Valid Contracts

Under S.10, agreements are contracts, if they are made by:

Free Consent

• of parties competent to contract 
• for lawful consideration and a lawful object and 
• are not expressly declared to be void. 


Competency:

S. 11 Every person is 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 from contracting by any law to which he is subject.

A. Agreement by a minor

An agreement made by a minor is void and cannot be enforced in a court of law. If obligations are imposed on a minor, the agreement will be considered void and such obligations cannot be enforced against the minor.

Example: (The case Mohori Bibi v Dharmodas Ghose) Aminor borrowed a sum of money after mortgaging his property. The mortgages approached the court for getting his money back. The Privy Council (highest court prior to the Supreme Court) held that the sum couldn’t be claimed because an agreement with a minor is not valid.

No estoppel against a minor:

Estoppel essentially means, when a person by communicating in written or oral form, or even by such a conduct that leads the other person to believe it to be true, and then the person acts after having believed in it. Then he is prevented from denying the truth of that thing. A minor cannot be estopped from pleading minority and can therefore escape liability on ground of minority.

Example: (Leslie v Sheill) The boy borrowed sum of money claiming falsely to be an adult. He later tried to defend himself by stating that he is a minor hence he is not liable to pay any money. In this case the court held that the rule of estoppel does not apply against minors and held that the boy was not liable.

B. The Position of a Person of Unsound Mind

Only a person of sound mind is competent to contract. The position of a person of unsound mind is similar to that of a minor, a contract entered by him is void ab initio, it is treated as though it was void from the beginning, implying thereby that it never came into being. He is not capable of transferring any property by any kind of deed, of sale or gift or any other kind and a transfer by him would be void ab initio, i.e void from the very inception.

Contracts by Lunatics: In India, contracts by persons of unsound mind are void altogether. It is not necessary to prove that the person dealing with the person of unsound mind knew that the person was unsound. So the party pleading unsoundness has the burden of proof to prove unsoundness at the time of entering into the contract. There is a presumption of sanity and if the contract is made during the ‘sane period’ then it is valid.

Contracts by Drunkards: Contract by a person in a state of drunkenness is absolutely void and incapable of ratification. The legal position of a contract by a drunken person would depend upon whether or not the other contracting party fraudulently took advantage of his mental state. 


Contracts by Insolvents: There is nothing in the contract act to prohibit a contract by an insolvent after commencement of insolvency proceedings, but before adjudication. 


Consent:

One of the prerequisites for a valid contract is that both parties should have given their consent and the consent should be free.

According to the provisions of the Contract Act, unless two or more persons agree to the same thing in the same sense, there is deemed to he no consent on their part. In other words, there may be absence of meeting of minds of the parties, or there may be no consensus ad idem. In such cases, there arises no contract, which can be enforced.

Example: Let us consider the example of Raffles v Wichelhaus, the buyer and the seller entered into an agreement under which the seller was to supply a cargo of cotton to arrive, ‘ex Peerless from Bombay. There were two ships of the same name, Peerless, and both were to sail from Bombay, one in October and the other in December. The buyer had in mind the Peerless sailing in October, whereas the seller thought of the ship sailing in December. The seller dispatched cotton by ship but the buyer refused to accept the same. In this case, the offer and acceptance did not coincide and there was no contract and, therefore it was held that the buyer was entitled to refuse to take delivery.

One of the essentials of a valid contract is that parties should enter into a contract with free consent. The two elements of free consent are:

1. presence of consent which essentially means parties agreeing and saying yes to an agreement.2. the consent should have been freely given.

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

(3) 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.

If consent is given under of the four circumstances, the contract is voidable. But in case of mistake, the agreement is void. Thus, it is essential for the formation of a valid contract that the consent is free on the part of both parties.

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