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Contract with Minor: Time ripen for change or not

A person who has not attained the age of majority is refeered as a minor. In India, people below the age of 18 are minors. A person who is 17 years and 364 days old will be viewed as a minor in the eyes of law. The age of majority has been decided by Indian Majority Act of 1875. As per the Indian Contract Act of 1872, minors are incompetent to hold any form of contract.

Also, an agreement made by a minor is completely voidable. However, nowadays minors are as much important as a major. A minor has to travel in a public transport, has to visit malls and cinema halls with friends, has to order food in restaurant, go to barber to, pay his/her education expanses and to falicitate his/her daily-day life occasions.

Thus, there arises a need to change or flexibility in the contractual liability of a minor in India under the Indian Contract Act of 1872. Minor's agreement is void/invalid, yet isn't illicit as there is no legal arrangement upon this.

According to Indian Contract Act of 1872, only those agreements are contract that are made by parties who are competent to enter into a contract. Now as per the Section 11 of the Indian Contract Act, the word 'competent' is described as:
  • the person should be of the age of majority; that is to say, 18 years
  • he should be of sound mind at the time of making of contract.
  • he should not be disqualified from contracting by any law to which he is subject.
Hence, from the above, it can be concluded as a person must attend the age of majority in order to indulge in any contract.

Objectives of Study
  • To know why minors are not indulged into contracts.
  • To know about the exceptions in case of minors' contracts
  • To know about some effective measures in order to make contracts with minors more easy and less manipulative.
Sources of data
The data reffered for the completion of the research is secondary data. Secondary data sources may be referred to as data that is not originally gathered by the study. Secondary data for this project was acquired from a variety of online sources like databases of journal, books and other such work and offline sources like books.

Methods of data collection
The data has been collected by reading books, reports and journals. Internet has also been used to find out several cases. The data collected is authentic in all ways and has been used by the researcher for reference purpose.

Methodology of study
This project work is doctrinal in approach. Given a study of this kind, a descriptive analytical method has been followed to carry out the study. The present study is based on the secondary sources of information for systemization, analyses and conclusions.

Source of data
Primary data such as bare acts and laws are used to carry out research. Secondary sources of data have been used to carry out the study. These includes books, research papers and international documents etc.

Chapter 1

1. Minor Agreement

An agreement made with minor is ab initio. This type of agreement will not enjoy legal effect in court of law. Let us have a look to the historical cases which happened with the minors under Indian Contract Act of 1872

Mohiri Bibi v Dharmadas Gosh[1]
In Mohiri Bibi vs Dharmadas Ghosh, it can be concluded that an agreement, participating by a minor, must be considered as null and void in the eyes of law. Any agreement with an infant should not be administered against them. Parents and guardians of minors must not be subject for the dealings done by the minor without their assent or information, and consequently they won't be at risk to restore the sum back removed by the minor from the social obligations.

As per the section 65 of the Indian Contract Act of 1872,:
When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it”. Here, person includes minors. Also, the courts and the council must ensure that the 'minority' status must not give any undue advantage to the minor. Also, the courts must provide justice to the major in most precise manner.

For this, the Indian Evidenve Act of 1872, has Section 115 which states that “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representative shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing”.

Raj Rani v. Prem Adib[2]
In Raj Rani vs Prem Adib, Prem Adib, who was a film director, entered into a contract with Indrani's father. According to this contract, Prem Adib was to give role to Indrani, who was a minor. But later, the defendant gave the role to another actress. The father as well as the daughter were not in a position to sue the defendant. If the contract was with the father, it was without consideration and thus, void. From daughter's point of view this contract was void and invalid because she was a minor.

Section 183 of Indian Contract Act states that “Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent”. Thus Indrani was not in any position to enter into the contract. Section 11 also supports the above mention statement. However, here it can be onserved that the defendant took unfair advantage of the minor.

T. Raghava Chariar Vs O.A. Srinivasa Raghava Chariar
A mortgage was enforced on behalf of a minor. The minor had already paid the advance money in favour of execution of the mortgage. Here, the question arises, “whether the mortgage executed in favour of a minor[3] who has advanced the whole of the mortgage money is enforceable by him or by any other person on his behalf.”

The decision made by judges said that, minors can be transferees but not transferors . This was due to to the fact that Transfer of Property Act nowhere says that “person cannot be transferee of property unless he is competent to contract”. Hence, if the minor took money through loan and failed to repay, mortgage can be enforced on the mortgaged property.

Chapter: 2
Let us study about various provisions provided to the minor by the Government of India. This is followed by brief case studies related to them.

2.1 Ratification by Minor

As per BlackLaw Dictionary[4], ratification means:
“the confirmation of a previous act done either by the party himself or by another; confirmation of a voidable act”.

A minor's agreement is impotent of becoming a validation through a future ratification when he achieved majority. This is because whenever, the minor turned major will ratify, there is always a question whether the concerned authority have conferred the ratifier at the dates when acts were performed. Thus, minors are not allowed to perform ratification.

Nazir Ahmad vs Jiwan Das[5]
A lawsuit was instituted on Nazir Ahmed by Jiwan Das and his brother for a recovery of Rs 340 n the footing of an instalment bond said to have been executed by plaintiff in defendant's favour in the year 1934. During the trial it was discovered that a similar suit was executed in lieu of another bond which had been jointly executed in the year 1931. This was instituted by Nazir Ahmed and Ilam Din. Ilam Din was step father of Nazir Ahmed. This bond was also executed in lieu of a previous bond in the year 1930. Counsel for the petitioner relies on 16 Lah 546, which stated that the parties which are interested in drawing a contract but are incapable because of minority, can draw a fresh contract on achieving the age of majority. This new contract will need fresh considerations. Thus, the consideration which passed under the earlier contract cannot be imported into the contract into which the minor entered on attaining majority. This contract can also not be used as a reference for new contract after attaining the age of majority. This contract will then only be enforceable in the court of law. The trial court declared the original executed bond as void. Judges also remarked that section 25(2) of the Indian Contract Act, which stated that, “it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do; or unless;”, was not applicable here.

Indran Ramaswamy Vs. Anthiappa Chettiar[6]
In this case, the defendant borrowed some money and executed a promissory note. Later, when he attained the age of majority, he executed another promissory note against the settlement of first note. This note was without any consideration and it was not fresh. Thus, this was void under the eyes of law.

2.2 Doctrine of Estoppels against a minor

Estoppel means a man's own act or acceptance stops or closes his mouth to allege or plead the truth. There is no estoppel against a minor. If a minor enters into a contract by unfair/fraud ways, falsely claiming himself to be a major. Then later on he can plead his minority status as a defence.

2.3 Doctrine of Restitution

The act of restoring something is restitution. Section 65 of the Indian Contract Act states:
“When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it."

This section has some exceptions which make minors incapable of applying doctrine of restitution. An Obiter dictum was done in case of MohiriBibi v Dharmadas Gosh under Section 65 of Indian Contract Act of 1872.

In case, a contract is void ab initio then there is no provision of doctrine of restitution.

The exceptions of doctrine of restitution covers contract between two incompetent persons. Surprisingly, minors are eligible for claiming restitution.

Both restitution and compensation has one thing in common i.e 'recompense'. However, restitution clearly means compensation to restore something which is lost. Compensation, on the other hand, is just substituting something which has same monetary value as that of the previous one.

2.4 Doctrine of mutuality

The reciprocal understanding between the two parties is known as mutuality. Mutuality is essential in the making of a contract which is legally enforceable. Absence of mutuality implies that there is an absence of common understanding between the parties. Both the parties are either bounded or not bounded under the doctrine of mutuality. Mutuality is inapplicable in the case of fraud and unilateral contracts.

Lord McNaughton introduced the English doctrine of mutuality in India. He stated that:
“it is not within the competency of the manager or guardian of the minor to bind the minor into an agreement for the purchase or selling of immovable property like real estate.”

As long as a minor is not bound by the contract, there is no mutuality. The parent, guardian or the manager holds no authority in the selling or purchasing property on behalf of minor.

Thus same set of principles are followed in case of minor for the doctrine of mutuality. There is no change in principles if minor is a hindu or a muslim.

Chapter:3

3.1 Liabilities of Minor under various Acts

3.1.1 Under the Indian Contract Act of 1872

Under the Indian Contract Act of 1872, a minor is liable as well as non-liable as per various sections of the Indian Contract Act of 1872.
  • Just like in Mohiri Bibi case, a minor was not liable to pay the mortgage under the section 64 and 65 of the Indian Contract Act of 1872.
     
  • However, in the case of Chapple v. Cooper, where a widow (minor) was sued for the expenses of funeral of her late husband. The court said that expenses of services which are necessaries in life are bound to be paid by the person. Section 56 and 68 applies here as per the validity and voidability of the agreements.
     
  • Section 70 of the Indian Contract Act of 1872 states that:
    Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered”.

    Here, 'person' does not specifically exclude minor because there is nothing in the Indian Contract Act of 1872 which prevent the case of minor which is getting covered in both section 68 and section 70.
     
  • Section 183 of the Indian Contract Act of 1872 says that:
    Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent”.
    Thus, minors are not eligible to employ an agent. Therefore, for contracts with minor to be legally enforceable, a guardian, who is major is needed.
     
  • Ratification of transaction is accepted once a minor has attained the age of majority as per the section 196, 197 and 198 of the India Contract Act of 1872.

3.1.2 Liability of Minor under the Law of Evidence Act, 1872

  • Section 115 of The Indian Evidence Act did not allow the minor to plead his minority in the case of MohiriBibi. As per the Privy Council when the party knows about the minor's age then this principle cannot be applied.
However, in the case of Nawab Sadiq Ali Khan v. Bibi Jai Kishori in which the defendant, the minor, had represented that he was a major and the plaintiff acted on that representation. Here, the Privy Council stated that a minor cannot be stopped as per the rules of the estoppel, if he/she is expressing his/her age fraudulently.

3.1.3 Liability of Minor Under the Provincial Insolvency Act of 1920

An agreement with a minor is completely void ab initio. Hence, there is no way a minor can be declared insolvent or bankrupt. Minors are not liable for any loan during his/her minority.

3.2 Necessaries

Necessaries are the items which are significant for us. Food, shelter and clothing are some of the basic necessities for the humans. Minor's and his/her parents' economic status is taken into account in determining their necessaries. Minors are wholly liable to all the necessaries provided to him/her.

The conditions below must be followed in order to make necessaries liable for minor:

  • The supply must be ample and should not be more than required.
  • The supplies must be according to the standard of the minor.
As per the interpretation of section 68 of the Indian Contract Act of 1872 the money which is advanced for the necessary purpose can be considered as the money for the necessaries.
Apart from food and other items, certain rituals and religious practices are also considered as necessaries. For instance, in the Chappel v. Cooper case, the young widow was held liable for the expenses of her dead husband's funeral.

Sometimes, items like watch and automobile can also be taken into necessaries.

Suggestions
As mentioned earlier, minors nowadays perform tasks with potential equal to an adult. They are required to be self-reliant. Minors have to leave their homes for getting higher education and internships which will help in their coming future. Thus, the provisions for minors in the Indian Contract Act and Specific Relief Act must be revised and made according to the present generation.

As we have seen, the Infants Relief Act of 1874 had suspected to change the normal law position by making all minors contracts, aside from contracts for necessaries, totally void, however the courts in England actually adhered to the custom-based law position, which they, most likely, took to be a realistic and successful one. The present-day custom-based law position on enforceability of minors' contracts expands on this convention of pragmatism.

There must be uniformity in the definition of 'minor' in all of the Indian legislations. The Indian Majority Act says that age of 18 years is the age of majority. This bill hasn't received the assent of president as of now.

Also, minority must be taken as protection which will protect minors from all sorts of advantages that people can take from them. Minors also should not take undue advantage of their age factor. However, section 65 of the Indian Contract Act and section 115 of the Indian Evidence Act somehow provides a narrow escape to the minor.

Thus, the minor can take undue advantage of the above-mentioned section. The agreements with must not be made taking the account of the age factor. It must be based on the capability of the minor. Sometimes, minors can be capable of entering into the doctrine of mutuality. Just as the Companies Act of 2013, which makes the minor eligible to become a stakeholder, Indian Contract Act must also provide some provisions to make minors eligible to enter into contract under the guidance of guardian.

Taking example of changes in other laws, like introduction of Gearless Driving Licence which allow minors to drive gearless two-wheeler vehicles, the Indian Contract Act can also introduce certain measures and provisions for the minor which can allow them to enter into the contracts for which they are capable of.

Conclusion
Minors are considered to be immature in their conduct. However, the young generation of today are much more advance and independent. From buying a transport ticket or flagging down a cab to pursuing an email account or using social media services, the circle of minor's contracts is a critical and steadily extending one. Thus, a need of change in some laws of the Indian Contract Act definitely arises. Sometimes, cases of death of father, leaves no choice in the hand of minor but to indulge in work and occupation so as to prevent financial burden to the family.

Changes in the contract will provide an ease in the working of minor as it will enable the minor to buy or sell land. Section 65 of the Indian Contract Act must allow minors in case a minor has sold goods to a person who hasn't paid the amount. Also, section 11 must make minors eligible to enter into contract with the implementation of certain restrictions.

Most specific contract is the contract of service which clearly allows minor to legally perform the contract. This contract provides an apprenticeship to the minor which will be beneficial to the minor in the future.

From Raj rani case, we came to know that even in the contract of apprenticeship, the adults are ready to take undue advantage of the minor. Strict laws can prevent such things. Also, giving and taking compensation from a minor must be made under section 39 and section 41 of the Specific Relief Act.

The contracts with minors can be made partially enforceable by keeping certain factors like guardian, mutuality, compensation and restitution in mind, instead of making the whole contract as void ab initio.

References
Bibliography

Primary Sources:
  1. The Indian Contract Act, 1872
  2. The Specific Relief Act, 1963
  3. Law of Evidence Act, 1872
Articles
  1. Swaminathan, S. and Surana, R., 2018. Minors' Contracts: A Major Problem with the Indian Contract Act, 1872. Statute Law Review, 2(1), pp.1-15.
  2. Brizio, A., Gabbatore, I., Tirassa, M. and Bosco, F., 2015. "No more a child, not yet an adult”: studying social cognition in adolescence. Front Psychol, 6, p.1011.
List Of Cases:
  1. Mohori Bibee v/s Dharmodas Ghose, (1903) 30 PC 539
  2. Raj Rani v/s Prem Adib, (1949) 51 BOMLR 256
  3. T. Raghava Chariar Vs O.A. Srinivasa Raghava Chariar (2011) 5 CTC 146 (FB) : (2011) 3 MWN (Civil) 1 (FB) : AIR 1917 Mad 630 : ILR (1917) 40 Mad 308 : (1916) 31 Mad LJ 575 : (1916) 30 Mad LJ (NRC 2) 28
  4. Nazir Ahmad vs Jiwan Das (1938) AIR 159 (Lah)
Webliography
  • https://www.taxmanagementindia.com/visitor/detail_article.asp?ArticleID=1378
End-Notes:
  1. Mohori Bibee v/s Dharmodas Ghose, (1903) 30 PC 539
  2. Raj Rani v/s Prem Adib, (1949) 51 BOMLR 256
  3. T. Raghava Chariar Vs O.A. Srinivasa Raghava Chariar (2011) 5 CTC 146 (FB) : (2011) 3 MWN (Civil) 1 (FB) : AIR 1917 Mad 630 : ILR (1917) 40 Mad 308 : (1916) 31 Mad LJ 575 : (1916) 30 Mad LJ (NRC 2) 28
  4. Ratification, Black's Law Dictionary (10th ed. 2014)
  5. Nazir Ahmad vs Jiwan Das (1938) AIR 159 (Lah)
  6. Indran Ramaswamy Vs. Anthiappa Chettiar (1906) 16 MLJ 422

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