BACHELOR OF BUSINESS ADMINISTRATION

Detailed explanation-1: -Competency of parties to contract is one of the most important requirements to make an agreement valid and enforceable in a court of law. A contract made by a person who does not possess the mental capacity to understand the nature and consequences of the contract is void ab initio.

Detailed explanation-2: -What is Mental Capacity to Contract? To enter into a contract, a person must have mental capacity sufficient to understand the nature and consequences of her actions. If mental capacity is absent, the contract is voidable by the person lacking capacity.

Detailed explanation-3: -48 Moreover, a person who is usually of unsound mind may make a contract when he is of sound mind. But a person who is usually of sound mind may not make a contract when he is of unsound mind under the Indian Contract Act.

Detailed explanation-4: -To be legally binding as a contract, a promise must be exchanged for adequate consideration. There are two different theories or definitions of consideration: Bargain Theory of Consideration and Benefit-Detriment theory of consideration.

Detailed explanation-5: -Mental Incapacity and Contracts A person who lacks mental capacity can void, or have a guardian void, most contracts (except contracts for necessities). As with contracts with minors, the contract is voidable, and not automatically void.