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CMA Intermediate · Business Laws and Ethics · Indian Contracts Act, 1872

Under the Indian Contract Act, 1872, an agreement is a contract if it is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and is not expressly declared void. Rohan, a person of sound mind who is below the age of majority, signs a promissory agreement with a shopkeeper. Which element of the above requirement is directly missing?

The missing element is competence of the party to contract. The Act makes an agreement a contract only if the parties are competent, and a minor below the age of majority is not competent, even if of sound mind and offering consideration.

  1. ALawful object
  2. BFree consent
  3. CCompetence of the party to contractCorrect
  4. DLawful consideration

Explanation

The Act requires parties to be competent to contract. A person who has not attained majority is not competent, so this element fails. His sound mind and the presence of consideration do not cure the lack of competence.

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