who can enter into a contract

 

                                 

What is the Capacity of Parties to enter into a Contract?

In common law, the capacity of parties to enter into a contract is an important element that determines the validity and enforceability of the contract. Capacity refers to the legal ability of a person or entity to enter into a binding agreement. There are certain requirements that must be met in order for parties to have the capacity to enter into a contract.

 

In Pakistan, the Contract Act, 1872 governs the formation and enforcement of contracts. Section 10 of the Act states that every person is competent to contract if he is of the age of majority, is of sound mind, and is not disqualified from contracting by any law to which he is subject.

 

Age of Majority:

 According to Pakistani law, the age of majority is 18 years. Therefore, a person under the age of 18 is considered a minor and cannot enter into a contract. Any contract entered into by a minor is voidable at the option of the minor.

 

Case Law:

In the case of Mirza Abdul Rehman vs Muhammad Aslam (1992) PLD 1992 SC 1, the Supreme Court of Pakistan held that a minor cannot enter into a contract because he lacks the legal capacity to do so. The court further held that any contract entered into by a minor is voidable at the option of the minor.

 

 

Sound Mind:

 A person must have the capacity to understand the nature and consequences of the contract they are entering into. If a person lacks the mental capacity to understand the terms of the contract, they are considered to be of unsound mind and incapable of entering into a contract.

Case Law:

In the case of Habib Bank Limited vs Shaukat Ali (2003) PLD 2003 SC 527, the Supreme Court of Pakistan held that a person who is of unsound mind cannot enter into a contract. The court stated that if a party to a contract is incapable of understanding the nature and consequences of the contract, the contract is void.

 

In the case of Muhammad Bakhsh vs Karam Elahi (1971) PLD 1971 SC 51, the Supreme Court of Pakistan held that a contract entered into by a person who is under the influence of drugs or alcohol is voidable. The court stated that if a party is incapable of understanding the terms of the contract due to intoxication, the contract is voidable at the option of the affected party.

 

 

Disqualification from Contracting:

There are certain categories of persons who are disqualified from contracting under Pakistani law. For example, a person who has been declared insolvent or bankrupt cannot enter into a contract without the permission of the court.

 

Case laws:

In the case of Roshan Lal vs Seth Bhola Ram (1916) 43 IA 192, the Privy Council held that a person who has been declared insolvent or bankrupt cannot enter into a contract without the permission of the court. The court stated that a bankrupt person’s property vests in the trustee and he has no right to enter into a contract without the trustee’s permission.

 

 



In conclusion, the capacity of parties to enter into a contract is an important consideration in common law. Parties must meet certain requirements, including being of age, sound mind, and not disqualified from contracting. The above-mentioned case laws provide guidance on the capacity of parties to enter into a contract under Pakistani law.

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