Competency of the parties to contract . Indian Contract Act 1872

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Definition: Section 11 of the ICA specifies that every person is competent to contract if they have attained the age of majority prescribed by the law to which they are subject. In India, the age of majority is 18 years old.
Implications: Minors (persons below the age of 18 years) are generally not competent to contract. Contracts entered into by minors are voidable at their option, meaning they can either enforce or avoid the contract upon reaching majority or shortly thereafter. This protection is intended to safeguard minors from entering into agreements that they may not fully understand or benefit from.

Criteria: Section 12 of the ICA states that a person is considered to be of sound mind for the purpose of making a contract if, at the time of making the contract, they are capable of understanding it and of forming a rational judgment as to its effect upon their interests.
Test: The test of soundness of mind is whether the person understands the nature and consequences of the transaction they are entering into. Factors such as mental illness, intoxication, or temporary incapacity due to illness or medication may impair someone’s ability to contract.
Implications: Contracts made by persons of unsound mind, or those who are unable to understand the terms and consequences of the contract due to mental incapacity, are voidable at their instance. This protects individuals who may not be able to fully comprehend the implications of their actions due to mental impairment.

Categories: Apart from minors and persons of unsound mind, certain other categories of individuals are also disqualified from entering into contracts under specific circumstances. For example:
- Persons disqualified by law: Individuals disqualified by any law to which they are subject cannot enter into contracts. This may include individuals who are bankrupt or individuals involved in certain professions or occupations where entering into specific contracts might be restricted or regulated.
Implications: Contracts entered into by disqualified persons are generally void or unenforceable. This prevents individuals who are legally restricted from entering into certain types of agreements from doing so, ensuring compliance with legal and regulatory requirements.

Essential Requirement: Section 14 of the ICA stipulates that consent is said to be free when it is not caused by coercion, undue influence, fraud, misrepresentation, or mistake.
Coercion: When consent is obtained under the threat of force or unlawful act.
Undue Influence: When one party dominates the will of another, typically due to a relationship of trust or authority.
Fraud: When one party intentionally misleads another or conceals material facts.
Misrepresentation: When false statements are made that induce the other party to enter into the contract.
Mistake: When both parties are mistaken about a fundamental aspect of the contract.
Implications: If consent is not free due to any of these factors, the contract may be voidable at the option of the aggrieved party. This protects parties from being unfairly coerced or misled into agreements that they would not have otherwise entered into.

Corporate Contracts: When a contract is entered into on behalf of a company or organization, the person representing the entity must have the authority to do so. This authority is typically derived from their position within the organization (e.g., directors of a company, partners of a partnership).
Implications: If the representative lacks the requisite authority, the contract may not be binding on the company or organization. This ensures that third parties dealing with corporations or other entities can rely on the authority of those entering into contracts on behalf of these entities.

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