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CMA Foundation · Fundamentals of Business Laws and Business Communication · Capacity of Parties, Free Consent

Rohan, aged 16, signs a loan agreement with Mehta Finance for Rs 50,000 to buy a motorbike. Which statement fits the Contract Act reading that the minor lacks competence under Section 11?

The agreement is not a valid contract. Section 10 requires parties competent to contract, and Section 11 requires the age of majority. Rohan, at sixteen, is not competent, so the loan agreement does not satisfy the conditions for a contract. Section 19 voidability concerns defective consent, not minority.

  1. AMehta Finance can enforce the agreement because Rohan received the money
  2. BThe agreement is not a valid contract because Rohan is not competent to contract, so Section 10 requirements are not metCorrect
  3. CThe agreement is a contract voidable at Rohan's option under Section 19
  4. DThe agreement is valid once Rohan's friend of majority age signs as witness

Explanation

Section 10 makes agreements contracts only if made by parties competent to contract. Rohan, being below the age of majority, is not competent under Section 11, so the agreement fails this test. Section 19 deals with consent caused by coercion, fraud or misrepresentation, not with minority, so the voidable option is wrong.

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