Persons disqualified from entering into a contract

A contract may be defined as an agreement enforceable by law.

A contract may be defined as an agreement enforceable by law.

A contract must satisfy the provisions of Section 10 of the Indian Contract Act, 1872 to be legally enforceable. The requirements are:

  • Section 11 & 12 – The parties must be competent
  • Section 14 – The parties entering into the contract should do so on their own will/free consent without any undue influence or coercion.
  • Section 23 – The object of the contract should be lawful and it must have a legal consideration
  • Not expressly declared void contracts

Persons not competent to contract

As per Section 3 of the Indian Majority Act, 1875 that ever person domiciled in India on attaining the age of 18 years becomes a major, in case a guardian is appointed by the court then they have to complete 21 years to attain majority. Mohri Bibi v. Dharmodas Ghose, it was held contact entered into by a minor is not void from the beginning, as per Section 64 of the Indian Contract Act, 1872 does not apply against minor as these contract should be able to make contracts, the principle of restriction cannot apply as the parties were aware that contract was being done with a minor, under Specific Relief Act, 1963, the minor may be compelled to return the benefits availed uner zero contract, but in this case the court does not think it is appropriate as the fact that he was a minor was known by the appellant.

As per Section 12 of the Indian Contract Act, 1872 a person has to be of sound mind to enter into a contract. By sound mind it is meant that the person should have the mental capacity to comprehend the consequences of entering into a contract.

As per Section 11 the persons “disqualified from contracting to any law to which they are subject” are:

  1. Alien enemies

An alien is a person from different country living in India. An alien fried is a person whose country has friendly ties or neutral diplomatic status with India. An alien enemy is a person from a country who is at a war status with India. A contract with an Alien friend is valid in India but a contract with Alien enemy is void. No contract can be made with an alien enemy during war without prior approval from the Government of India.

In Feroza Begum And Ors. V. Dewan Daulat Rai Kapoor And Ors on 18th December, 1973, observed that Section 83 of the Code of Civil Procedure says “Alien enemies residing in India with the permission of the Central Government, and alien friends, may sue in any Court otherwise competent to try the suit, as if they were citizens of India but alien enemies residing in India – without such permission or residing in a foreign country shall not sue in any such court.”

  • Convict

When a person is sentenced to death or life imprisonment by a competent court they are called convict. A convict cannot enter into a contract while serving his sentence. However, after his sentence is over or he is pardoned, his incompetency also dissolves.

But this concept was removed by Criminal Justice Act, 1948. In India till 1921, the offender was disabled from the right to sue for any injury in case of offence of forfeiture of the property.

  • Insolvent

A person is said to be insolvent when he has a debt balance in his capital account unable to bring in the necessary cash to make up the deficiency.

An insolvent person before an ‘order of discharge’ is competent to enter into certain types of contract. For example – he is capable of incurring debts, purchase property or ben an employee but he cannot sell his property which vests in the official receiver.

In Vraj Kuwar Bai v. Kunjbiharilal Krishna Chandra, AIR 1971 MP 109, it was held that meaning of property means the personal property of an insolvent, which he can dispose of whenever he wants.

In Banarasi Das v. Bhagat Ram, AIR 1934 Lah 683, it was held that the trust property held by an insolvent is not his property.

There are certain disqualifications too, for example – he cannot be a magistrate or a director of a company or a member of local body but he has the contractual capacity except with respect to his property.

There remains no prohibition against a contract by an insolvent after the insolvency proceedings are commenced but before adjudication.

  • Joint Company and corporation

A company or corporation is an artificial person created by law. It cannot enter into contracts outside the powers conferred upon it by its Memorandum of Association or by the provisions of its special Act. They are not barred from entering into contracts concerning only their personal nature.

  • Foreign sovereigns and Ambassadors

Foreign sovereigns and ambassadors have the capacity to enter into contract and can sue to enforce the contract in the court of law but they cannot be sued in the Indian Courts except in two cases:

  • Where they voluntarily submit themselves to the court.
  • Where the person intending to sue them obtains the approval of the Central Government.

They are privileged in case of proceedings in the court are ordinarily considered incompetent to contract.

As per Sections 86 and 87 of the CPC,” a suit against a foreign sovereign without the consent of the Central Government is only permissible where the plaintiff is a tenant under the foreign sovereign and the suit relates to lands held by him.

Otherwise, the permission of the Central Government is mandatory, and when permission has been applied for and refused by the Government, it is not open to the court to question the propriety of the order refusing consent”, Harbhajan Singh Dhalla v. Union of India.

Thus, it can be said that an aggrieved party has the right to file a suit against his wrongdoer but there are certain limitations where few categories of people can sue, or be sued, subject to the permission of the Central Government.


Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.


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In the year 2021, we wrote about 1000 Inspirational Women In India, in the year 2022, we would be featuring 5000 Start Up Stories.

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