence as
defined in section 16, or: Fraud, as defined in section 17, or: (4)
Misrepresentation, as defined in section 18, or: (5) Mistake subject to the
provisions of sections 20, 21 and 22. Consent is said to be so caused when it
would not have been given but for the existence of such coercion, undue
influence, fraud, misrepresentation or mistake.” (Sec.14)
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