Capacity to Contract, Free Consent

Capacity to contract refers to the legal ability of a person to enter into a contract and be bound by its terms and conditions. In India, the Indian Contract Act, 1872 defines the capacity to contract under Section 11, which states that every person is competent to contract if they satisfy the following criteria:

  1. Age: The person must have attained the age of majority, which is 18 years in India. A person who has not attained the age of majority is considered a minor and lacks the capacity to contract.
  2. Sound Mind: The person must be of sound mind at the time of entering into the contract. A person who is of unsound mind or has been declared insane by a court of law lacks the capacity to contract.
  3. Not Disqualified by Law: The person must not be disqualified from entering into a contract by any law to which they are subject. For example, a bankrupt person is disqualified from entering into certain contracts.

It is important to note that a person who lacks the capacity to contract cannot be bound by the terms and conditions of the contract. Any contract entered into by a person who lacks capacity is void and unenforceable.

Exceptions to Capacity to Contract:

There are certain exceptions to the capacity to contract. They are:

  1. Minor’s Contracts: A minor has limited capacity to contract. Any contract entered into by a minor is voidable at the option of the minor. This means that the minor can either choose to enforce the contract or void it.
  2. Person of Unsound Mind: A person of unsound mind lacks the capacity to contract. However, if the person is under the care of a guardian or is declared of sound mind by a court of law, they can enter into a contract.
  3. Company’s Capacity to Contract: A company is a legal person and has the capacity to contract. The capacity of a company to contract is determined by its memorandum and articles of association.

Legal Provisions:

Section 11 of the Act provides that every person is competent to contract if they are of the age of majority, of sound mind, and not disqualified by any law to which they are subject.

Section 12 provides that a person who is of unsound mind cannot enter into a contract, unless they are capable of understanding the terms of the contract and its consequences.

Section 13 provides that a person who is disqualified from entering into a contract by any law to which they are subject cannot enter into a contract.

Free Consent

Free consent is an essential element of a valid contract under the Indian Contract Act, 1872. It means that the parties to a contract must enter into the agreement freely, without any undue influence, coercion, fraud, misrepresentation, or mistake. Here are some key features of free consent:

  • Absence of Coercion: Coercion refers to the use of force or threats to make someone enter into a contract against their will. Any agreement entered into by a person under coercion is voidable at the option of the coerced party.
  • Absence of Undue Influence: Undue influence refers to the use of one’s position of power to persuade another person to enter into a contract. Any contract entered into under undue influence is voidable at the option of the influenced party.
  • Absence of Fraud: Fraud refers to the intentional misrepresentation of facts to induce a person to enter into a contract. Any agreement entered into under fraud is voidable at the option of the defrauded party.
  • Absence of Misrepresentation: Misrepresentation refers to the unintentional misstatement of facts to induce a person to enter into a contract. Any agreement entered into under misrepresentation is voidable at the option of the misled party.
  • Absence of Mistake: Mistake refers to the erroneous belief about the facts of the contract. Any agreement entered into under a mistake of fact is voidable at the option of the mistaken party.

Legal Provisions:

  • Section 14 of the Act provides that consent is said to be free when it is not obtained by coercion, undue influence, fraud, misrepresentation, or mistake.
  • Section 15 provides that a contract is said to be induced by “coercion” when one party commits or threatens to commit any act which the Indian Penal Code defines as an offense, or unlawfully detains or threatens to detain the other party or any person dear to them with an intention to cause harm or loss.
  • Section 16 provides that a contract is said to be induced by “undue influence” when one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
  • Section 17 provides that a contract is said to be induced by “fraud” when one party makes a false representation, with an intention to deceive the other, and the other party enters into the contract based on that false representation.
  • Section 18 provides that a contract is said to be induced by “misrepresentation” when one party makes a statement which is not in accordance with the facts, but the other party enters into the contract based on that statement.
  • Section 20 provides that a contract is voidable if it is entered into based on a mistake of fact, which is fundamental to the contract.

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