A contract is an agreement between two or more parties to do, not do, or promise something

Contracts can come in many forms — they can be oral or written, implied or express, and legally enforceable or not.

The strongest contract, in terms of enforceability, has an offer, acceptance, consideration for the exchange, clearly sets out the terms of the agreement without ambiguity, and is signed by the involved parties with proper capacity to enter into the contract.

Weaker contracts include verbal agreements or contracts drawn up by parties in direct violation of state or federal laws.

As per Contract Act, an agreement enforceable by law is a contract. [section 2(h)]

Every promise and every set of promises, forming the consideration for each other, is an agreement. [section 2(e)].

A person makes a proposal (offer). When it is accepted by other, it becomes a promise.

Promise cannot be one sided. Only a mutual promise forming consideration for each other is ‘agreement’

the term ‘agreement’ as defined in Contract Act requires mutual consideration

When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. [section 2(a)]

Thus, a ‘proposal’ can be to do a positive act or abstinence from act (i.e. negative act).

[English Act uses the word ‘offer’, while Indian Contract Act uses the word ‘proposal’

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

A pro posal, when accepted, becomes a promise. [section 2(b)].

Thus, when a proposal (offer) is accepted, it becomes a ‘promise’.

Only person to whom proposal is made can signify his assent. Other person cannot accept a proposal.

promisor and promisee - The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”. [section 2(c)].

reciprocal promises - Promises which form the consideration or part of the consideration for each other are called reciprocal promises. [section 2(f)].

consideration for promise – The definition of ‘agreement’ itself states that the mutual promises should form consideration of each other. Thus, ‘consideration’ is essential for an agreement. A promise without consideration is not ‘agreement’ and hence naturally, it is not a ‘contract’.

definition of ‘consideration’ - When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a consid eration for the promise. [section 2(d)]

The steps involved in the contract are – proposal and its communication acceptance of proposal and its

communication Agreement by mutual promises Contract Performance of Contract. 

All agreements are not contract. Only those agreements which are enforceable by law are ‘contracts’.

Offer and its acceptance Free consent of both parties Mutual and lawful consideration for

agreement It should be enforceable by law. Hence,

intention should be to create legal relationship. Agreements of social or domestic nature are not contracts

Parties should be competent to contract Object should be lawful Certainty and possibility of performance  Contract should not have been declared

as void under Contract Act or any other law

Communication of proposal/ revocation/acceptance are vital to decide validity of a contract.

A ‘communication’ is complete only when other party receives it.

In order to convert a proposal into a promise, the acceptance must - 

(1) be absolute and unqualified; (2) be expressed in some usual and

reasonable manner, unless the proposal prescribed the manner in which it is to be accepted.

Acceptance of offer is complete only when it is absolute and unconditional.  Conditional acceptance or qualified acceptance is no acceptance.

Insofar as the proposal or acceptance of any promise is made in words, the promise is said to be express.

Insofar as such proposal or acceptance is made otherwise than in words, the promise is said to be implied. [section 9].

For example, if a person enters a bus, there is implied promise that he will pay the bus fair.

An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract. [section 2(i)]

a) When consent is obtained by coercion, undue influence, misrepresentation or fraud is voidable at the option of aggrieved party i.e. party whose consent was obtained by coercion/fraud etc. However, other party cannot avoid the contract.

(b) When a contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the option of the party to prevent. (section 53).

Obvious principle is that a person cannot take advantage of his own wrong (c) When time is essence of contract and party fails to perform in time, it is voidable at the option of other party (section 55).

A person who himself delayed the contract cannot avoid the contract on account of (his own) delay.

A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. [section 2(j)]

Thus, initially a contract cannot be void, i.e. a contract cannot be void ab initio. 

The simple reason is that in such a case, it is not a contract at all to begin with.

Hence, only a valid contract can become void contract due to some subsequent events. e.g. the person dies or property is destroyed or Government imposes a ban etc.

A void agreement is void ab initio. It never becomes a contract. It is nullity and cannot create any legal rights.

In a landmark case of Mohori Bibi vs. Dharmodas Ghose, the council held that a minor’s contract is null and void from the beginning.

Neither of the parties acquires any rights nor can they be held liable in cases where the contract is formulated with a minor.

The main reason for the contract with a minor to be considered invalid is that a minor is not capable of taking a rational decision.

Also, it is accepted by law that a minor cannot judge his own interests.

Minor can be promise: Although a contract is considered void if it is entered with a minor, a minor can gain benefit under a contract and be a promisee. The benefits specified for the minor can be derived only by the minor.

Ratification of contract: A void contract that a minor entered cannot be ratified even after he reaches the age of majority. This means it cannot be validated by law when the minor reaches the age of majority.

Partnership: A minor cannot be included in a partnership. However, he can enjoy the benefits of the partnership with the approval of other partners. It is advisable to avoid including a minor in a partnership.

Minor’s parents: The parents of a minor cannot be held liable for any agreement that the minor enters into. However, they can be held liable in case the minor is acting as their agent.

Insolvency: A minor can be never considered as insolvent. 

Who is competent to contract? As per section 11 of the Indian Contract Act

(a) Every person who has attained the age of majority, (b) Who is of sound mind and

(c) is not otherwise disqualified from contractingis competent to contract.

  (a) Age of majority – In India, the age of

majority is regulated by the Indian Majority Act.

Every person domiciled in India attains majority on the completion of 18 years of age.

 

(b) Sound mind – As per section 12 --A person is of sound mind 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.

Section further lays down that a person who is usually of unsound mind but occasionally of sound mind, may make a contract when he is of sound mind.

A person who is usually of sound mind, but occasionally of unsound cannot make a contract when he is of unsound mind.

An agreement made with minor is altogether void

The word void means “void as against the minor”. Contract with or by a minor is altogether void. The Act provides that a person who is a major is competent to contract.

An agreement by a minor involves a promise on his part and he is incapable of giving a promise imposing a legal obligation. Therefore, the agreement with the minor is void ab initio

 

2. Minor can be a beneficiary – Though a minor is not competent to contract. There is nothing, which prevents him from making the other party bound to the minor. Thus minor though incompetent to contract may accept a benefit.

A promissory note executed in favors of a minor is not void and can be sued upon by him. In the case Raghavachariah Vs. Srinivas it was held that a mortgage executed in favor of minor and minor can a get a decree for its enforcement.

A minor under a contract of sale delivered goods to the buyer. Minor can maintain a suit for the recovery of price.

3. Minor can always plead minority :-A minor’s agreement is void. Any money advanced to a minor on a promissory note or otherwise, cannot be recovered.

Even when a minor procures a loan by falsely representing that he is full age, he can plead his minority in a suit intended to recover the amount from him (minor the suit against him will be dismissed).

Following observations are important in this connection:-

(a) If an infant obtains property by misrepresenting his age, he can be compelled to restore it but only so long as the same is traceable in his possession. This is known as the equitable doctrine of restitution.

(b) But where the infant has sold the goods, he cannot be made to repay the value of the goods because that would amount to enforcing a void agreement.

(c) Again the doctrine of restitution is not applied where the infant has obtained cash instead of goods.

The well-known authority on this point is Leslie ® Ltd. Vs. Sheill. Lord Summer who delivered the judgment pointed out that the minor might have spent the money as his own, there was no chance of tracing it and no possibility of restoring the very thing got and the court would not pass a personal decree against the minor.

(d) A minor had fraudulently mortgaged and sold certain properties.

He invokes the aid of the court for the cancellation of his contract. Thus he is the plaintiff.

The court may grant relief and may compel him to restore all benefits obtained by him under the contract or make suitable compensation to the other party.

Reason is simple. He who seeks justice must do justice.

4. Ratification on attaining majority is not allowed – As a minor’s agreement is void he cannot validate it by ratification on attaining majority.

For instance, a minor borrows money and executes a promissory note. On attaining majority, he executes a fresh promissory note in substitution of the one executed as a minor.

The second promissory note is void as it is without consideration.

5. Contract by guardian – how far enforceable – Though a minor’s agreement is void. His guardian can, under certain circumstances enter into a valid contract on the minor’s behalf.

Where the guardian makes a contract for the minor and which is within his {guardian} competence and which is for the benefit of the minor.

Such a contract is valid which minor can enforce.

For instance a guardian can make an enforceable contract of marriage for a minor. It is customary among most of communities in India for parents to arrange marriages between minor children and the law has to adapt itself to the habits and customs of the people.

Similarly, when the father of the bridegroom contracts with the father of the bride to pay the bride an allowance the bride can sue her father-in-law to recover arrears of the allowance But all contracts made by guardian on behalf of a minor are not valid.

For instance, the guardian of a minor has no power to bind the minor by a contact.

6. Liability for necessaries – However, the contract with minor for necessaries is valid and minor’s property is liable. This is illustrated in Section 68 of the act to the effect

If a person incapable of entering into a contract or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person

Thus any person would be entitled to reimbursement out of the minor’s estate, for necessaries supplied to him or to his family whom he is bound to support A minor cannot be held personally liable for necessaries but his property is liable.

Necessaries as defined by the English Sale of Goods Act, mean goods suitable to the condition in the life of infant as required by him at the time of sale and delivery.

It includes not only food and clothing and housing but also includes the education and the instruction needed.

Necessaries also include services offered. Articles of mere luxury offered are always excluded though luxurious articles of utility are in some and relevant appropriate cases may be allowed.

Even the money advanced to buy the goods and services necessary are also included and covered.

The infant’s need of things may also sometimes depend upon the peculiar circumstances under which they are purchased and the use to which they are put.

For instance, articles purchased by an infant for his wedding may be deemed necessary, while under ordinary circumstances the same articles may not be so considered.

A person of unsound mind is incapable of entering into a contract.

An agreement by a person who is not of sound mind is void.

However, such a person can enter into a valid contract during an interval of lucidity.

Unsoundness of mind is one who is - (i) Incapable of understanding the contract (ii) and of forming a rational judgement as

to its effect upon his interest.

Idiots, lunatics and drunken persons are examples of those having an unsound mind. Where a person is usually of sound mind, but occasionally becomes a person of

Unsound mind cannot enter into agreement when he turns unsound.

Similarly, a person who is unsound mind can make a contract when he turns sound mind.

For example a patient in a lunatic asylum, who is at intervals of soulmind may contract during such intervals.

Besides minors and persons of unsound mind, there are also other persons who are disqualified from contracting, partially or wholly.

Contracts by such person and with such persons are void. If, by any provincial legislation, person is declared ‘disqualified proprietor’, he is not competent.

An alien enemy during war cannot enter into a contract with an Indian subject. He cannot sue in Indian Courts without a licence from the Central Government Contracts made before the war may either be suspended or disallowed if they are against the public policy or if their performance would benefit the enemy

Similarly, a statutory corporation cannot enter into a contract which is ultra vires its memorandum. Likewise, municipal bodies are disqualified from entering into contracts which are not within their statutory powers.

Sovereign States, Ambassadors and Diplomatic Couriers enjoy certain special privileges with the result that they cannot be legally proceeded against in Indian Courts and Indian Citizen has to obtain a prior sanction of the Central Government to enable himself to sue them in our law courts.

However, they can, at their will enter into contracts which may be enforceable in Indian Courts.

Insolvents: When a debtor is adjudged insolvent, his property vested in the official receiver or the official assignee.

As such the insolvent is deprived of his power to deal in that property It is only the official receiver or the official assignee who can enter into contract in respect of that property and can sue and be sued on his behalf.

Convict: - A convict while undergoing imprisonment is incapable of entering into contract. This incapacity to contract comes to an end when the period of sentence expires or when he is pardoned.

 

As per constitution minors are given prime importance.

It is prime duty of courts to take care of minors and give them appropriate and judicious treatment as and when required.