Chapter 3 Consideration and Capacity of Parties

Question 1

Define Voidable Contract?

[Chapter 3]

Answer 1

An agreement which is enforceable by law at the option of one party (i.e. aggrieved party), but not at the option of the other e.g. agreement in which consent is not free.

Question 2

What is the difference between Void Agreement and Void Contract?

[Chapter 3]

Answer 2

• A void agreement is an agreement which is void from start (also called void ab-initio) e.g. agreement with illegal object.
• A void contract is valid at start but subsequently something happened which made it void e.g. subsequent illegality or subsequent impossibility.

Question 3

List down essentials of a valid contract.

[Chapter 3]

Answer 3

1. Offer and Acceptance
2. Intention to create legal relationship
3. Capacity/Competence of parties
4. Free Consent
5. Consideration
6. Lawful Object
7. Possibility of performance
8. Certainty
9. Legal formalities regarding writing and registration

Question 4

Which persons are not competent to contract?

[Chapter 3]

Answer 4

1. Minor.
2. Person of Unsound Mind.
3. Person Disqualified by Law.

Question 5

Is there any difference between agreement without consideration, and agreement with inadequate consideration?

[Chapter 3]

Answer 5

Yes. Agreement without consideration is void. Agreement with inadequate consideration is valid.

Question 6

What is the effect of agreement to do impossible things?

[Chapter 3]

Answer 6

This agreement is void-ab-initio.

If one of the party knew about impossibility, he will compensate other party.

Question 7

List down examples of agreements which are required to be in writing.

[Chapter 3]

Answer 7

• Agreement to make a gift for natural love and affection must be in writing and registered.
• Promise to pay time-barred debt must be in writing.
• Arbitration agreements must be in writing.

Question 8

List down headings to explain “Position of agreement with Minor”.

[Chapter 3]

Answer 8

1. Agreement by a minor is void against him.
2. No ratification of agreement by minor.
3. Rule of estoppels does not apply to a minor.
4. Minor in a partnership.
5. Minor in an Agency.
6. Minor and insolvency.
7. Agreement by minor and adult jointly.
8. Agreement by guardian or parents on behalf of minor.
9. Filing suit.
10. Necessaries Supplied to Minor.

Question 9

Under what conditions, price of goods supplied to minor can be recovered.

[Chapter 3]

Answer 9

1. Goods must be supplied to minor or his dependents.
2. Goods must be necessities of life.
3. Only reasonable price can be recovered.
4. Price will be recovered only if minor has property.

Same rule applies to necessities supplied to Unsound Mind.

Question 10

Can a minor be appointed as Agent?

[Chapter 3]

Answer 10

Yes, but he will not be personally liable in case of any negligence or breach of duty.

Question 11

Can a minor become partner?

[Chapter 3]

Answer 11

No. However, he can be admitted into benefits of partnership (i.e. he will not be personally liable for debts of firm).

Question 12

What is the age of majority?

[Chapter 3]

Answer 12

18 years. However, if guardian is appointed, age of majority will be 21 years.

Question 13

Who is a person of unsound mind?

[Chapter 3]

Answer 13

One who is unable to understand terms of a contract, and their effect on him.

Examples: Specific Person, Lunatic, Drunken/Delirious

Question 14

What is the Position of Agreements with a person of unsound mind?

[Chapter 3]

Answer 14

• If such person is of sound time at time of contract, it will be valid.
• If such person is of unsound time at time of contract, it will be void.

Burden of proof will be on party enforcing contract (if person is usually unsound) or party avoiding contract (if person is usually sound).

Question 15

Which persons are disqualified by law to make contract?

[Chapter 3]

Answer 15

1. Alien enemy
2. Foreign Sovereigns and Ambassadors
3. Convicts
4. Insolvent

Question 16

What is the status of Agreement with Alien Enemies?

[Chapter 3]

Answer 16

• Agreement during war is Void.
• Agreements before war are suspended.

Question 17

What is the status of Agreement with Foreign Sovereigns and Ambassadors?

[Chapter 3]

Answer 17

They can sue, but cannot be sued.

Question 18

What is the status of Agreement with Convicts?

[Chapter 3]

Answer 18

• Agreement during conviction is Void.
• No suit can be filed on agreements before conviction.

No such restriction if he is on parole.

Question 19

What is the status of Agreement with Insolvent?

[Chapter 3]

Answer 19

Void.

Question 20

List down essentials of a valid Consideration.

[Chapter 3]

Answer 20

1. Consideration must be given at the desire of promise.
2. Consideration may be given by promisor or any other person.
3. Consideration may be past, present or future act or abstinence.
4. Consideration must be something in value.
5. Consideration must be real.
6. Consideration must be something which promisor is not already bound to do.
7. Consideration must be lawful.

Question 21

List down exceptions to the rule “No consideration, No contract”.

[Chapter 3]

Answer 21

1. Agreement made on account of natural love and affection.
2. Agreement to compensate for past voluntary service.
3. Agreement to pay a time-barred debt.
4. Completed Gift.
5. Contribution to charity.
6. Other contracts: (Bailment, Guarantee, Agency)

Question 22

Under what conditions, agreement on account of natural love and affection can be enforced?

[Chapter 3]

Answer 22

1. Between parties having a near relation to each other, and
2. Made on account of natural love and affection, and
3. Expressed in writing, and
4. Registered under the law for registration of documents.

Question 23

Under what conditions, agreement to pay time-barred debt can be enforced?

[Chapter 3]

Answer 23

1. Debt cannot be recovered because of law of limitation, and
2. It is made in writing, and
3. Signed by debtor or his authorized agent.

Question 24

Under what conditions, agreement to contribute to charity can be enforced?

[Chapter 3]

Answer 24

If promisee undertakes a liability on the basis of promise.

Question 25

List down circumstances when a consideration or object is unlawful.

[Chapter 3]

Answer 25

1. It is forbidden by Pakistan Penal Code i.e. punishable by law (e.g. wagering).
2. It involves injury to a person or his property.
3. It is fraudulent.
4. If permitted, it would defeat the provisions of any law.
5. Court regards it immoral or opposed to public policy.

Question 26

List down agreements which are considered as opposed to public policy?

[Chapter 3]

Answer 26

1. Trading with an alien enemy.
2. Stifling criminal prosecution.
3. Sale of public office.
4. Marriage brokerage agreement.
5. Restraint of parental rights.
6. Restraint of personal liberty.
7. Agreement to create monopoly.

Question 27

What is the legal status of an agreement which is partly lawful and partly unlawful.

[Chapter 3]

Answer 27

• If both parts can be separated, then legal part will be enforced and illegal will be void
• If both parts cannot be separated, then whole agreement will be void.