Business Regulation and Control Final Shankynew (2)
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Transcript of Business Regulation and Control Final Shankynew (2)
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Business Regulation and Control
PRESENTATION ONCompetency to Contract-
Contract with minorGroup No. 2
Presented By:-
Anshul Agrawal(09)Arpit Shukla(10)
Ekta Shah(17)
Mayank Bhadani(29)
Shanky Agrawal(42)Vineet Kumar(56)
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Contract An agreement enforceable by law is a contract.
When an agreement compels another to dosomething, or not to do something it is a contract.
Essential elements of a valid contract:-
1. Proposal and acceptance.
2. Consideration.3. Capacity of parties to contract- competent
parties.4. Free Consent.
5. Possibility of Performance.6. Enforceable by law.
7. Legal Relationship.
8. Certainty.
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Capacity of parties to contract-
Competent parties.
An agreement becomes a contract if itis entered into between the partieswho are competent to contract.
Every person is competent to contract:
I. Who is of the age of maturityaccording to the law which he issubject.
II. Who is of sound mind andIII. Who is not disqualified from
contracting by any law to which he
is subject.
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Contract by a minor Rules relating to
a minors contract
According to the Indian Majority Act,
1875, a minor is a person who has not
completed 18 years of age.
But in case where a guardian of the
minors person or property(or both) is
appointed or where a minors property
is taken over by a Court of Wards, theminority continues upto the
completion of his age of 21 years.
A minor is not competent to contract.
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1.Minors agreement is absolutely void:- Privy council had held that a minors contract is void ab
initio and not merely voidable.
A minors agreement being absolutely void, neither he
nor the other party acquires any right or incurs any
liability under the agreement. So a minor is neither liable
to perform what he has promised to do under anagreement, nor he is liable to repay money that he has
received under it. The principle behind this ruling is, a
minor is incapable of judging what is good for him.
Even if a minor has received any benefit, he cannot be
asked to compensate or pay for it. A minor is incapable of
giving a promise imposing a legal obligation upon
himself.
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2.Specific performance of a
minors agreementAs a minors agreement is absolutely void,
there can be no specific performance of
such a contract.
Privy Council has held that guardian has no
power to bind a minor by a agreement for
the purchase of immovable property. Even
a minor cannot enforce specific
performance as there is no mutuality.However, when such a agreement is
entered into by a guardian on behalf of a
minor, for minors benefit, it can be
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3. Ratification of a minors
agreement. Ratification means consenting to a past
agreement entered into during minority at afuture date on attaining majority.
It relates back to the date of the making of the
agreement. Since a minors agreement is void,there can be no question of ratifying it as theconsideration given during the minority is heldto be no consideration at all.
It cannot be made valid by a subsequentratification. A fresh contract can be enteredinto by a minor on attaining majority with a
fresh consideration.
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4. False representation by a minor -
Estoppel
A minor cannot be stopped by a falserepresentation as there can be no estoppel against astatue.
A minor who falsely represents himself to be a
major and thereby induces another person to enterinto a contract with him, can plead minority as adefence. The infant is not estopped from settingup infancy.
A minor cannot be sued on the ground that hefalsely represented that he is of full age andthereby induced other person to enter into acontract, because to allow an injured person to suea minor person would be giving him an indirect
means of enforcing a void contract.
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Meaning of Estoppel.
Estoppel is a rule of evidence. When a manhas by words, spoken or written, or byconduct, induced another to believe thatcertain state of things exist, he will not be
allowed to deny the existence of that state ofthings.
However, a minor even though he falselyrepresents himself to be a minor can yet deny
the stand and take up the defence ofminority. He is not stopped from pleading hisminority. The law of estoppel, therefore,does not apply to a minor.
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Example:- S, a minor, borrowed Rs.4000 from L, a
moneylender, by fraudulently misrepresentingthat he was of full age. On default by S, L sued
for return of Rs.4000, and damages of deceit.
Held : L could not recover Rs.4000, and his
claim for damages also failed. The court didnot grant the relief; otherwise, it would have
been an indirect way of enforcing a void
contract. Even on equitable grounds, the minorcould not be asked to refund Rs.4000, as the
money was not traceable and the minor had
already spent the same.
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5.Liability of a third person-
Surety for a minor.
An agreement by a minor is void, but anagreement by a guardian on his behalf is
valid.
When a guardian enters into a contract inrespect of his property on behalf of the minor,
it is valid, provided it is for his benefit or for
legal necessity.
Insolvency:-
A minor cannot be adjudged insolvent as he is
incapable of contracting.
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6.Minors marriage:
Minors marriage contracted by their
parents and guardians is valid. It is valid
on the grounds of the custom of the
community.
7.Service contracts: A contract for personal service by minor is
void under the Indian Law and the mere
fact that it is for his benefit would not
entitle the minor to sue under the contract.
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Exception to the rule that minors
agreement is absolutely void.
1) Promisee or transferee: A minor can be a
promisee or a transferee for ex. a
promissory note executed in favour of a
minor can be enforced by the minor.2) Agency: A minor can act as an agent. He
can bind his principal by his acts, but
unlike other agents, he is not liable tohis principal for his acts.
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3.) Partnership: A minor cannot be a partner in apartnership firm. However, a minor may, be
admitted to partnership by his guardian with the
consent of all the partners for the time being, be
admitted to the benefits of partnership.
4.) Necessaries: If a person supplies necessaries to a
minor, or to minor dependents, which he actually
needs, whom the minor is bound to support, theperson who supplies such necessaries is entitled to
be reimbursed from the properties of such a minor.
A minor is therefore, liable to pay out of his
property for necessaries supplied to him.
Exception to the rule that minors
agreement is absolutely void(contd)
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Example-
G, a minor and a professional billiards player,
agreed with R, a leading professional player, to go
on a world tour, competing against each other in
matches. G was to pay a certain sum of money to
R for this purpose and also for the purpose oflearning the game. R made all arrangements for the
matches and spent money, but G refused to go. R
sued G and claimed damages for breach of his
contract. Held : G was liable to pay as the agreement was
for the minors benefit in that he would in effect be
receiving instruction
C t t b P f U d
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Contracts by Persons of Unsound
Mind. 1. Agreement by lunatics: A contract by a lunatic,
for example, a person of unsound mind like that ofa minors contract, is altogether void. A person ofunsound mind is incompetent to contract.
A person is said to be of sound mind for the purpose
of making a contract if, at the time when he makesit, he is capable of understanding it and forming arational judgment as to its effect upon his interests.
Examples-A patient, in a lunatic asylum, who is
at intervals, of sound mind, may contractduring those intervals
The liability for necessaries of life supplied to
persons of unsound mind is the same as forminors
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Example
In Indersingh Vs. Parmeshwar Singhcase, where a person who was an
idiot and incapable of understanding
the transactions, agreed to sellproperty worth Rs. 25000 for Rs.
7000 only , it was held that the
agreement was void as the personwas incapable of exercising his own
judgment.
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2.Idiots
An idiot is a person who is permanently of
unsound mind.
He does not have lucid intervals.
He is incapable of entering into a contract
and, therefore, a agreement with an idiot is
void.
However, like a minor, his properties, if
any, shall be liable for recoveries onaccount of necessaries of life supplied.
Also he can be a beneficiary.
A t b D k I t i t d
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Agreements by Drunken or Intoxicated
Persons
Agreement by a drunken person isabsolutely void and cannot be ratified. A
person who is drunk, intoxicated or delirious
from fever so as to be incapable of
understanding the nature and effect of an
agreement or to form a rational judgment as
to its effect on his interests cannot enter into
valid contracts whilst such drunkenness ordelirium lasts.
Under the English Law, Agreement made by
persons of unsound mind are voidable and
C t t ith P d Ni hi
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Contracts with Parda-Nishin
Women AParda-nishin women is one who is obliged
to observe complete seclusion
She is open to undue influence, and therefore,
unable to exercise her independent
understanding. In order to make a valid contract with a
parda-nishin woman, it should be established
that the deed was not only executed by her butwas explained to and understand by her,
besides she had independent and disinterested
advice in the matter.
C t t b C ti
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Contracts by Corporations A corporation is an artificial person created by law
under the Companies Act.
It is competent to contract. A corporation cannot enter into contracts of a strictly
personal nature.
Its powers are subject to limitations which may be
either-a) Necessary or Natural limitations: This is imposed bythe nature of the corporation, for ex., a corporationmust contract through its agents under its seal.
b) Express or Legal limitations: The express or legal
limitation is one which is imposed by the terms of itsincorporation. For ex. The corporation cannotcontract beyond the powers defined in itsMemorandum and Articles of Association, forotherwise the contract would be ultra vires and void.
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Contracts by Insolvents
Insolvent Persons (Legal status) -Insolvent persons are incompetent to
contract until they obtain a certificate of
discharge. Insolvent person cannot enter into a
contract.
Disqualification of an insolvent isremoved after he is discharged.
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References
Business Law by K. R.
Bulchandani - Chapter 6 (Page
47-51).www.legalindia.in/minority-and-
partnership.
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