The legal capability of a person to enter into contract is known as capacity to contract. Capacity refers to the competence of the parties to make a contract. It is one of the essential elements to form a valid contract.

Who are competent to contract:

According to sec.11 “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 not disqualified from contracting by any law to which he is subject.”

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Legal provisions relating to contracts:

1. Minor: 

A minor is a person who has not attained the age of majority. The age of majority is to be determined according to the law to which the minor is subject to. Sec-3 of the Indian Majority Act, 1875 defines it as “ A minor is a person who has not completed 18 years of age.”

2. Unsound Mind:

A person said to be of sound mind for the purpose of making a contract if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests [Sec-12].

3. Drunkard or intoxicant:

A drunkard or intoxicated person loses his contractual capacity when he is intoxicated so excessively that he loses reasoning power for the time being.

4. Lunacy or insanity:

A lunatic is a person whose mental thinking is disordered due to some mental strain or disease. However, the mental capacity of such persons may not be completely lost.

5. Idiot:

An idiot is a person who doesn’t have mental ability of thinking. His incapacity is permanent and at any time he is unsound mind.

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