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Minor's Capacity to Contract

As per the Indian Contract Act, 1872, under its section 2 (h), a contract can be defined as an agreement made between two or more individuals that are enforceable by law. A contract is an agreement enforceable by law. The Contracts or agreements among various individuals are formed and validated as per the provisions of the Indian Contract Act.

The essentials of a valid Contract are:
  1. Offer and Acceptance
  2. Intention to create a legal relationship
  3. Lawful Consideration
  4. Competent parties
  5. Free consent
  6. Lawful Object
  7. Not being expressly declared void

Section 10 of the Indian Contract Act states that the parties must be competent to contract. Competence is defined in Section 11 of the Indian Contract Act. It says that
“Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject”

Thus, this section declared the following persons to be incapable of forming a contract
  1. Minors
  2. Persons of unsound mind, and
  3. Persons disqualified from law to which they are the subject.

Minor

  • The age of majority is generally eighteen years except for the cases where a guardian of person, property, or both have been appointed by the court, in which case the age of majority is twenty-one years
  • Formally, the age of attaining majority was 21 years in England. Now, as per the Family Law Reform Act, 1969, “a minor is a person under the age of eighteen years
  • Earlier, a minor was referred to as an ‘infant’ but this act changes this term to ‘minor’
However. The terms mentioned in Section 10 and 11 of the Indian Contract Act do not clear that whether it would be voidable at his option or altogether void if a minor enters into a contract.

This controversy was resolved in 1903 by the Judicial Committee of the Privy Council in their judgment in the case Mohori Bibee V Dhurniodas Ghose.

According to the facts of this case, Dharmodas Ghosh, the plaintiff (a minor) mortgaged his property to the defendant who was a moneylender. At that time, the defendant’s attorney had knowledge about the plaintiff’s age. The plaintiff paid only Rs 8000 and refused to pay the remaining amount. The mother of the plaintiff was his next friend or legal guardian at that time.
 He initiated an action against the defendant stating that at the time when the contract was made, he was a minor. So, the contract being is a void one and hence he is not bound by the contract.

The court held that unless the parties have competence under Section 11 of the Act, no agreement is a contract.

This ruling has been used time and again in various cases to both advantages and disadvantages to minors. Another major judgment by the Privy Council regarding this matter is Mir Sarwarjan V Fakhruddin Mahomed Chowdhury.

In this case, the contract to purchase some immovable property had been made by the guardian on behalf of the minor. Later, that minor sued the other party for a decree of specific performance to recover possession. His action was rejected by the court. The court, in its judgment, said that it was not possible to bind the minor’s property, both movable and immovable, by any contract. This is because the minor is not competent to contract, there was no mutuality, and as a result, the minor could not obtain specific performance of the contract.

It was subsequently case of Srikakulam Subramanyam V Kurra Subba Rao, the Privy Council overruled the earlier decision and entertained no doubt that was within the power of the mother of minor as a guardian to enter into a contract on the behalf of the minor to enter into a contract of the sale for the purpose of discharging his father’s debts. Following these orders, the Orissa High Court held that holding of property for religious purposes by the guardians on behalf of the minor was specifically enforceable.

A few years later, according to the doctrine under Section 20 of the Specific Relief Act, 1963, if the contract is within the competence of the minor’s guardian, then for the minor’s benefit it is specifically enforceable.

Effects Of Minor’s Agreement

  1. No Estoppel Against Minor

    Estoppel is a legal principle that prevents a person from arguing something or asserting a right that contradicts what they previously said or agreed to by law. An infant or minor is not estopped for setting up the defence of incompetence due to minority. This is because of the reason that the policy of the law of contract is to protect minors from any contractual liability and hence the defence of estoppel cannot be used against them.

    Thus, in a judgment by the Bombay High Court, it was said that even if a minor fraudulently misrepresents his/her age and induces another person to enter into a contract with them, then in defence the minor is not stopped from setting up a defence of minority
     
  2. No Liability Arising In Contract Or Tort

    A minor’s agreement in principle is devoid of all legal effects. In this case, ‘Johnson V Pye’ in 1965, it was said that if by falsely representing a minor obtained load from someone, he cannot be made to repay the loans in the form of damages for deceit. Hence, a minor cannot be held liable for anything which would directly or indirectly enforce any agreement. The Calcutta High court upheld the principle that a contract cannot be converted into a tort to sue a minor.

    In Burnard V Haggis, the defendant, a Cambridge undergraduate and a minor, hired a horse for the purpose of going for a ride. The defendant then gave the horse to a friend who used it for jumping. As a result, it fell and was injured. The minor was thus held liable for the injuries to the horse as in according to the contract, the horse was to be used only for the purpose of riding and jumping. The injuries caused to the horse had happened outside the contract and could nit said to be the abuse of the contract.

    In another case, Jennings V Rundall. The defendant hired the horse to ride it for a short journey but ended up taking it on a much larger journey. As a result, the horse was injured. But the court held that he was not liable upon the ground that the action was founded in the contract.
     
  3. Doctrine Of Restitution

    Section 64 of the Indian Contract Act states that when a person at whose option a contract is voidable re it, the other party need not perform it. This principle applies to contracts that are voidable. But a minor’s contract is void.

    According to this, if an infant obtains property or goods by misrepresenting his age, he can be asked to restore it but only as long as it is traceable in his possession. This is known as equitable doctrine of restitution. Here, if the infant has sold the goods or converted it, it cannot be made to repay the value of the goods because this would be equal to entering into a void contract. The doctrine of restitution is not applicable if the minor has obtained cash instead of goods.

    This above-mentioned principle was observed in ‘Leslie (R) Ltd V Sheil’. According to the facts of this case, a minor succeeded in deceiving some money lenders by misrepresenting their age and were successful in obtaining a sum of 4000 euros from them. Their attempt to recover the amount and subsequent damages failed due to the principle explained above.

    However, when a minor asks the aid of the court for the cancellation of a contract, the court may grant relief with the condition that he shall restore all the benefits obtained by him under the contract and also make suitable compensation to the other party.

    This aspect of Doctrine of Restitution is expressly mentioned in Section 41 of the original Specific Relief Act of 1877. The first well-known case decided under this principle is Mohori Bibee V Dhurmodas Ghose. The relief of cancellation was granted to the plaintiff under the Section 39 of the Specific Relief Act of 1877

    Another landmark case here is Khan Gul V Lakha Singh. Here, a minor by fraudulently concealing his age, contracted to sell a plot of land. After receiving the consideration of Rs. 17,500, he refused to fulfil his bargain of the contract. However, according to the final verdict of this case, the minor was compelled to refund the consideration.
     
  4. Amended Provisons Of The Specific Relief Act

    The principle of restitution is contained in Section 33 of the new Specific Relief Act of 1963. The amended provisions are as follows:
    • Where a void or voidable contract has been canceled at the instance of a party, he may be required to repay the benefits he/she has received under the contract and also make necessary compensation to the other party
       
    • When the defendant successfully resists any suit on the ground that the contract is void against him due to his incompetence, he may be required to repay the benefits, if any received by him under the contract but only to the extent which his estate has been benefitted

      This was seen the case of ‘Jagar Nath Singh V Laltha Prasad’. The Allahabad High Court stated that if any underage person induces another person to purchase property from them, he/she is liable to pay the benefits received by them due to this transaction before recovering the possession of the property sold.

      But the court will not compel any restitution by minor even when he is a plaintiff when:
      • the other party was a aware of the infancy so that he was not deceived
      • the other party has been apart in his dealings with the minor
      • where weather minor had misrepresented his age but the other party was so zealous to enter into a transaction that the fault representation exerted no influence on him
      • where the other party lays no material before the court for coming to the conclusion that justice requires return of the money paid to the minor.
Section 33(1) of the Specific Relief Act, 1963 did not change the earlier law. If the plaintiff goes to the court as a plaintiff, he can be compelled to repay the benefits he received under the agreement. Sub section (2), makes the difference that if a minor is brought before the court as a defendant, he can be made to account for the portion of the money or anything received by him as a benefit personally.

Beneficial Contract

The contracts beneficial to a minor in the following instances:
  • If a minor has advanced mortgage money and there is a mortgage in his favour, he can sue for enforcement of the contract
  • Similarly, a minor can sue on a Promissory Note executed in his favour.
  • A contract for the marriage of a minor is also prima facie for his or her benefit. The contract of marriage cannot be enforced against the minor.
  • A minor can also be supplied with “necessaries suited to his condition in life” (e.g., food, lodging, education) and the supplier of such necessaries is entitled to be reimbursed from the property of the minor.
  • A lease to a minor is void.
A minor cannot be a partner in a partnership firm. However, he can be admitted to the ‘benefits of partnership’ as per Section 30 of the Indian Partnership Act. The minor shall not share losses except when liability to third parties has arisen. But then too, he is liable only up to his share in the partnership assets. He cannot be made personally liable.

Where an adult and a minor jointly enter into an agreement with a third party, the minor cannot be held liable but the contract as a whole can be enforced against the adult [Jamna Bai v Vasanta Rao ].

The liability will be of the principal even of the agent is a minor. A minor cannot be adjudicated insolvent because he is not capable of contracting debts. The parents of a minor are not liable for the agreements made by a minor, whether the agreement is for the purchase of necessaries or not. The parents can be held liable only when the parents are the principles the minor is contracting as an agent for the parents.

Contract Of Marriage

A contract for the minor is also prima facie for is his or her benefit.

But according to Hindu Marriage Act, 1995, the age of girl at the time of marriage must be at least 18 years. Even in the case if a girl is less than 18 years old when the marriage was fixed but she has passed the age of 18 years at the time of marriages, it is valid.

Contracts Of Apprenticeship

It is another contract made for the benefit of minors. The Indian Apprentices Act, 1850 provides for the nature of contracts for service which are binding for minors. This was done for better enabling the children, and specifically children with special needs, poor children and orphans, to learn trade, crafts and employments by which when they come of age, they can gain livelihood

This act required a contract to be made by the guardian on the behalf of the minor. The well-known English case on this subject is ‘Roberts V Gary

According to the facts of this case, the defendant, a minor, agreed to join the plaintiff, a renowned billiard player, to join him on a billiard playing tour across the world. The defendant rejected the contract. The plaintiff succeeded in receiving damages for the breach of contract. The court held that one of the pre conditions of this contract to be formed is that the teaching or instructions my profit him afterward in future.

It has also been suggested in the case Raj Rani V Prem Adib that though according to English Law, the minor is liable in the case of a contract of service where the contract is of benefit, it is given that, under Section 11, the contract by any minor is void and hence minor would not be held liable.

The facts of the case were as follows, Raj Rani’s father entered into a contract on her behalf (as she was a minor) with a film producer, Prem Adib. According to the terms of the contract, the minor was to act in a film on payment of a certain amount. Later, she was not given any work. As a result, she sued the producer of the movie for breach of contract. The Bombay High Court held that neither she nor her father could sue on the promise. If it was a contract with the plaintiff, she being a minor, it was void. The contract with the father was also void because there as no consideration.

Trade Contracts Not Included In Beneficial Contracts

This category of beneficial contracts does not include ordinary trade contract. In Cowen V Nield, a minor was carrying a trade contract for the supply of clover and hay. The plaintiff paid him part of the payment. On this, the defendant delivered him clover but failed to deliver hay. The plaintiff’s action for recovering the amount of the cheque failed. The court held that only the contracts which are for the benefit of the minor can be supported. The trade contract was dine done for the benefit of the minor hence the minor cannot be held liable.

Option To Retire From The Beneficial Contract On Majority

A minor will have the option of retiring from the contract made for the benefit of the minor on attaining majority provided that he exercises the option within a reasonable amount of time.

Ratification

A person cannot ratify an agreement made by him during minority once he attains majority. Ratification deals back to the date of making of the contract. Once a contract which was then void cannot be made valid due to subsequent ratification.

It would hence be a contradiction of terms to say that a once void contract can be made valid by subsequent ratification. When a minor attains majority.

In a case decided by the Allahabad High Court, the court stated A minor borrowed a sum of money, placed a simple bond on it and, after reaching the majority, placed a second bond on the original loan plus interest. He argued that the claim to the second bond was not sustainable. As the bond was without consideration and did not come under Section 25(2) of the Indian Contract Act.

In another case, the defendant, a minor, executed a deed about his interest in the estate. The suit was filed against him when he attained majority. He did not refute to the agreement on attaining majority. He rather admitted to it. The contract became enforceable to the extent of minor’s interest in the estate.

Liability For Neccssaries

Section 68 of the Indian Contract Act lays down terms for the liability for necessaries supplied to persons who to incompetent to contract.

It says that ‘if a person is incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person’

In simple words, for example, A supplies B, a person of unsound mind, with necessaries suitable for living his life. A is entitled to adequate compensation from B’s property.

Necessaries

The meaning of this term could be found in the judgment given in the case Chapple V Cooper
Necessities refers to the things without which a person can’t reasonably exist. This includes things like food, place, lodging, etc. The clothes may be fine or coarse depending upon his rank, his education may vary or the kind of medicines consumed may vary.

The articles of mere luxury are always excluded, though luxurious items may be necessary in some cases.
Thus, what is necessity is a relative fact to be determined with reference to the fortune and circumstances of the particular minor. Articles that may be a necessity to one may be a luxury to another.

In the case Peters V Fleming, the court said that prima facie, it was not unreasonable that an undergraduate college student should have a watch and a watch chain supplied on credit as such it was necessary to support him in his degree.

Two conditions must be satisfied to render a minor’s estate liable for necessaries:
  • The contract must be for the goods reasonably necessary for his reasonable existence
  • He must not already have a sufficient supply of the necessities

Nature Of Liability

There are two theories relating to liability of a minor’s estate for necessaries.

In one of the theories, it is suggested that the liability does not depend upon minor’s consent. It arises due to the necessities supplied to him, and hence is quasi-contractual in nature
The other view of liability in England is that it is contractual. A minor is not absolutely free of contractual capacity. A contract for necessaries is just one of those categories which a minor is allowed to make.

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