Which of the following statements are TRUE in a contractual capacity?
(A) Law presumes that every person is competent to contract unless otherwise proved
(B) That a minor can make a contract for necessities of life
(C) That a person of unsound mind can enter into the family contracts
(D) A convict cannot enter into a valid contract nor can sue
(E) That a wife can always make valid business contracts and bind her husband
Choose the correct answer from the options given below:

Correct option is C

In contract law, contractual capacity refers to the legal ability of a person to enter into a contract. Under the Indian Contract Act, 1872, the following categories of people are considered to have limited or no capacity to contract: minors, persons of unsound mind, convicts, and in some cases, married women.

The statements that are true in the context of contractual capacity are:

1. (B) A minor can make a contract for necessities of life:

   • According to Section 68 of the Indian Contract Act, 1872, a minor's contract is void. However, there is an exception: a minor can enter into a contract for necessities (e.g., food, clothing, shelter, education, and medical care). Such contracts are valid, and the person providing the necessities can seek reimbursement from the minor’s estate.

2. (D) A convict cannot enter into a valid contract nor can sue:

   • A convict (a person serving a prison sentence) is not completely incapable of contracting, but their capacity is restricted during the period of their sentence. They cannot sue or enter into a valid contract while serving the sentence. However, their contractual capacity is restored upon release.

Information Booster:

1. Contracts for Necessities (Minor’s Capacity) – Section 68

• A minor cannot be held liable for a contract. However, necessities provided to a minor are recoverable from the minor's estate but not personally from the minor.
• Example: If a 17-year-old purchases food or medical care, the provider can seek payment from the minor’s estate.

2. Convict’s Contractual Capacity

• A convict loses the right to enter into contracts or sue during imprisonment.
• However, upon completion of the sentence, full legal rights are restored.

Additional Knowledge:

1. "Every person is presumed competent unless otherwise proved" (Incorrect - Option A)

• The Indian Contract Act, 1872clearly restricts certain people (e.g., minors, unsound persons) from entering into contracts.
• Example: A minor’s contract is void ab initio (invalid from the beginning), even if no evidence is provided to prove incompetency.

2. "A person of unsound mind can enter into family contracts" (Incorrect - Option C)

• A contract made by a person of unsound mind is void unless they were of sound mind at the time of contracting.
• Exception: A guardian or legal representative can make contracts on their behalf.

3. "A wife can always make valid business contracts and bind her husband" (Incorrect - Option E)

• A wife cannot automatically bind her husband in business matters unless:
  • She is acting as his authorized agent, or
  • The contract falls under necessities of household expenses (e.g., buying groceries).
• Example: If a wife takes a loan for a business without the husband's authorization, he is not legally bound to repay it.