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Introduction

The ‘capacity to contract’ means the competence (i.e. legal ability) of the parties to enter into a valid contract. According to Sec.10, competency of a party is one of the essential elements of a valid contract. Thus parties having contracting capacity would make the contract valid and therefore such a contract would be enforceable in the court of law.
 
The term ‘capacity to contract’ is defined in Sec. 11 of the Indian Contract Act as under:
 
“Every person is competent, to contract who is of the age of the 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 analysis of this section reveals that a person who is a major, is of sound mind and is not disqualified from contracting by the law is competent to enter into a valid contract.
 
In other words the following persons are regarded as incompetent to enter into a valid contract:
  1. Minor
  2. People with unsound mind-
    1. Lunatics
    2. Idiots
    3. Drunkards
  3. Persons disqualified by law-
    1. Alien enemies
    2. Foreign sovereigns
    3. Convicts
    4. Insolvent
    5. Corporations




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