The third types of incompetent persons, as per Section 11, are those who are “disqualified from contracting by any law to which they are subject.” Thus:

(a) Alien enemies:

An alien (citizen of a foreign country) living in India can enter into contracts with citizens of India during peace time only, and that too, subject to any restrictions imposed by the Government in that respect. On the declaration of a war between his country and India, he becomes an alien enemy and cannot enter into contracts.

“Alien friend can contract but an alien enemy can’t contract.” Contracts entered into before the declaration of the war stand suspended and cannot be performed during the course of war, of course, they can be revived after the war is over provided they have not already become time barred.


(b) Foreign sovereigns and ambassadors:

One has to be cautious while entering into contracts with foreign sovereigns and ambassadors, because whereas they can sue others to enforce the contracts entered upon with them, they cannot be sued without obtaining the prior sanction of the Central Government. Thus they are in a privileged position and are ordinarily considered incompetent to contract.

(c) Convict:

A convict is one who is found guilty and is imprisoned. During the period of imprisonment, a convict is incompetent (a) to enter into contracts, and (b) to sue on contracts made before conviction. On the expiry of the sentence, he is at liberty to institute a suit and the Law of Limitation is held in abeyance during the period of his sentence.


(d) Married women:

Married women are competent to enter into contracts with respect to their separate properties (Stridhan) provided they are major and are of sound mind. They cannot enter into contracts with respect to their husbands’ properties. A married woman can, however, act as an agent of her husband and bind her husband’s property for necessaries supplied to her, if he fails to provide her with these.

(e) Insolvent:

An adjudged insolvent (before an ‘order of discharge’) is competent to enter into certain types of contracts i.e., he can incur debts, purchase property or be an employee but he cannot sell his property which vests in the Official Receiver. Before ‘discharge’, he also suffers from certain disqualifications e.g, can’t be a magistrate or a director of a company or a member of local body but he has the contractual capacity except with respect to his property. After the ‘order of discharge, he is just like an ordinary citizen.


(f) Joint-stock company and corporation incorporated under a special Act (like L.I.C., U.T.I.):

A company/corporation is an artificial person created by law. It cannot enter into contracts outside the powers conferred upon it by its Memorandum of Association or by the provisions of its special Act, as the case may be. Again, being an artificial person (and not a natural person) it cannot enter into contracts of a strictly personal nature e.g., marriage.