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Who Is Incompetent to Contract in India?


Trade and commerce are built on contracts. They lay out the system for different exchanges and arrangements. An agreement is a legitimately perceived understanding that frames the obligations, qualifications, and arrangements accessible to all gatherings. To ensure that agreements are legitimate and observe lawful guidelines, it is essential to understand the idea of capability in making them. In India, as in other legal jurisdictions, no one but some can participate in agreements, and certain limitations apply. This article investigates who is viewed as incompetent to contract in India. It delves into the legal requirements and restrictions governing this crucial part of contract law.

What Is a Contract?

Before we investigate the intricacies of skill in framing contracts, we should lay the foundation by developing an essential cognizance of agreements. An agreement addresses a lawfully restricting accord that outlines the privileges and duties of at least two gatherings. To accomplish validity, an agreement should stick to different fundamental parts; for example, 

  • Offer and Acceptance: A clear-cut offer from one party and an unambiguous acceptance from the other is essential. 
  • Free Consent: All elaborate gatherings should willingly agree to take part in the agreement without pressure, false exercises, unjustifiable impact, or deception. 
  • Legal Thought and Object: The agreement should include lawful thought (something of significant worth traded) and have a lawful article (the understanding’s motivation should not be unlawful). 
  • Intention to be Legally Obligated: The gatherings should plan to make lawful relations and be limited by the agreement terms.

Understanding Competency in Contract Formation

Skill, on the other hand, is called a legally binding limit, which relates to the legal capacity of a person to take part in an agreement. It ensures that the gatherings referred to have the expected mental and legal aptitude to comprehend and be obliged by the contract’s provisions. In India,

Section 11 of the Indian Contract Act 1872 layouts the standards for figuring out who can contract:

  • Age of Majority: To be considered capable of going into an agreement, an individual priority accomplished the age of majority. In India, the age of majority is characterized as 18 years. 
  • The soundness of Mind:  Capability additionally expects that the individual is of sound mind. This implies they should understand the nature and outcomes of the agreement. A person of unstable mind, while agreeing, isn’t considered able to contract. 
  • Not Disqualified by Law: The individual should not be disqualified from shrinking by any material regulation. Several legal provisions may disqualify individuals from entering certain types of contracts. Familiarity with these legitimate limitations is fundamental to ensure the contract’s legitimacy.

Minors: Incompetent to Contract

Clumsy to Agreement One class of people considered clumsy to contract in India is minors. According to the arrangements expressed in Segment 3 of the Indian Greater Part Demonstration of 1875, people under 18 are viewed as minors in India. By and by, there is an exemption for this standard if a court has delegated a gatekeeper to care for the government assistance or resources of the minor. At times, the minor holds their status as a minor until they turn 21. 

Nature of Agreement with Minors

  • Sections 10 and 11 clarify whether the minor’s agreement can be revoked at his option or void. This prompted a discussion about the minor’s contract, which was settled in the Privy Committee choice in Mohiri Bibi v. Dharmodas Ghosh. 

  • The Privy Council decision in Mohiri Bibi v. Dharmodas Ghosh held that a minor’s understanding was invalid and void. The minor needs to be considered skilful to agree or give any thought.

Summary of Mohiri Bibi V. Dharmodas Ghosh

The court’s decision, in this case, can be summarized as follows:

  • When a minor agrees, it is considered null and void. This means the minor cannot legally enter a contract or provide any consideration. 

  • In a court case where a plaintiff was aware of the minor’s age, the court did not consider the doctrine of estoppel against minors. The court stated that it would not apply in this case.

  • Section 64 does not apply as it applies to voidable contracts, and the minor’s agreement is void ab initio. Section 65 is also inapplicable as it deals with subsequent void ab initio or agreements discovered to be void. At the same time, the minor is not competent to contract.

  • If justice requires it, the court may order compensation under Section 41 of the Specific Relief Act. However, in this case, the court didn’t order any compensation because the plaintiff was aware that the minor was underage.

Effect of a Minor’s Agreement

A minor’s agreement is considered void ab initio, making the contract null and void from the beginning. Legal principles like estoppel and restitution do not apply to minors in such cases. Moreover, an agreement entered into by a minor cannot be legally validated as it is considered invalid from the beginning. However, suppose a minor receives goods and services. In that case, the individual providing them can seek reimbursement from the minor’s assets by Section 68 of the Indian Contract Act.

People of Unstable Mind: Incompetent to Contract

  • In India, Section 12 of the ICA governs the legally binding risk of people of unsound mind, including those who are drunk. Under this part, an individual is viewed as of sound mind on the off chance that they can understand and shape an objective judgment about the agreement’s impact on their interests when making it.

  • If an individual is mostly of unsound mind, they can agree when they are of sound brain. In any case, if they are by and large of sound mind, they can’t go into an agreement when they are of unsound mind. 

  • The primary variable is whether the individual could judge that going into the agreement was in their interest at the time of agreeing.

Distinguishing Between Sound and Unsound Mind

As per Section 12, an individual is regarded as of sound mind if they can comprehend the contract and make rational judgments. This means that someone who is generally sound of mind but occasionally experiences unsoundness of mind can engage in a contract during their lucid intervals. Conversely, an individual generally of unsound mind but occasionally of sound mind can only agree during their sound mind periods.

Legal Position of Persons of Unsound Minds

Under the Indian Contract Act, people of unsound minds are viewed as bumbling to contract. In contrast to English law, where simple shakiness of mind doesn’t act as protection, a contract made by an individual of unsound mind is void in India.

Disqualified Persons: Incompetent for Contract

Specific individuals are disqualified from entering into contracts due to their legal, political, or corporate status. These disqualified persons are also considered incompetent to contract. Let’s explore some of these categories:

Alien Enemy:

According to the Indian Contract Act, contracts made with citizens of countries where India is at war, also known as alien enemies, are void. An Indian resident living in an outsider hostile area is likewise treated as an outsider adversary under contract law. Contracts signed before the war either remain suspended and are revived after the war, provided they are not prohibited by limitation, or they are dissolved if they are against public policy.

Foreign Sovereigns and Diplomats:

Foreign sovereigns have explicit privileges and immunities, ordinarily delivering them safe to lawful activities except if they willingly subject themselves to the jurisdiction of Indian courts. Additionally, they face limitations in entering into contracts unless an Indian citizen secures prior authorization from the Government of India to initiate legal proceedings against them in an Indian court of law.


A convict cannot enter into a contract while serving their sentence. However, they regain their capacity to enter into a contract upon completion of their sentence.

Illustration: A is serving their sentence in jail. Any contract signed by them during this period is void.


An insolvent is someone unable to meet their debt obligations as they come due. While no specific prohibition prevents an insolvent from engaging in contracts after insolvency proceedings have started before adjudication, they are typically considered incompetent to contract until formally discharged by a court of law.


The ability of a corporation to enter into contracts varies depending on its nature. As an artificial legal entity, a company is generally competent to contract. However, its contracting power may be subject to certain limitations imposed by law or its constitution.


From the above conversation, it is clear that only those competent to contract are central, sound minds and not disqualified by legal regulation. A person who has been diagnosed with mental illness and is unable to carry out their responsibilities may be deemed intellectually clumsy by a judge. A guardian is designated to deal with an individual’s property and undertakings when considered incapable.

G.Durghasree B.A.B.L (Hons)

G Durghasree B.A.B.L (Hons) is a registered trademark attorney with extensive experience as an Advocate for a period of 8 years. She possesses expertise in trademark law, including trademark filing and trademark hearings. Additionally, she is skilled in contract drafting and reviewing, providing legal advice and opinions, particularly in the areas of Company Law, Insolvency and Bankruptcy Code (IBC), and Goods and Service Tax Law (GST). Her experience encompasses both litigation and non-litigation aspects of these laws.