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Indian Contract Law

Who Can Enter Into Contract?

A person who

1. is of the age of majority according to the law to which he is subject
2. is of sound mind – 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 judgement as to its effect upon his interests.
3. is not disqualified from contracting by any law to which he is subject

is competent to contract.

Therefore a minor is not competent to contract and an agreement by a minor is void ab initio. He can not ratify an agreement on attaining the age of majority and validate the same. (Void ab initio means it has at no time had any legal validity).

The following persons are therefore incompetent to contract

1. Minors
2. Persons of unsound mind
3. Persons disqualified by law to which they are subject

Essential Of A Valid Contract

All agreements are contracts if they are made

1. BY THE FREE CONSENT OF PARTIES competent to contract - Consent is said to be free if it is not caused by
   • Coercion - Consent is said to be caused by coercion when it is obtained by pressure exerted by either committing or threatening to commit an act forbidden by the Indian Penal Code or unlawfully detaining or threatening to detain any property.
   • Undue influence - A contract is said to be induced by ''undue influence'' where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
   • Fraud - Means and includes the following acts done with the intention to deceive or to induce a person to enter into a contract. (a) the suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true (b) active concealment of a fact by a person who has knowledge or belief of the fact, (c) promise made without the intention of performing it.
   • Misrepresentation - When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true, it is misrepresentation. A breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is also a misrepresentation.
   • Mistake - Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. An erroneous opinion as the value of the thing, which forms the subject matter of the agreement, is not deemed as mistake as to a matter of fact. Unilateral mistake, i.e. the mistake in the mind of only one party does not affect the validity of the contract.
2. For A Lawful Consideration And Object -

   Consideration or object is unlawful if

   1. It is forbidden by law.
   2. Is of such a nature if permitted it would defeat the provisions of any law.
   3. It is fraudulent.
   4. The court regards it immoral.
   5. The court regards it opposed to public policy. Every agreement of which the consideration or object is unlawful is void.
3. Not Expressly Declared To Be Void.