The person disqualified by laws also incompetent to enter into contract as minor and person of unsound mind. Section 3(2) of the Nepal Contract Act, 2056 has made the provisions that person lacking of qualifications to conclude a contract under current law shall be disqualified for the purpose of formulating contract. Their legal status is the cause of disqualification by which they are regarded as incompetent for making contract. If such disqualified person enters in to contract that contract does not amount the status of valid contract. The certain legal status of person makes him incapable to do contract. Persons who are disqualified by laws to enter into a valid contract are discussed given below.
1. Alien enemy:
Alien is a person of foreign country. When the war is declared with that country, which belongs with nationality of such alien person, in this situation that alien person is regarded as alien enemy. In such situation no local person permitted to contract with such alien enemy. If any contract was signed before the war, it is either repudiated (reject) or suspended up to the period of war. After the termination of war, the previously held contract is revived if it has not crossed the duration according to law. If there is no war between the countries as mentioned above, the alien and local person can make a contract.
2. Convict or Criminal:
A person, punished by the court in the case of criminal charge, is known as convict or convicted criminal. Such person looses their legal capacity to perform certain work. The convicted person does not enter in to a contract during the period of punishment.
3. Foreign sovereigns:
Ambassador, Representative, Delegates can not enter into contracts. Because, they are free from civil liability, which are created by the law of residential country. That is why; individual cannot enter into contract with such person because there is no legal remedy against them.
4. Insolvent:
When a person unable to pay of borrowing money and whose property is divided among the creditors is known as insolvent. Such person has no right to sell his property and has no right to make contract.
5. Company/ Corporation:
Company is also a person in the eyes of law. It is the creation of law for performing certain works. Such person has less significant capacity in comparison to natural person to make a contract. It is empowered by its memorandum. Corporation or Company can involve in to a contract within the jurisdiction of the memorandum and article of association if they cross the jurisdiction of memorandum and article of association that would be void.
6. Professional person:
Professional person means such persons who are engaged in particular profession having with specific rules and code of conduct like; doctor, professor, Judge, lawyer etc. Due to their high and reputed professional career they are also disqualified by law to make certain contract in particular sector. Barrister can not contract directly to his client in England due to their code of conduct. Similarly, retired Justice of Supreme Court of Nepal can not make representation on behalf of his client. Nepalese lawyers are also prohibited to make contract with their client for fees.