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[5/10, 10:08 AM] Dipesh: Introduction The Law of Specific Relief in India was originally codified by Specific Relief Act, 1877. The provision of this enactment was considered by the Law Commission in its Ninth Report which was later replaced by the present act of 1963. The Specific Relief Act, 1963 deals with the remedies granted at the discretion of the court for the enforcement of individual civil rights. In case of breach of contract, the general remedy available to the aggrieved party is compensation or damages of loss suffered. For this, a civil suit is filed against the guilty party who had made the default in performance of its duty or obligation as per the terms of contract under the statutory provision of Section 73-75 of Indian Contract Act 1872. However, sometimes pecuniary compensation does not satisfy the plaintiff so he may ask for specific relief. For example if somebody unlawfully dispossess a person without his consent having peaceful possession over the property then specific relief may enable him to have the possession of same property instead of claiming pecuniary compensation.

The act provides the following kinds of Specific Relief Recovery of possession of property Specific performance of contracts Rectification of instruments Rescission of contracts Cancellation of Instruments Declaratory decrees Injunction Specific Performance of Contracts Specific performance means enforcement of exact terms of the contract. Under it the plaintiff claims for the specific thing of which he is entitled as per the terms of contract. For example, if A agrees to sell certain shares to B of a specific company which are limited in number and after the payment made by B, if A refuses to sell the shares then B is entitled to recovery of those shares.

According to Section 10 of Specific Relief Act 1963 in the following conditions specific performance of the contract is enforceable:

When there exist no standard for ascertaining actual damage: It is the situation in which the plaintiff is unable to determine the amount of loss suffered by him. Where the damage caused by the breach of contract is ascertainable then the remedy of specific performance is not available to the plaintiff. For example, a person enters into a contract for the purchase of a painting of dead painter which is only one in the market and its value is unascertainable then he is entitled to the same.

Commented [k1]:

When compensation of money is not adequate relief: In following cases compensation of money would not provide adequate relief: Where the subject matter of the contract is an immovable property. Where the subject matter of the contract is movable property and, Such property or goods are not an ordinary article of commerce i.e. which could be sold or purchased in the market. The article is of special value or interest to the plaintiff. The article is of such nature that is not easily available in the market. The property or goods held by the defendant as an agent or trustee of the plaintiff. In Case of Ram Karan v. Govind Lal [1], an agreement for sale of agricultural land was made & buyer had paid full sale consideration to the seller, but the seller refuses to execute sale deed as per the agreement. The buyer brought an action for the specific performance of contract and it was held by the court that the compensation of money would not afford adequate relief and seller was directed to execute sale deed in favour of buyer.

Similarly, it was held by the court where the part payment was paid by plaintiff and defendant admitted that he had handed over all documents of title of property to the plaintiff. Sale price in an agreement is not low and defendant had failed to establish that said document was only a loan transaction then the agreement is valid and defendant is liable to perform his part (M. Ramalingam v. V. Subramanyam)[2].

Contracts which cannot be specifically enforced According to Section 14 of Specific Relief Act 1963, there are certain contracts which cannot be specifically enforced and these are:

Where compensation in money is an adequate relief: Here the court will not order specific performance of contract as it is expected that the plaintiff will bank upon the normal remedy for breach of contract i.e. remedy of compensation. For example contract of mortgage of immovable property (Rambai v. Khimji)[3], contract of sale of goods (Bharat v. Nisarali) [4], contract of repair of premises etc. Where a contract runs into minutes or numerous detail: These contracts includes contract which depends upon the personal qualification or the violation of the parties or is of such nature that the court cannot enforce specific performance of its material terms. In Robinson Davison [5], it was held by the court that the contract to perform in concert depends upon the personal kill of defendant’s wife, and the contract cannot be specifically enforced due to her illness. The other example is construction contract where the detailed terms of contract are not explained.

Contracts of determinable nature: Determinable contract means a contract which can be determined or revoked or put to an end by a party to the contract. For example in case of partnership at will any partner can retire by giving notice in writing to other partners and can dissolve the firm. Contracts which involve the performance of continuous duty which court cannot supervise: Earlier under Specific Relief act, 1877 the continuous duty which court cannot supervise is considered over a period of 3 years which was omitted under Specific Relief Act, 1963 and no time limit restricted for the performance of a continuous duty. These include contract of appointment of employees for continuous service or contract to execute sale deed every year. In Central Bank v. Vyankatesh [6], the defendant was required to execute deed every year for the period of 25 years and contract is held to be specifically unenforceable. Contract of arbitration: According to Section 14(2), a contract to refer present or future differences to arbitration shall not be specifically enforceable. However, Section 14(3) contains certain exception and the following kinds of contract are specifically enforceable A contract to execute a mortgage or furnish other security for repayment of any loan which the borrower is not willing to repay at once, the court would grant specific performance to execute mortgage or to give any other security. A contract to take up and pay for any debentures of a company. A contract to execute a formal deed of partnership at will when the business has already commenced. A contract for the construction of any building or the execution of any other work on land if; Detailed or the terms of the contract has been sufficiently explained & the court can determine the exact nature of building or work. The plaintiff has a substantial interest in performance of the contract and compensation in money is not an adequate relief. The defendant has in accordance with the contract, obtained possession of whole or part of the land on which the building is to be constructed or other work is to be executed. References

[1] A.I.R. 1999 Raj. 167

[2] A.I.R. 2003 Mad. 305

[3] AI.R. 1950 Kutch 86

[4] 20 Cal W.N. 1020

[5] (1871) L.R. Ex. 269

[6] A.I.R. 1949 Nag 286

{ [1-6] with ref. to Law of Contract & Specific relief act 1963 by R.K. Bangia} [5/10, 10:09 AM] Dipesh: STANDARD FORM OF CONTRACT The law of contract has in recent time to face a problem, which is assuming new dimensions. The problem has arisen out of the modern large scale and widespread practice of concluding contracts in standardized form. People upon whom such exemption clauses or standard form contracts are imposed hardly have any choice or alternative but to adhere. This gives a unique opportunity to the giant company to exploit the weakness of the individual by imposing upon him terms, which may go to the extent of exempting the company from all liability under contract. It is necessary and proper that their interests should be protected. The courts have therefore devised some rules to protect the interest of such persons.

A valid contract requires offer and acceptance. It is in the essence of acceptance, that such acceptance must be a valid acceptance, that is to say, an acceptance made, fully conscious of and alive to the terms and conditions of the proposal. Of course, this is not to say that a man who signs an agreement blindfolded will be relieved from his obligations under that agreement, simply because he later chooses to discard the blindfold. However, what Section 2(b) [1] does require is that the acceptor must have a real opportunity to review the proposal and decide on whether to accept it or not.

A standard form contract is a contract between two parties that does not allow for negotiation, i.e. take it or leave it. Sometimes it is referred to an adhesion contract or boilerplate contract. It is often a contract that is entered into between unequal bargaining partners. It’s a type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage.

OVER VIEW

It would be difficult for large-scale organizations to draw up a separate contract with every individual. They therefore keep a printed form of contract. Such standardized form of contracts contain large

number of terms and conditions in “fine print” which restrict and often exclude the liability, and therefore his only function is to accept the offer whether he likes its terms or not.

NATURE

A standard form contract is a contract, which does not allow for negotiation, i.e. take it or leave it. It is often a contract that is entered into between unequal bargaining partners. It’s a type of contract, a legally binding agreement between two parties to do a certain thing, in which one side has all the bargaining power and uses it to write the contract primarily to his or her advantage. Sometimes it is referred to an adhesion contract or boilerplate contract.

An example of an adhesion contract is a standardized contract form that offers goods or services to consumers on essentially a “take it or leave it” basis without giving consumers realistic opportunities to negotiate terms that would benefit their interests. When this occurs, the consumer cannot obtain the desired product or service unless he or she acquiesces to the form contract.

Let’s take another example, that, when an individual is given a contract by the salesperson of a multinational corporation. The consumer is in no position to negotiate the standard terms of such contracts and the company’s representative often does not have the autonomy to do so. While adhesion contracts, in and of them, is not illegal per se, there exists a very real possibility for unconscionability.

MISCHIEF

The law of contract has in recent time to face a problem, which is assuming new dimensions. The problem has arisen out of the modern large scale and widespread practice of concluding contracts in standardized form. People upon whom such exemption clauses or standard form contracts are imposed hardly have any choice or alternative but to adhere. This gives a unique opportunity to the giant company to exploit the weakness of the individual by imposing upon him terms, which may go to the extent of exempting the company from all liability under contract. It is necessary and proper that their interests should be protected. The courts have therefore devised some rules to protect the interest of such persons.

A valid contract requires offer and acceptance. It is in the essence of acceptance, that such acceptance must be a valid acceptance, that is to say, an acceptance made, fully conscious of and alive to the terms and conditions of the proposal. Of course, this is not to say that a man who signs an agreement blindfolded will be relieved from his obligations under that agreement, simply because he later chooses

to discard the blindfold. However, what Section 2(b) does require is that the acceptor must have a real opportunity to review the proposal and decide on whether to accept it or not.

DEVICES

In the Contract of Adhesion, the individual has no choice “but to accept”; he doesn’t negotiate, but merely adheres [2]. Therefore individual deserves to be protected against the possibility of exploitation inherent in such contracts. Some of the modes of protection which has been developed by the courts are as follows;

REASONABLE NOTICE

It is the duty of the person who is delivering a document to give adequate notice to the offeree of the printed terms and conditions. Where it is not done, the acceptor will not be bound by the terms.

In Henderson v. Stevenson [3], the plaintiff bought a steamer ticket on the face of which was these words only: “Dublin to Whitehaven”; on the back were printed certain conditions one of which excluded the liability of the company for loss, injury or delay to the passenger or his luggage. The plaintiff did not see the back of the ticket, nor was there any indication on the face about the conditions on the back. The plaintiff’s luggage was lost in the shipwreck caused by the fault of the company’s servants. This was laid down by the House of Lords that the plaintiff is entitled to recover the loss which he suffered from the company in spite of the exemption clauses.

In Parker v. South Eastern Rail Co [4], the plaintiff deposited his bag at the cloakroom at a railway station and received a ticket. On the face of the ticket it was printed: “See back”; and on the back there was a notice “the company will not be responsible for any package exceeding the value of ₤ 10”. A notice to the same effect was also hung up in the cloakroom. The plaintiff’s bag was lost and he claimed the full value of his bag which was more than ₤ 10. The company relied upon the exemption clause. The plaintiff contended that although he knew there was some writing on the ticket, he did not see what it was as he thought that the ticket was a mere receipt of the money he paid.

In M/s Prakash Road Lines (P) Ltd v. HMT Bearing Ltd [5], it has been held that the carrier is bound to deliver the goods consigned at the appointed destination or else he will be liable to pay compensation for the same. Merely printing on the lorry receipt that the goods are transported at the owner’s risk will not absolve the transporter from his duty unless it is proved that such terms were brought to the notice of the plaintiff. Mere printing on the lorry receipt cannot be deemed to be the term of contract unless the plaintiff’s knowledge and the consent about the same.

NOTICE SHOULD BE CONTEMPORANEOUS WITH THE CONTRACT

If a party to the contract wants to have exemption from liability he must give notice about the exemption while the contract is being entered into and not thereafter. If the contract has been entered into without any exemption clause then subsequent notice regarding the exemption from liability will be in effective.

In Olley v. Marlborough Court Ltd. [6], plaintiff and her husband hired a room in the defendant’s hotel for one week’s boarding and lodging in advance. When they went to occupy the room they found a notice displayed there stating “proprietors will not hold themselves responsible for articles lost or stolen, unless handed to the management for safe custody.” Due to the negligence on the part of the hotel staff, plaintiff’s property was stolen from the room.

In an action against the defendant to recover the compensation for the loss, they sought exemption from liability on the basis of the notice displayed in the room. It was held that notice in the room was not forming the part of contract and therefore the defendants were liable to pay compensation.

FUNDAMENTAL BREACH OF CONTRACT

Another device which has been adopted to protect the interest of the weaker of the parties to the contract when they have an unequal bargaining position is to see that enforcing the terms of contract does not result in the fundamental breach of contract. In a standard form of contract it is likely that the party having a stronger bargaining power may insert such exemption clause in the contract that his duty to perform the main contractual obligation is thereby negative.

In Alexander v. Railway Executive [7], the plaintiff deposited his luggage in defendant’s cloak-room and in return received a ticket. A term printed on the ticket exempted the defendant from liability for loss or misdelivery of luggage. Plaintiff’s luggage was delivered to an unauthorized person without the production of the ticket. It was held that non-delivery of luggage to the plaintiff amounted to fundamental breach of contract for which the defendant was liable.

In Shivraj Vasant Bhagwat v. Shevanta D Indulkar [8], overloading an insured vehicle was a mere irregularity and not a fundamental breach so as to enable the insurer to get rid of his liability.

LIABILITY IN TORT

Even where an exemption clause is exhaustive enough to exclude all kinds of liability under the contract, it may not exclude the liability of tort. In White v. John Warwick & Co Ltd [9], plaintiff hired a cycle from the defendant. The defendant agreed to maintain the cycle in working condition and a clause in the agreement provided: “nothing in this agreement shall render the owners liable for any personal injuries…” while plaintiff was riding the cycle saddle titled forward and he was thrown and injured.

It was held that although the clause exempted the defendants from their liability of contract, it did not exempt from liability in negligence.

UNREASONABLE TERMS

Another mode of protection is to exclude unreasonable terms from the contract. A term is unreasonable if it would defeat the very purpose of the contract or if it is repugnant to the public policy. In M Siddalingappa v. T Nataraj [10], where a condition that only eight per cent of the cost of garment would be payable in case of loss was held to be unreasonable. In RS Deebo v. MV Hindlekar [11], laundry receipt contained printed condition restricting liability for loss or damage to 20 times laundry charges or half the value of the garment, whichever was less. The condition was held to be unreasonable.

LIABILITY TOWARDS THIRD PARTY

On the basis of the principles of law of contract, a contract is a contract only between the parties to it and no third party can either enjoy any rights or suffer any liability under it [12]. In Morris v. CW Martin & Sons, the plaintiff gave her fur garment to a furrier for cleaning. Since the furrier himself could not do the job, he gave this garment to the defendant for cleaning, with the consent of the plaintiff. The defendant’s servant stole the garment, for which the plaintiff bought an action against them. The defendant sought exemption from the liability on the basis of agreement between the plaintiff and furrier. The defendants were not allowed exemption and they were held liable.

ENGLISH & INDIAN VIEW

In England, Unfair Contract Terms Act, 1977 severely limits the rights of the contracting parties to exclude or limit their liability through exemption clauses in their agreements. Liability for death or personal injury cannot be excluded or restricted through a term in the contract or notice. Moreover the manufacturer or the distributer cannot exclude their liability arising out of defective goods or for their negligence, as regards goods supplied for private use or consumption.

Unlike England, there is no specific legislation in India concerning the question of exclusion of contractual liability. There is a possibility of striking down unconscionable bargains either under section 16 of the Indian Contract Act on the ground of undue influence or under section 23 of that Act, as being opposed to public policy.

In Central Inland Water Transport Corp. Ltd v. Brojo Nath [13], the Supreme Court struck down a clause in service agreement whereby the service of a permanent employee could be terminated by giving him a 3 months’ notice or 3 months’ salary. It was held that such clause was unreasonable and against public policy and void under section 23 of Indian Contract Act.

The Law Commission of India in its 103rd report (May, 1984), on Unfair Terms in Contract, has recommended the insertion of a new chapter IV- A consisting of section 67-A of Indian Contract Act. According to this recommendation where the court on the terms of contract or evidence adduced by the parties, comes to the conclusion that contract or any part that it holds to be unconscionable. A contract according to this provision is considered to be unconscionable if it exempts any party there to from either the liability for willful breach of contract, or consequence of negligence.

CONCLUSION

The Standard Form Contracts are standardized contracts that contain a large number of terms and conditions in fine print, which restrict and often exclude liability under the contract. This gives a unique opportunity to the giant company to exploit the weakness of the individual by imposing upon him terms which often look like a kind of private legislation and which may go to the extent of exempting the company from all liability under the contract. The battle against abuse has fallen to the courts. The courts have found it very difficult to come to the rescue of the weaker party.

The courts have evolved and applied certain rules to protect the interest of the consumer, customer or passenger, as the case may be upon whom standard form contracts or exemption clauses are imposed, like reasonable notice should be given, notice should be given, notice should be contemporaneous with contract, theory of fundamental breach, contra proferentem interpretation of the contract, liability in tort, exemption clauses and third parties etc. These modes, along with other Acts help the courts in dealing with the problem of Standard Form Contract. [5/10, 10:10 AM] Dipesh: Only those who have the capacity to contract can enter into a contract. Section 11 of the Indian Contract Act, 1872 states that only a person who has attained majority and is not of unsound mind is competent to contract. This article deals with the capacity to contract under Indian laws.”

INTRODUCTION

Legal capacity is the attribute of a person who can acquire new rights, or transfer rights, or assume duties, according to the mere dictates of his own will, as manifested in juristic acts, without any restraint or hindrance arising from his status or legal condition. Ability; qualification; legal power or right. Applied in this sense to the attribute of persons (natural or artificial) growing out of their status or juristic condition, which enables them to perform civil acts; as capacity to hold lands, capacity to devise, etc. This, according to Black’s Law Dictionary, is how one could define capacity. In simpler terms:

In every case of a valid contract there must be assent of the parties. “But a man cannot be said to assent that he will be bound, unless he be endowed with such a degree of reason and judgment as will enable him to comprehend the subject of negotiation. Hence it is, that the assent which is requisite to give validity to a contract, necessarily presupposes a free, fair and serious exercise of the reasoning faculty; or, in other words, the power, both physical and moral, of deliberating upon and weighing the consequences of the engagement about to be entered into. If, therefore, either of the parties to an engagement be absolutely deprived of the use his understanding, or if he be deemed by law not to have attained to it, there can in such a case be no aggregaitomentium (agreement) and, consequently, no agreement which shall bind him. The rule of law, therefore, which requires the assent of the parties to a contract, assumes “that such assenting parties shall be competent to contract; and accordingly, in order to there being a valid contract, a capacity to contract is absolutely necessary”. The contract by a lunatic is void. The subordinate Judge is a ‘Person’ and is capable of entering into a contract. Adult pardanashin women of sound mind are sui juris and must not be treated as though they were minors and were incapable through mental deficiency in conducting their own business. Illness may prevent a person from electing an agreement but does not prevent a transfer by others in his favour as he is a passive party. The competency laid down by section 11 is indispensable for the formation of an agreement which may become the embryo of a contract, and unless it is present in both parties the result is infertility. Such competency is a personal qualification. [i]

In this project, the theoretical basis, that is the purpose of capacity to contract shall be examined, with each type of incapacity being dealt with and explained in detail so as to understand the theoretical basis.

CAPACITY IN INDIAN LAW

In India, the law regarding contracts is majorly the Indian Contract Act of 1872. Therein, capacity is dealt with in Section 11 of the Act. Section 11 says:

11. Who are competent to contract.—Every person is competent to contract who is of the age of majority according to the law to which he is subject,and who is of sound mind and is not disqualified from contracting by any law to which he is subject.

The first factor of Section 11 is that of the age of majority, that is, this section is also applicable to minors.

In India, Act XI of 1875 determines the age of majority. Section 3 of the Act lays down that every person domiciled in British India shall be deemed to have attained his majority when he shall have completed his age of eighteen years, and not before. The question of personal capacity to enter into any contract is to be decided by the law of domicile. In the strict legal sense, that is the domicile of a person where he has his true fixed permanent home and principal establishment land to which whenever he is absent he has the intention of returning. When the age of majority has been provided by law to be 18 years, any person less than that age, even by a day would be a minor in law. The Majority Act lays down further that in the case of a minor of whose person or property or both a guardian has been appointed by a Court, or of whose property the superintendence is assumed by a Court of Wards, before the minor has attained the age of eighteen years, the age of majority shall be deemed to have been attained on the minor completing the age of twenty-one years. Once a guardian of a minor is validly appointed by a Court, the minor’s age becomes fixed by law at 21 years, and nothing which may subsequently happen can have the effect of reducing it again at 18 years, for example, the fact that there was no guardian at the time of entering into a contract, or the fact that the original guardian ceased to continue as such, or that the necessity for a guardian may not have continued.[ii]

By virtue of section 11, a minor is incompetent to contract. But the Indian Contract Act is conspicuous by its silence about the nature of a minor’s contract. It is thus not clear as to whether a minor’s contract is void or voidable. Upto 1903, there was a great controversy among High Courts in this connection. This controversy was finally resolved by the Privy Council in 1903 in Mohori Bibee v. Dharmodas Ghose.[iii][iv] In this case, Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed mortgage of property in favour of the lender. Subsequently, the minor sued for setting aside the mortgage. The Privy Council had to ascertain the validity of the mortgage. Under Section 7 of the Transfer of Property Act, every person competent to contract is competent to mortgage. The Privy Council decided that Sections 10 and 11 of the Indian Contract Act make the minor’s contract void. The mortgagee prayed for refund of Rs. 8,000 by the minor. The Privy Council further held that as a minor’s contract is void, any money advanced to a minor cannot be recovered.

A minor’s contract is void and it is immaterial whether father signs on behalf of minor or gives an undertaking that the minor would act or perform the contract. The Privy Council held that guardian cannot contract on behalf of minor. However, this rule was subsequently modified by the Privy Council in Srikakulam Subramanyam v. KurraSubba Rao.[v] The Privy council entertained no doubt that it was

within the powers of the mother of a minor as a guardian to enter into a contract of sale for the purpose of discharging his father’s debts. Thus, if the court finds that the contract has been entered into for the benefit of the minor, it would be declared valid.

When a guardian enters into a contract on behalf of a minor, the validity of the contract depends on whether the guardian is acting within the scope of his legal powers or not. The Privy Council, in the case of Mir Sarwarjan v. Fakhruddin,[vi] held that the guardian’s contract can neither be enforced against the minor nor be enforced against him. The contract was for the purchase of immovable property and the suit was by the minor for specific enforcement. The Privy Council applied the doctrine of mutuality. The rights of both parties to the contract should be equal. The other party could not enforce the contract against the minor. Therefore, the minor cannot enforce the contract. The Doctrine of Mutuality has been expressly superseded with the Specific Relief Act, 1963. The validity of the guardian’s consent, therefore, should be considered only with reference to his legal powers.

Furthermore, there can be no estoppel against a minor.[vii] So, even when a minor misrepresents that he is a major and thereby induces another to enter into a contract, it cannot be enforced against him as he is not estopped from setting up his minority as a defence. However, he will be compelled to make restitution of the benefits received by him. If the minor is in possession of any property obtained by the fraud, he can be compelled to restore it to its former owner. If the benefit consisted of the receipt of money, there was a difference of opinion whether it could be restored or not.[viii] In the case of Ajudhia Prasad v. ChandanLal, [ix] it was held that a mortgagee cannot recover the money lent by him to a minor on the principle of restitution. In the said case, the Allahabad High Court dissented from a Full Bench Decision of the Lahore High Court in Khan Gul v. Ladka Singh[x], where the defendant while still a minor by fraudulently concealing his age contracted to sell a plot of land to the plaintiff. He received the consideration of Rs 17,500 and refused to perform his part of the bargain. The plaintiff prayed for recovery of possession or refund of the consideration where the Court had ruled restitution in respect of the money received by him. It was held that the doctrine of restitution rests upon the salutary principle that an infant cannot be allowed by a court of equity to take advantage of his own fraud. The order was passed for the refund of consideration. They considered that in India, the power to order restitution is wider than in England and even money can be directed to be returned though it is not traceable in the hands of the minor.

Section 33 of the Specific Relief Act, 1963, provides as follows:

“(1) On adjudging the cancellation of an instrument, the Court may require the party to Whom such relief is granted, to restore, so far as may be any benefit which he may have received from the other party and to make any compensation to him which justice may require.

(2) Where a defendant successfully resists any suit on the ground. –

(a) That the instrument sought to be enforced against him in the suit is voidable. the court may if the defendant has received any benefit under the instrument from the other party, require him to restore, so far as may be, such benefit to that party or to make compensation for it;

(b) That the agreement, ought to be enforced against him in the Suit is Void by reason of his not having been competent to contract under Section II of the Indian Contract Act, 1972, the court may, if the defendant has received any benefit under the agreement from the other party, require him to restore, so far as may be, such benefit to that party, to the extent to which he or his estate has benefited thereby.”

Hence it is evident that any benefit, which includes even cash received, may be directed to be restored provided it is shown that the minor or his estate derived some benefit therefrom.

The provision relating to the position of necessaries supplied to a minor occurs under section 68 of the Indian Contract Act, 1872.

The rule of law is clearly established that an infant is generally incapable of binding himself by a contract. But to this rule, there is an exception introduced not for the benefit of the tradesman who may trust the infant, but for that of the infant himself. This exception is that he may make a contract for necessaries.

68. Claim for necessaries supplied to person incapable of contracting, or on his account.—If a person, incapable of entering into a contract, or any one 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.

In the Indian Contract Act, section 68 provides that a minor falls within the class of persons referred to in the section, and so, though he is not liable even for necessaries and no demand in respect thereof is enforceable against him by law, a statutory claim is created thereby against his property. But though the property of the minor may be liable for the necessaries under section 68 of the Contract Act, the minor himself is not personally liable as in English Law.8 Section 68 will not apply where necessaries are supplied to a person or to someone whom that person is bound to support when such person is competent to contract.

There is, however, no definition of the term “necessaries” in the Contract Act. It is, therefore, necessary to turn to judicial decisions to determine its precise import. Now, it was ruled by Baron Parke in Peters v.

Fleming[xi], that from the earliest times down to the present, the word ‘necessaries’ is not confined in its strict sense to such articles as were necessary to support life, but extended to articles fit to maintain the particular person in the state, degree and station in life in which he is; and therefore we must not take the word “necessaries” in its unqualified sense but with qualification as above pointed out. To put the matter concisely, “necessaries” means goods suitable to the condition in life of the defendant and to his actual requirements at the time of the sale and delivery, and whether an article supplied to an infant is necessary or not, depends upon its general character and upon its suitability to the particular infant’s means and station in life. It must further be observed that as necessaries include everything necessary to maintain the infant in the state, station, or degree of life in which he is, what is necessary is a relative fact, to be determined with reference to the fortune and circumstances of the particular infant; articles therefore that to one person might be mere conveniences or matters of taste, may in the case of another be considered necessaries, where the usages of society render them proper for a person in the rank of life in which the infant moves. 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 might not be so considered. The word “necessaries,” therefore, includes money urgently needed for the requirements of a minor and cannot be restricted to what is necessary for the elementary requirements of the minor such as food and clothing. Thus cash lent to him to effect necessary repairs in his house, and payment of Government revenue are necessaries of the minor proprietor. In the case of a minor Muslim girl, marriage is a “necessity” the person incurring expenditure for marriage is entitled to relief under section 68. A debt incurred by guardian for improving or developing minor’s estate is not binding on such estate. Money borrowed for its upkeep or its preservation binds the estate.

Expenses incurred for minor’s education, marriage of his sister, expenses incurred in funeral of minor’s parents, expenses incurred for necessary litigation etc. have been held to be necessaries. Expenses incurred for minor’s marriage have also been held to be ‘necessaries’.

The obligation to defray the expenses of the marriages of sons and daughters is cast by the Hindu law upon a father if there is any joint family property in his hands and not in other cases. A wife who spends for the marriage of her minor daughter cannot recover the amount personally from the husband. Neither section 68 nor sections 69 and 70 will apply. Further, the term ‘necessaries’ is comprehensive and is not confined to necessaries of the person of the infant himself but extends to necessaries provided for other members of his family, e.g., sister’s marriage, but the money spent cannot be recovered, unless it constitutes a debt and is not a bounteous gift. As “necessaries” include everything necessary to maintain an infant in the state, station, or degree of life in which he is, “what is necessary” is a relative fact to be determined with reference to the fortune and circumstances of a particular infant. Where the guardian of a minor borrows money for the payment of rent due to lambardar, which the minor was bound to pay, the minor is liable under the transaction, as the guardian can do, what the minor himself would do. The house leased to a minor for the purpose of living and continuing his studies is for a necessity, suited to the conditions of minor’s.

The advancing of funds to a male Hindu minor for meeting his own marriage expenses is not supplying him with necessaries suited to his condition in life within the meaning of section 68 of the Contract Act, and a person advancing such funds is not entitled to be reimbursed from the property of such a minor. The Hindu law does not enjoin the marriage of a Hindu male before the age of majority.[xii]

Section 12 of the Indian Contract Act also deals with capacity.

12. What is a sound mind for the purposes of contracting.—A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.

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 mind, may not make a contract when he is of unsound mind.

Illustrations

(a) A patient in a lunatic asylum, who is, at intervals, of sound mind, may contract during those intervals.

(b) A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract, or form a rational judgment as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts.

Unsoundness of mind

Unsoundness of mind is also another circumstance which renders a contract void and unlike English Law, the question whether the other party had or had not the knowledge of such fact does not arise. A contract entered into by a person who at the time was of unsound mind is void. Mere weakness of mind does not amount to unsoundness of mind. In English law in order that a person may avoid contract on the ground of insanity it is not only necessary to show that he was insane at the time of entering into the contract, but it is further necessary for him to prove that the other party knew him to be so insane as not to be capable of understanding what he was about. The test of unsoundness of mind is whether the person is capable of understanding the business and of forming a rational judgment as to its effect upon his interest. There being a presumption in favour of sanity, the person who relies on the unsoundness of mind must prove it sufficiently to satisfy this test. Where a person is not proved to be a lunatic on

inquisition, it is necessary to rebut the general presumption of sanity. This can be done by proving that his mind was completely deranged so that he was incompetent to enter into any contract, or by proving that he was of unsound mind with regard to the particular transaction. But when a person has been found lunatic by inquisition, so long as the inquisition has not been superseded, he cannot, even during the lucid interval, enter into a valid contract.

Mere weakness of mind is not sufficient. Although it is not necessary to prove utter mental darkness or congenital idiocy, the party alleging unsoundness of mind of a person must establish that that person was incapable of understanding business and forming rational judgement as to its effect.\ Idiocy is the most extreme form of mental unsoundness. Mere temporary forgetfulness is not sufficient to indicate want of mental capacity. In a case to set aside a mortgage on the ground of unsoundness of mind, the Court cannot substitute a mere weakness in the mind of the executant and give him a decree thereon on the plaintiff failing to prove the particular kind of insanity originally set up by him.

A person who is sometimes insane may make a valid contract in a lucid interval. But even though the general insanity is established the existence of the lucid interval will require clear proof. So where the unsoundness of mind has been proved by definite expert evidence the allegation of a lucid interval has to be equally strictly proved. On the other hand, in the case of a document executed by a person who is not generally insane but subject to attack of insanity at intervals, the burden of proving that the document was executed at the time when the executant had an attack of insanity is on the person who seeks to avoid the document. Similarly where a person is proved to have lucid intervals, the onus of proving that he was of unsound mind at the time of the execution of a document lies on him who challenges the validity of a document.[xiii]

The test of unsoundness of mind is whether a person is incapable of understanding the business concerned and of forming a rational judgment as to its effect upon its interest. Unless a person is adjudged as of unsound mind by inquisition, there is always a presumption of sanity. Therefore, a person who alleges unsoundness of mind must prove sufficiently enough to satisfy his case. Mere weakness of mind is not sufficient proof of unsoundness of mind. Temporary forgetfulness is not a sufficient test of unsoundness of mind. Where a person is usually of unsound mind, then the burden of proving that at the time of contract he was of sound mind lies on the person who affirms It is not that the lunatic remains continuously in state of unsoundness of mind, but once it is established that a person is of unsound mind, the onus is one the person who alleges the execution of a document during lucid interval. Although it is necessary to prove utter mental Infirmity or congenital idiocy in order to constitute unsoundness of mind, yet it is for the Plaintiff to establish that the person was incapable of understanding business and of forming a rational judgment as to its effect’6. If a person has been adjudged to be of unsound mind on inquisition, the presumption is that he continues to be of unsound mind and it is for the person who wants to take the benefit of the contract made with such person to establish that he was of sound mind at the time when he made the contract. Only proof of loss of memory is not sufficient because such loss of memory would not by itself render a person unfit for the

management of his affairs. With the increasing old age there results a loss of vigour and even mental energy and the extreme old age brings about vacuity of mind, but it cannot be said that the person of old age has not become of unsound mind until it can be proved that his mind has become completely blank. When it is alleged that due to extreme old age, the person has become incapable of understanding his own business and of forming a rational judgment as to its effect upon his interest, the onus to prove unsoundness of mind lies upon the person who alleges such unsoundness of mind.[xiv]

Imbecility

An imbecile person is one who has no understanding from his infancy. Contracts entered into by such persons, other than those for necessaries, are void. In the case of Keolapati v. Amar Krishna Narain Singh[xv], a document executed by an imbecile person and bearing his signature does not have conclusive force.

Burden of Proof relating to unsoundness and imbecility

The question of unsoundness and imbecility is to be determined not upon wire drawn speculations but upon tangible and unmistakable facts. Normal presumption is in favour of sanity. The onus of proving insanity is on person who alleges it. The question whether a person is of unsound mind at the time of execution of a document is a question of fact.

A case of lucid interval cannot be established by the solitary fact that on the day on which the transaction took place the person in question did not show any instability or insanity. An allegation of the unsoundness of mind of a person should be established by proof which shows that he was incapable of understanding business and forming a rational judgement as to the effect of his transaction upon his interest. Question whether contract is invalidated by unsoundness of mind does not depend merely on belief or disbelief of the witness before Court but largely upon inference to be drawn from evidence.

When it is shown that a person suffered from senile dementia on a particular day a presumption of its continuance would arise and it would then be on the party who tries to uphold the subsequent transaction of that person to show that at the time of the transaction there was no incapacity. Once it has been established that a person is usually of unsound mind, the burden of proof is on the party who alleges that the document was executed during a lucid interval.

It may be noted that the provisions of section 68 are not applicable to a contract entered into by a person of unsound mind and so no claim for refund of moneys advanced to such person is maintainable.

But money lent by a lunatic to another may be recovered in a suit on his behalf by his next friend under section 65.[xvi]

Drunkenness

Similarly drunkenness is a ground for avoidance of contract but in order to be so it must be so excessive and absolute as to suspend the reason for a time and create impotence of mind, and it must be distinguished from that “merriment of a cheerful cup which rather revives the spirits than stupefies the reason”. So it has been held that although a mortgagor may have been drinking hard and frequently of unsober and unsound mind, a mortgage deed executed by him is good and validly executed unless it is established that at the time the deed was executed he was of unsound mind. A contract by a drunken person is voidable only and not void and so it may be ratified by him when he is sober.[xvii]

Old Age

Mere loss of memory is not sufficient to constitute unsoundness of mind as such loss of memory, on its own, does not render any person unable to manage his own affairs. It has been held that loss of memory and absent mindedness is not inconsistent with the acts of a sane man. Therefore, even an extremely old man with declining strength of mind and body may be deemed fit to contract if he could exercise an independent and intelligent mind over what he is doing.[xviii] With ageing, there results a natural vacuity of mind, but it cannot be said that such a person has become of unsound mind unless it can be proved that his mind has become completely blank.[xix] In such cases, the onus is on the one who alleges unsoundness of mind to prove that he has become unable to understand his own affairs and form rational judgements.[xx]

CAPACITY IN ENGLISH LAW

The general rule of English law is that any person is competent to bind himself to any contract he chooses to make, provided that it is not illegal or void for reasons of public policy. In common law there are exceptions to this rule in the case of corporations, minors, married women, mentally incompetent and intoxicated persons. The exceptions are now greatly reduced in scope. A series of statutes from 1870 to 1949 abolished the married woman’s disabilities and she now enjoys full contractual capacity. The present state of the other exceptions requires a little further explanation.

Minors

Minors are persons under 18 years of age’ (when he/she reaches majority) and have the capacity to establish most contracts. However, whilst this is generally true, situations exist where the minor requires protection and in those situations the contract established may be voidable, hence allowing the minor the ability to avoid the contract. Typically, contracts involving the sale of shares; the leasing of property; and contracts of partnership have been held as voidable, rather than void. The minor may avoid such contracts within a reasonable time, and until he/she reaches the age of majority, but must satisfy any debts whilst party to the contract.

Circumstances exist where a minor is bound by the contract. If the contract is for necessities, as defined under the Sale of Goods Act 1979 s. 3, then the contract will bind the minor. ‘Necessities’ is a broad term, and whilst this can include food and clothing, it has been assessed as including items reflecting the minor’s social status. Where necessities have been provided, the minor is liable to pay a reasonable price, rather than, necessarily, the price established in the contract. Further, where the contract is not unduly harsh or detrimental to the minor, it will be binding, and conversely where it places an unfair responsibility on the minor he/she may be able to avoid the contract.’ Finally, if the contract is for the benefit of the minor, and again, does not place unfair responsibility on him/her, it will be enforceable against the minor. [xxi]

Clements v. London and North Western Railway Co.[xxii]

A minor had been employed as a porter at a railway and had agreed to join an insurance society that was organized by the railway’s employees. The effect of this membership was, in part, to waive rights against the employer as provided under the Employer’s Liability Act 1880, as the society provided a more comprehensive package of protection. This protection was beneficial in some circumstances, but, importantly in this case, provided for sums to be paid out in claims at rates lower than would have been available under the Act. When the minor was injured due to negligence on the part of the employer, he sought to have his membership avoided to enable him to claim under the Act. It was held by the Court of Appeal that he could not. The contract was binding on him, as, when considered as a complete package, it was beneficial.

Despite this protection for minors, those entering into contracts with a minor are afforded rights under the Minors’ Contracts Act 1987. The minor who, when reaching the age of majority, ratifies debts that were created during his/her minority, will have this ratification binding upon him/her. Also, where a third party acted as guarantor for the minor in contracts that were unenforceable against him/her, this will not result in the contract being unenforceable against the third party.’ Further, the Act consolidated the existing law allowing the remedy of restitution to be used to require the minor to return any property acquired under the contract, or any property representing this, in an unenforceable contract.[xxiii]

Mental incapacity

Persons who have been identified with a mental incapacity, and as such are defined under the Mental Capacity Act 2005 as a ‘patient’, are protected from entering contracts. The consequence is that any agreement made which purports to be a contract will be void. This is the situation even if the other party was not aware of the ‘patient’s’ incapacity. There may be a different conclusion where the person is not considered to be a patient under the relevant legislation. In this scenario, there exists the ability for a contract to be established with a person suffering from a mental illness or some other form of mental incapacity. To avoid the contract, the mentally ill person must demonstrate that at the time of concluding the contract he/she did not understand the nature of the agreement, and the other party must or should have known of the mental incapacity present. The Sale of Goods Act 1979 has also provided guidance on how potential contracts may be viewed when they involve those without mental capacity. Under s. 3, if the contract is for necessities and the other party is unaware of the mental incapacity, the contract is valid and the price must be paid. If, however, the other party is aware of the mental incapacity, then only a ‘reasonable price’ must be paid. ‘Necessities’ is defined under the Mental Capacity Act 2005 as suitable to a person’s condition in life and to his/her actual requirements at the time the goods/services were supplied.[xxiv]

INTOXICATED PERSONS

The authorities are scanty; but in Gore v. Gibson (1845) 13 M & W 621; 153 ER 260, it was held that a contract made by a person so intoxicated as not to know the consequences of his act is not binding on him if his condition is known to the other party. It appears, however, that such a contract is not void but merely voidable, for it was held in Matthews v. Baxter (1873) LR 8 Ex 132 that if the drunken party, upon coming to his senses, ratifies the contract, he is bound by it.

Section 3 of the Sale of Goods Act 1979 makes the same provision for persons who are incompetent to contract by reason of “drunkenness” as for minors and the mentally incompetent. No doubt, the same rule would be applied to persons intoxicated by drugs other than alcoholic drink, either by a broad interpretation of “drunkenness,” or at common law.[xxv]

CONCLUSION

It can thus be seen that capacity being a very essential factor in contracts, needs to always be fulfilled. Each reason for incapacity, in Indian and English law, has its own basis and history, academically and judicially, and has thereby been incorporated into the laws of most countries, both of Common and Civil

law. The Indian structure is heavily modelled on its English counterpart, and the basic notions and edifice is based on the English common law system. However, the English model may be seen as far wider and more comprehensive. [5/10, 10:20 AM] Dipesh: *Family Law For End Term*

0.

Lakshmi Kant Pandey v UOI AIR 1987 SC 232. 0.

Githa Hariharan v Reserve Bank Of India AIR 1999 SC 1149.

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Vai Tahira v Ali Hussain Fissalli AIR 1979 SC 362.

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Daniel Latifi v UOI 2001 (6) SCALE 537.

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Sarla Mudgal v UOI AIR 1995 SC 153.

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Bhaurao Shankar Lokhande v State of Maharashtra AIR 1965 SC 1564.

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Dr. N.G. Dastane v Mr. S. Dastane AIR 1975 SC 1534.

MODULES:0.

Sources

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Marriage

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Matrimonial Reliefs

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Dowry and Dower

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Maintenance

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Guardianship & Custady

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Adoption

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Family Courts Act 1989 & Uniform Civil Code.