Capacity To Contract : Minor’s Agreement Under Indian Contract Act

access_time February 9, 2024
perm_identity Posted by Admin

One of the most essential elements of a valid contract is the competence of the parties to make a contract.

SECTION 10 : All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

SECTION 11 : 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.

MEANING AND DEFINATION

According to SECTION 11, “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.”

So, we have three main aspects:

  1. Attaining the age of majority
  2. Being of sound mind
  3. Not disqualified from entering into a contract by any law that he is subject to

A GOVERNMENT can enter into contracts like any other person.Under the Constitution of India, the executive power of the Union and of each state extends, inter alia, to the making of contracts for any purpose. However, when a government enters into a contract in the exercise of its executive power, the contract will only be valid and binding if certain formalities are complied with. Statutory corporations and statutory bodies can make contracts. The legislation that creates them confers the power to make contracts.

ATTAINING THE AGE OF MAJORITY

According to the SECTION 3 Indian Majority Act, 1875, the age of majority in India is defined as 18 years. For the purpose of entering into a contract, even a day less than this age disqualifies the person from being a party to the contract. Any person, domiciled in India, who has not attained the age of 18 years is termed as a minor.

NOTE : A minor cannot bind himself by a promise, but he is competent to enforce a promise made to him. Although a minor is not liable on contract, he is liable in quasi contract to reimburse for necessaries supplied to him.

LAWS GOVERNING A MINOR’S AGREEMENT:

  • A CONTRACT MADE WITH A MINOR IS VOID

Since any person less than 18 years of age does not have the capacity to contract, any agreement made with a minor is void ab-initio (from the beginning). also, if a minor enters into a contract, then he cannot ratify it even after he attains majority since the contract is void ab-initio. And, a void agreement cannot be ratified. In SURAJ NARAIAN V. SUKHU AHEER, a person when he was minor borrowed some money from moneylender. After attaining majority, he made a fresh promise that he will pay the sum plus interest thereon. It was held by the Allahabad High Court that the fresh consideration is necessary for the fresh promise. The promisor, therefore, could not be made liable for such a promise.

  • A MINOR CAN BE A BENEFICIARY OF A CONTRACT

While a minor cannot enter a contract, he can be the beneficiary of one. SECTION 30 of the Indian Partnership Act, 1932, also specifies that while a minor cannot become a partner in the partnership firm, the benefits of the firm can be extended to him.

  • A MINOR IS ALWAYS GIVEN THE BENEFIT OF BEING A MINOR

Even if a minor falsely represents himself as a major and takes a loan or enters into a contract, he can plead minority. The rule of estoppel cannot be applied against a minor. He can plea his minority in defence.

  • CONTRACT BY GUARDIAN

Under certain circumstances, a guardian of a minor can enter into a valid contract on behalf of the minor. Such a contract, which the guardian enters into, for the benefit of the minor, can also be enforced by the minor.

However, guardians cannot bind a minor by a contract for buying immovable property. But, a contract entered into by a certified guardian of a minor, appointed by the Court, with approval from the Court for the sale of a minor’s property can be enforced.

  • INSOLVENCY

A minor cannot be declared insolvent as he cannot avail debts. Also, if some dues are pending from the properties of the minor and he is not personally liable for the same.

  • JOINT CONTRACT BY A MINOR AND AN ADULT

When a joint contract is signed between a minor and major, it has to be done in the presence of the minor’s guardian. In such contracts, the liability of the contract is held by the adult.

EFFECTS OF MINOR’S AGREEMENT

1. NO ESTOPPEL AGAINST MINOR : Estoppel is a legal rule of evidence which prevents a party from alleging something that contradicts what he previously stated. The court held that the doctrine of estoppel does not apply to the case in which the person knows the real facts, before hand and here the attorney of the defendant knew that the plaintiff was a minor. Hence this rule does not apply.

2. NO LIABILITY IN CONTRACT OR IN TORT ARISING OUT OF CONTRACT : A minor is incapable of giving consent, and the nature of minor’s agreement is a nullity and cannot be enforced.

3. DOCTRINE OF RESTITUTION :If a minor falsely claims to be an adult and enters a contract, he may be required to restore the commodities in his possession that were part of the contract, if they are still in his custody (not sold/given to someone else or converted) and there is no consideration (money). Otherwise, it would imply enforcing a void contract, such as a minor's agreement.

Other implications are, the parents of a minor will not be held accountable if the child lies about his age, but they will be held liable if the minor entered the contract with the consent of his parents. A minor will be unable to file for bankruptcy. A minor cannot own, acquire, or sell a business stock, but a major who is the minor's guardian can do so on his behalf.

4. RATIFICATION OF A CONTRACT : The ratification of a minor's contract does not exist. If a person is a minor at the time of contracting, the contract is invalid and void. After becoming a major, the minor is no longer able to remedy the contract (the contract, if corrected, will no longer be valid). Furthermore, if the parties to the contract express interest, they may engage in a new contract with the restriction that the consideration in the new contract be new, as the prior consideration cannot be utilized again.

MOHORI BIBEE VS. DHARMODAS GHOSE

  1. The respondent, Dharmodas Ghose, a minor, had mortgaged his property in favor of the moneylender, Brahmo Dutt for securing a loan amounting to INR 20,000/-.
  2. Mr. Brahmo Dutt had authorized Kedar Nath to enter into the transaction through a power of attorney. Mr. Kedar Nath was informed of the fact that Dharmodas Ghose was a minor through a letter sent by his mother.
  3. However, the deed of mortgage contained a declaration that Dharmodas Ghose was of the age of majority.
  4. The respondent’s mother brought a suit on the ground that the mortgage executed by his son is void on the ground that her son is a minor.
  5. The relief sought by the respondent was granted and an appeal was preferred by the executors of Brahmo Dutt before the Calcutta high court. The same was dismissed.
    1. An appeal was then made to the Privy council. The Privy council held that-
    2. A contract with a minor is void-ab-initio.
    3. SECTION 7 of the Transfer of Property Act, 1882 states that a person competent to contract is competent to transfer a property.
    4. Hence, the mortgage executed by the respondent is void.

However, if a minor enters into a contract and performs his part of obligations, the other party can be compelled to perform and fulfill its obligations, and, in such instances, the contract becomes legally enforceable.

A.T RAGHAVA CHARIAR VS. O.A. SRINIVASA RAGHAVA CHARIAR

  1. A minor entered into a contract for mortgage with a person of the age of majority.
  2. The minor extended the monetary amount and performed his part of the obligations.
  3. The other party refused to honor the agreement.
  4. The full bench of the Madras High court had to decide “whether a mortgage executed in favour of a minor who has advanced the whole of the mortgage money is enforceable by him or by any other person on his behalf.”
  5. The court ruled that-
    1. The agreement sought to be enforced is the promise of the mortgagor who is of full age to repay the money advanced to by the mortgagee.
    2. The mortgagee (the minor) has already advanced the money which was the consideration for the promise of the mortgagor and performed his part of the obligations. There is nothing pending from his side.
    3. Hence, the contract is enforceable.

Additionally, a minor cannot enter into a contract and provide his consent when he attains majority. This is because a minor’s agreement is void from the beginning. A void agreement cannot be made legally valid by ratification.

SURAJ NARAIN DUBE VS. SUKHU AHIR

  1. Suraj Narain lent money to Sukhu Ahir who was a minor. The minor executed a promissory note against the money borrowed.
  2. After four years, when the minor attained majority, he and his mother executed a second promissory note in favour of Suraj Narain in respect of the original loan plus the interest accumulated over the years.
  3. The court held-
  • The first agreement entered into by the parties is void as a minor is incompetent to contract. The minor had no liability to pay under this agreement. However, the minor made a promise and provided the promissory note, amounting to consideration.
  • A minor has no power to ratify the contracts entered into by him upon attaining the age of majority.
  • In the second agreement executed by the parties, there was no consideration from the Plaintiff. The original advance was no consideration for a second agreement. The second agreement is void due to want of consideration.

In certain instances, a contract entered into by the minor or by the minor’s guardian for his benefit is valid in the eyes of law-

  1. A contract for marriage entered into by a minor/his guardian.
  2. A partnership contract entered into with a minor admitting him to the benefits of a partnership. However, the minor cannot be held personally liable for the losses incurred.
  3. A contract relating to the minor’s property entered into by his guardian if it is for the benefit of the minor.
  4. A contract of apprenticeship with a minor.
  5. A contract supplying the minors with goods and services necessary for life.

Websites such as YouTube expressly mention in their terms and conditions that any minor while using its services represents that he has the permission of his parent/ guardian to do so. Parents and guardians are held liable for the child’s activity on such websites.

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