Lawful consideration, Privity of contract, Capacity to contract

Table of Contents

LAWFUL CONSIDERATION

The most important factor of valid contract is the consideration. When two parties enter into the agreement in order to return something to each other is consideration. Now to make the contract valid, the consideration must be lawful.

Under section 23 of Indian contract act, the consideration or object of an agreement is lawful unless:-

It is forbidden by the law; or
Is of such a nature that if permitted, it would defeat such provisions of any law; or
Is fraudulent; or
Involves or implies injury to the person or property of another; or
The court regards it as immoral or opposed to public policy.

In each of these cases the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Consideration may be past present or future.

ESSENTIALS OF CONSIDERATION.

Consideration must be at the desire of promisor.

- Durgaprasad vs. Baldeo : A entered into agreement with B In writing ,promising to pay him a commission on articles sold through their agency in a bazaar. Afterwards denied to pay him the same. Court upheld that such expenditure was not consideration for agreement, since it was not made at the desire of the promisor.

Consideration need not be adequate.
Consideration must be real value in the eye of law.
Consideration by promissee can be party to the contract or the third party.
According to ICA, consideration may be given by promise or any third person. In India, there is a possibility that, the consideration for promise may not move to promise but a third person who is not party to the contract.

Chinnayya vs Ramayya : Mother enter into an agreement with her daughter, who promised to pay rs.650 monthly to her maternal uncle and then denied to pay the same. The court upheld that the daughter is not bound to pay her maternal uncle.

PRIVITY OF CONTRACT :

Strangers of the contract can never sue. This doctrine simply means only those parties who are parties to the contract enforce the same. A stranger to a contract has no legal right to interfere into the contract and sue to the parties. Refer the following case to understand the concept better.

Jamna Das vs Ram Avtar

EXCEPTIONS TO THE RULE OF PRIVITY OF LAW :

If under family arrangement the contract is entered upon to give benefit to the third party. Such third party shall have the right to sue as a beneficiary in the case of breach of contract.
Sometimes there may be no privity of contract between 2 parties but if one of this by acknowledgement recognises the right of the other to sue him, then the liability still arises.

CAPACITY TO CONTRACT:

Section 11 of Indian Contract Act deals the provision of the capacity of parties to the contract. It states that the following 3 categories of person who are not competent to contract:

A person who has not attained the age of majority
A person who is of unsound mind.
A person who has been disqualified by laws.

NATURE OF MINOR’S AGREEMENT :

Any minor is not competent to contract. If any minor enters into the contract the question arises in validity of such agreement, the provisions of Indian Contract Act does not have any answer to this question in the absence of any legal controversy.

Mohori bibee vs Dharmodas Ghose

Dharmodas Ghosh, a minor mortgages his house to Brahmodutt to get a loan of 20K from him. He agrees and gives Dharmodas half amount that 10.5K . When all this comes to the knowledge of Dharmodas’s mother wrote a letter to Brahmodutt stating, when this instrument was being executed Dharmodas was a minor, that’s why this agreement is void. Dharmodas agreed to the same but was of the view that they should repay the loan given by him to the minor. But SC upheld that any agreement by a minor is void-ab-initio so Dharmodas need not repay the loan to Brahmodutt.

POSITION OF LAW OF ESTOPPEL IN MINOR’S

At the time of contract when a minor has misrepresented his age, the question arises that whether the law of estoppel shall be against a minor, which simply means that can a minor be made liable on the ground that since earlier he had made a statement regarding his age, should now he be allowed to deny the same

From various decisions of diff high courts it was stated that the law of estopal doesn’t apply to minor. He is allowed to plead minority as a Defense to avoid his liability under an agreement

Mohri bibee vs dharmodas ghose.

Position of minor in partnership:

A minor is not competent to enter into a contract. However he can enjoy the benefits of partnership, with the consent of all the other partners. On attaining majority he has the option to decide within six months from the date of majority whether he want to continue as partners.

Position of minor in contract of Agency:

Minor is incapable of entering into a contract therefore any work a minor cannot do by himself he can’t do it by agent. Minor can never appoint agent.

Minor’s status in contract of service:

A contract of service entered into by minor is void.

Contract of Marriage:

A contract of marriage was believed to be beneficial to minors therefore it was valid.

Khimji Kuverji Vs. Lalji karamsi.

MINOR’S LIABILITY FOR NECESSARIES :

It has already been specified that minor’s agreement is void-ab-initio .If any necessaries are supplied to minor then the person should be reimbursed by the same. If reimbursement’s not done by the parent or guardian of minor then such a person can get reimbursed of property of minor.

The items that constitute necessaries depend upon the requirement of the person at the time of actual delivery of the goods.

Kunwarlal vs Surajmal

In this case the house was rented to a minor to continue his studies and was not able to pay the rent to the owner. In spite of this the owner allowed him to stay at his place as education is one of the necessity. Court upheld that the minor or his parents/guardian would be liable to pay rent and the owner would succeed as education of minor is considered as a necessary factor to make him a good citizen of a country and to make him a good person

Author: Akshada Sarpande,
MIT School of law, student of FY BBA LLB