Parties to a contract must be completent to contract
11/September/2025 10:54
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Parties to a Contract Must be Competent to Contract
Meaning
For an agreement to become a valid contract, the parties entering into it must be competent in the eyes of law.
If any party is not legally capable, the contract is void or voidable.
? Section 11 of the Indian Contract Act, 1872 clearly lays down:
> “Every person is competent to contract who is of the age of majority according to the law to which he is subject, who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”
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Essentials of Competency of Parties
1. Must be of the Age of Majority
A person must have completed 18 years of age (21 years if under a court-appointed guardian).
Contract with a minor is void ab initio (void from the beginning).
Case law: Mohori Bibi v. Dharmodas Ghose (1903) – Minor’s agreement is void.
2. Must be of Sound Mind
At the time of making the contract, a person must be capable of understanding it and forming a rational judgment about it.
Persons of unsound mind include lunatics, idiots, drunkards, etc.
But a lunatic can contract during his lucid intervals.
3. Must Not be Disqualified by Law
Certain people, though major and of sound mind, are disqualified by law from contracting:
Alien enemies
Foreign sovereigns and diplomats (without government sanction)
Insolvents (undischarged bankrupts)
Convicts (during imprisonment)
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Why Competency is Important?
If parties are not competent, there is no consent in law, hence no valid contract.
It ensures fairness, legal responsibility, and protection of vulnerable persons (like minors).
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Example from Real Life
1. If a 17-year-old student borrows money from a bank and signs a loan agreement, it is not enforceable, because the student is a minor and hence incompetent to contract.
2. If a sober businessman signs a contract with another party, it is valid. But if he was drunk at the time and could not understand the terms, the contract is voidable.
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✅ Conclusion
For a contract to be valid, all parties must be competent.
Competency = Majority + Sound Mind + Not disqualified by law.
If any party fails these conditions, the contract is void or voidable.
