What Is Contractual Capacity Of Parties? Definition & Meaning

Contractual Capacity – An important element of a valid contract is that the parties to the contract should have the capacity to enter into a contract. For an ‘agreement’ to become a contract’, it is important that such agreement is between persons who have the capacity to contract. Capacity here means competence of the parties to enter into a valid contract.

According to Section 11 of the Indian Contract Act, “Every person is competent to contract who is of the age of 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 .”

On the basis of the above definition, it becomes clear that a party to a contract must:

1. Be a major.

2. Be of sound mind.

3. Not be disqualified by any law.

Thus, Section 11 declares the following persons to be incompetent to enter into a contract.

1. Minors

2. Persons of unsound mind

3. Persons disqualified by any law to which they are subject.

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Note ( Contractual Capacity )

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