What do you mean by being competent enough to contract? In this article, we will be briefly answering this question and highlight few criteria that is significant when it comes to constituting a contract.
According to Cambridge dictionary defines competency as, “having the skills or knowledge to do something well enough to meet a basic standard” and competency in law is defined as “having enough mental ability for a particular purpose.” [1] For example, a minor is not allowed to contract, why? It is understood that they are not at an age that allows them to understand the repercussion of their actions. For instance, “in the United States as of 1971, minor is generally legally defined as a person under the age of 18. However, in the context of alcohol or gambling laws, people under the age of 21 may also sometimes be referred to as minors. However, not all minors are considered juveniles in terms of criminal responsibility. As is frequently the case in the United States, the laws vary widely by state.”[2] For some countries the legal age is considered 16 and some countries consider the age 18 as majority. In India, landmark judgements have pronounced that in “rarest of rare case” minors aged 16 or 17 who are charged with extremely heinous crimes could sometimes be treated as an adult.[3] Thus, courts allow any contract made by a minor to be voidable at the minor’s discretion in order to protect them from being held accountable for entering into unwise contracts.[4]
General Criterion:
- Majority of age: We have already explained the importance of this first element.
- Unsound mind: A person is said to be of unsound mind if at the time of omission of an act he or she could not possibly foresee reasonably consequences of their action. “If they are unable to make decisions for himself if he fails to understand the information relevant to the decision, to retain that information, to make use of that information for making the decision, or to communicate his decision by talking, using sign language or any other means.”
In the case of Hughes v. Jones,[5] it was held that: “In an inquisition of lunacy, a finding by the jury that the person alleged to be insane, had been of unsound mind for several years is incidental, and, not conclusive as to the validity of a deed executed within that time.”[6]
- Free consent: It means both parties are joining the agreement voluntarily and without any form of coercion, misrepresentation, or undue influence from the other party.[7]
- Consideration: “Contracts arise when a dutycomes into existence, because of a promise made by one of the parties. To be legally binding as a contract, a promise must be exchanged for adequate consideration.”[8]
Contracts are legally binding agreements, however, not all agreements are contracts. For example: The Virginia Supreme Court has held in Lucy v. Zehmer that even an agreement made on a piece of napkin can be considered a valid contract, if the parties were both sane, and showed mutual assent and consideration.[9] We come across various contracts in our day to day lives. The crucial aspect of conducting most successful businesses are contracts! It is an official document that lists out parties’ duties, right and obligations. A contract can be between two or more people, between two countries or two companies.
In addition to the above points mentioned, it is also important that we look into the formation of contracts. As they too decide the legitimacy of such agreements. For instance, there has to be an “Offer” made by “A” to “B”. An “acceptance” needs to come form B’s side, B also has the option to counteroffer and or reject the offer altogether. Such counteroffer needs to be accepted too. When both the parties accept, we can say a contract is formed between “A” and “B”. In addition to this, the legality of the contract also matters. “Legality establishes the set of laws and regulations that apply to a contract, which varies by state and country. Since states and countries have different laws and methods to mediate disputes, this affects how contracts are executed and written.”[10]
The Terms and Conditions that you do not read or Privacy Policy or cookies that you accept while going through a website are also a form of contract. Contracts vary in their lengths and terms depending on the nature of what the contract is created for. However, why are we specifically discussing competency of contract? It is because of these important elements that such contracts will be legally enforceable in a court of law, failing which such contracts are considered null and void. Contracts can also be in form written, oral or in any manner of conduct of the parties involved.
[1] COMPETENT | English meaning - Cambridge Dictionary [2] Minor (law) - Wikipedia [3] Coleman, Bennet & (2017-12-21). "Class XI student to be tried as adult for Ryan boy's Murder". The Times of India. [4] https://www.legalmatch.com/law-library/article/competency-and-capacity-in-a-contract.htm [5] Hughes v. Jones, 116 N.Y. 67, 22, N.E. 446, 5 L.R.A., 632, 15, Am. St. Rep. 386. [6] Hughes v. Jones, 116 N.Y. 67 | Casetext Search + Citator [7] Who are Competent to Contract (tutorialspoint.com) [8] contract | Wex | US Law | LII / Legal Information Institute (cornell.edu) [9] Ibid. [10] 7 Essential Elements of a Contract - AXDRAFT blog
