INDIAN CONRACT ACT, 1872

MODULE-2
6. Competency of Parties to a Contract
7. Free Consent
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MODULE-2
6. Competency of P!t"e# to Cont!ct$
Definition
Rules
Exceptions:
Minor
Unsound Mind
Intoxicated ..etc.
7. Con#ent - %!ee Con#ent$
Rules
Exceptions:
Coercion
Undue Influence.etc.
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6. Competency of P!t"e# to Cont!ct
Competency of P!t"e# to Cont!ct$
Definition
Rules
Exceptions:
Minor
Unsound Mind
Intoxicated ..etc.
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Competency of Parties to a Contract
Def"n"t"on & R'(e#

!ection "#: $n a%reement &ecomes a contract if it is entered into

&et'een t(e parties '(o are competent to contract. )ere
capacity means p(ysical and mental capacity.

!ection "": E*ery person is competent to contract '(o is of a%e of

ma+ority accordin% to t(e la' to '(ic( (e is su&+ect, and '(o
is of sound mind, and is not dis-ualified from contractin%
&y any la' to '(ic( (e is su&+ect.
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Competency of Parties to a Contract

Persons incapa&le of enterin% into a contract ./road Di*ision0:

i0 Minor
ii0 Insane
iii0 Dis-ualified Persons
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Competency of Parties to a Contract

!ection 1 of t(e Indian Ma+ority $ct, "273: Ma+ority is "2 4ears.

5(e la' re%ardin% Minor6s $%reement:

i0 Minor6s $%reement is *oid a& initio
ii0 $ Minor can &e a Promisee or a /eneficiary
iii0 7o Ratification
i*0 Claim for 7ecessaries
*0 7o Estoppel
*i0 Restitution
*ii0 7o !pecific Performance
*iii0 7o Insol*ency
ix0 Minor as a Partner
x0 Minor as an $%ent
xi0 Minor 8ia&ility in 5ort .Ci*il 9ron%0
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Competency of Parties to a Contract

Unsoundness: Unsoundness may arise in t(e follo'in% cases:

i0 Idiocy
ii0 8unacy
iii0 Drun:enness

Effects of $%reements made &y Persons of Unsound Mind:

i0 $%reements &y persons of unsound mind are *oid.
ii0 /ut in particular circumstances, t(ere may &e an implied
condition excusin% t(e party from performance in suc( a contin%ency
.ex: contract to marry &ecomes *oid &y insanity0 .
iii0 )o'e*er, an a%reement entered into &y a lunatic for t(e
supply of necessaries for (imself or for t(e persons '(om (e is
&ound to support is *alid as a ;<uasi=Contract6.
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Competency of Parties to a Contract

Dis-ualified &y 8a':

i0 $liens
ii0 Forei%n !o*erei%n
iii0 Corporation .Doctrine of Ultra*ires0
i*0 Professional Incapacity .$d*ocates=8is Pendens0
*0 Insol*ency
*i0 Con*icts .Ri%(ts are suspended &ut not lost0
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7. %!ee Con#ent
". Definition
>. Coercion .!ection "?0
1. Undue Influence .!ection "60
3. Fraud .!ection "70
?. Misrepresentation .!ection "20
6. Mista:e .!ections >", >>, >10
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Free Consent

)ect"on 1*$ $ll a%reements are contracts if t(ey are made &y free
consent of t(e parties.

)ect"on 1+$ Defines t(e meanin% of t(e term ;Consent6

@5'o or more persons are said to consent '(en t(ey a%ree
upon t(e same t(in% in t(e same senseA

)ect"on 1,$ !tipulates under '(at circumstances consent is ;Free6.

@Consent is said to &e free '(en it is not caused &y:
i0 Coercion .!ec. "?0
ii0 Undue Influence .!ec. "60
iii0 Fraud .!ec. "70
i*0 Misrepresentation .!ec. "20
*0 Mista:e su&+ect to pro*isions of !s. >#, >", >>.
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Free Consent
Coe!c"on
R'(e#$
". /y @committin%A of any act for&idden &y Indian Penal Code
>. /y @t(reatenin% to commitA any act for&idden &y Indian Penal Code
1. /y @t(reatenin% to detain any property
3. It is immaterial '(et(er IPC is or is not in force in t(e place of t(e
coercion is employed
Con#e-'ence#$
?. Contract can &e set aside
6. Can refuse to Perform
7. Can ta:e defence of Coercion
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Un.'e Inf('ence
R'(e#$
". Relations(ip must su&sist t(at one of t(e parties is in a position to
dominate t(e 'ill of t(e ot(er.
>. 5(at t(e dominant party o&tains an unfair ad*anta%e o*er t(e ot(erB and
1. 5(at t(e dominant party uses (is dominant position to o&tain an unfair
ad*anta%e.
.
E/mp(e$ Illiterate lady C Mana%in% $%ent C Properties C !ale, 8ease, Mort%a%e etc. C
Mana%in% $%ent executed a Dift Deed in (is fa*our. )eld t(ere is undue influence and t(e
Mana%in% $%ent (as to return t(e property to t(e illiterate lady.
.
Effect of Un.'e Inf('ence$ .i0 Contract is *oida&leB .ii0 Contract may &e set aside
Free Consent
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%!'.
R'(e#$
". Parties
>. $ct of Fraud
=5(ere must &e a representation or assertionB and it must &e false.
=5(ere must &e acti*e concealment of fact.
=$ promise made 'it(out any intention of performin% it.
=$ny ot(er act fitted to decei*e.
=$ny suc( act or omission as t(e la' specifically declares to &e fraudulent.
1. !uc( representation must relate to a fact.
3. 5(e representation must (a*e &een made 'it( t(e :no'led%e t(at it is
false.
?. 5(e act must (a*e &een committed 'it( t(e intention of inducin% t(e
decei*ed party to act upon it.
6. 5(e act must (a*e in fact decei*ed t(e party.
7. 5(e ot(er party must (a*e suffered loss.
Free Consent
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9(et(er silence amounts to ;Fraud6E

Conse-uences of Fraud:
i0 Can Rescind t(e contract 'it(in reasona&le time.
ii0 May as: for dama%es.
iii0 May as: for Restitution.
i*0 May insist for performance .as if t(ere 'as no fraud0.
*0 Principal not lia&le for fraud committed &y an $%ent.
Free Consent
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M"#!ep!e#entt"on
R'(e#$
". Un'arranted $ssertion
>. /reac( of Duty
1. Innocent Mista:e .!(ip 5onna%e= stated as >2##=actual 'as 1?##0
Con#e-'ence#$
3. Can a*oid t(e Contract .i0 a*oid t(e contractB .ii0 accept t(e contract, &ut can insist for in
puttin% t(e %oods as if t(ere 'as no misrepresentation.
>. Cannot a*oid t(e Contract: .i0 Party (ad means of disco*erin% trut(B .ii0 Representation
(ad not &een instrumentalB .iii0 Party (a*in% :no'n t(e misrepresentation expressly
affirms t(e contractB .i*0 9(ere t(e interest of t(e t(ird party inter*ened
Free Consent
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Free Consent
M"#t0e
R'(e$
". /ot( t(e parties s(ould a%ree to t(e same t(in% in t(e same sense i.e.,
t(ere s(ould &e consensus ad idem.
>. Mista:e may &e defined as @n e!!oneo'# 1e("ef 1o't #omet2"n34.
C(##"f"ct"on$
1. Mista:e of 8a' .Ignorance of law no excuse)
3. Mista:e of Fact
a0 Unilateral Mista:e .*alid0
&0 /ilateral Mista:e .Foid0
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Free Consent

In#tnce# of M"#t0e$
i0 Mista:e as to identity of t(e person contractin% 'it(,
'(ere suc( identity is essential to t(e contractB .*oid0
ii0 Mutual mista:e as to existence of a t(in% .*oid0
iii0 Mista:e as to <uality of t(e su&+ect=matter. .*oid0
i*0 Mista:e as to Price .*oid0
*0 Mista:e as to <uantity .Foid0