Capacity of Parties and Free Consent for CMA Foundation

What this chapter covers

Capacity of Parties, Free Consent: topics in the order to study them

1. 1Competency of Parties to Contract (Sections 10-12)Start with the basic conditions of who can contract: age of majority, sound mind and not being disqualified. Everything else builds on this.
2. 2Minor's Agreements and Their EffectsThis is the most tested part of capacity. Learn it right after the general rule so the exceptions make sense.
3. 3Persons of Unsound Mind and Other Disqualified PersonsIt completes the capacity half. The test of soundness at the time of contract is short and easy once minors are clear.
4. 4Free Consent and Coercion (Sections 13-15, 19)It defines consent and free consent, and coercion is the simplest of the vitiating factors, so it is a good entry point.
5. 5Undue Influence (Sections 16 and 19A)It is close to coercion but works through a relationship of trust. Studying it next lets you compare the two.
6. 6Misrepresentation and Fraud (Sections 17-18, 19)Both involve false statements, so study them together and focus on the difference of intention and the remedies.
7. 7Mistake (Sections 20-22)It comes last because it differs from the others: no one is pressuring or misleading, and the effect depends on whether the mistake is of fact or law, bilateral or unilateral.

How to prepare Capacity of Parties, Free Consent

1. Read each topic once and write a one-line definition in your own words, with the key condition that makes it apply.
2. Build a comparison table on paper with columns for coercion, undue influence, misrepresentation, fraud and mistake. Fill in: who acts, what the act is, and whether the contract is void or voidable.
3. Learn the minor's position as a short list: agreement is void from the start, no ratification after majority, no estoppel against the minor, and the minor cannot be held liable under it. A minor can be a promisee or beneficiary, and can enforce a contract that is for the minor's benefit where the minor's consideration has been given and no obligation remains. This is a case-law position, not a statutory rule. A minor can also be an agent. Add the exception: a person who supplies necessaries to a minor can claim reimbursement from the minor's property under Section 68. This is a quasi-contractual claim, not a claim under the agreement, and the minor is not personally liable.
4. Make your own small examples with Indian names and rupee amounts, such as a 16-year-old selling a bike, and decide the outcome each time.
5. Practise MCQs by first looking for the keyword in the scenario: threat, trust, false statement, silence, wrong belief. Then eliminate options that name the wrong effect.
6. Revise the void versus voidable split every day for a week. Say aloud which party can cancel and which cannot.
7. On the last day, read only your table and the quick revision points, then try a timed set of 10 questions.

Common mistakes in Capacity of Parties, Free Consent

• Calling a minor's contract voidable instead of void.

  Fix: Remember that agreements by minors and by persons of unsound mind (when incapable of understanding the contract) are void. Mohori Bibee v Dharmodas Ghose (1903) is the authority that a minor's agreement is void. The defects of free consent in this chapter are generally voidable, except bilateral mistake.

• Allowing a minor to ratify the contract on turning 18.

  Fix: Link it to the rule: a void agreement cannot become valid later, as there was no valid contract to approve.

• Confusing coercion with undue influence.

  Fix: Ask whether there is a threat of a forbidden act or detention of property (coercion) or the misuse of a position of trust or authority (undue influence).

• Treating fraud and misrepresentation as the same thing.

  Fix: Look at intention. Fraud is deliberate or reckless deception; misrepresentation is a wrong statement or breach of duty without intent to deceive. Fraud also gives a right to claim damages. Also remember the Section 19 ordinary-diligence proviso: the right to avoid is lost if the truth could have been discovered with ordinary diligence, but this applies to misrepresentation and to silence amounting to fraud. It does not apply to active fraud, where a positive false statement was made. There the party can still rescind even if the truth could have been discovered.

• Saying every mistake makes a contract void.

  Fix: Check three things: is it a mistake of fact or law, is it by both or one party, and is the fact essential to the agreement. A bilateral mistake of essential fact makes the agreement void; a unilateral mistake does not make it voidable (Section 22), unless an exception such as the other party's fraud applies.

• Applying the wrong effect to a scenario by reading the options before the facts.

  Fix: Read the facts first, name the doctrine in your head, then choose the option that matches the effect.

Last-day revision: Capacity of Parties, Free Consent

• ✓A competent person is an adult (majority age), of sound mind, and not disqualified by any law.
• ✓A minor's agreement is void from the start under the settled rule.
• ✓A minor cannot ratify an agreement after reaching majority.
• ✓A minor can be a promisee or beneficiary, and can enforce a contract that is for the minor's benefit where the minor's consideration has been given and no obligation remains. This is a case-law position, not a statutory rule. The minor cannot be held liable under it.
• ✓The minor's property is liable for necessaries supplied to the minor (Section 68). This is a quasi-contractual claim, not a claim under the agreement, and the minor is not personally liable.
• ✓A person of unsound mind is judged by their state at the time of making the contract.
• ✓Consent is free when it is not caused by coercion, undue influence, fraud, misrepresentation or mistake.
• ✓Coercion is committing or threatening to commit an act forbidden by the Indian Penal Code, or unlawfully detaining or threatening to detain any property, with the intention of causing any person to enter into an agreement. The coercer need not be a party to the contract. The contract is voidable under Section 19 at the option of the party whose consent was so caused.
• ✓Undue influence arises where one party is in a position to dominate the will of the other and uses it unfairly. The contract is voidable.
• ✓Fraud is a deliberate false statement or act meant to deceive. Misrepresentation is a false statement, or a breach of duty that gains an advantage, made without intent to deceive. Both make a contract voidable.
• ✓Under the proviso to Section 19, a party cannot avoid the contract if the truth could have been discovered with ordinary diligence. This applies where consent was caused by misrepresentation, or by silence amounting to fraud. It does not apply to active fraud (a positive false assertion): the party can still rescind even if the truth could have been discovered.
• ✓Mere silence about facts likely to affect a person's willingness to contract is not fraud unless there is a duty to speak or the silence is equal to speech.
• ✓A mistake as to a matter of fact essential to the agreement by both parties makes the agreement void.
• ✓A unilateral mistake (by one party only) does not make the contract voidable (Section 22), with the usual exceptions, for example where the other party's fraud or misrepresentation caused it.
• ✓A mistake about the law of India does not make a contract void.

Capacity of Parties, Free Consent practice questions

• Ramesh, a trader in Surat, refuses to return the goods of Kishore, which he holds, unless Kishore signs an agreement to sell him a plot at a…
• Ramesh threatens to unlawfully detain the goods of Suresh lying in his godown unless Suresh signs an agreement to sell him a machine at a lo…
• Meera, a minor, owes a tailor ₹3,000 for suitable clothes supplied to her at home. The tailor claims payment. Which is the correct position …
• Karan, a minor, falsely states that he is 20 years old and induces a dealer, Mr. Bose, to sell him a motorcycle on credit. Karan's age is la…
• Mohan, normally a sane businessman, was so heavily drunk at a party that he could not understand the terms of an agreement he signed with Su…
• Arjun misrepresents to Bhavna that a factory produces 500 maunds of indigo annually. Before buying, Bhavna examines the factory accounts, wh…
• Under the Indian Contract Act, 1872, which combination of requirements must be met for an agreement to become a contract under Section 10?
• Under the Indian Contract Act, 1872, a person is said to be of sound mind for the purpose of making a contract if, at the time of making it,…

Capacity of Parties, Free Consent in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

• CS ExecutiveContract Law
• CSEETElements of Law of Contracts
• CMA IntermediateIndian Contracts Act, 1872
• CA FoundationThe Indian Contract Act, 1872