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A MINORS’ CAPACITY TO CONTRACT


Author: Tanisha Gautam,Institute of Law

Nirma University



WHAT IS A CONTRACT?

A contract is an agreement between two or more parties that creates a legal and lawful obligation. The Indian Contract Act, 1872 defines “Contract” under its section 2(h) as “an agreement enforceable by law.”[1] A contract can either be oral or written. Although it is vital to take into account, oral contracts are more taxing and challenging to enforce, justify and oblige by.


According to Section 10 of the Indian Contract Act, 1872, all agreements are contracts if they’re made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and aren’t hereby expressly declared to be void.[2] Agreements that are made by parties who are “competent” to enter into a contract are termed as contracts.


According to Section 11 of The Indian Contract Act, 1872, the term “competent” is inclusive of certain essentials, such as-

1. The person entering a contract should be of the age of majority, that is, 18 years,

2. The person entering a contract should of a sound mind at the time of making the contract,

3. The person entering a contract should not be disqualified from contracting by any legal entity to which he is subject.


Similarly, the term “capacity” under the English Law refers to the ability of the contracting parties to come into legally binding relations with each other.[3] The term “capacity” as well includes the above-mentioned essentials. Thus, the majority is considered as an indispensable factor before entering a contract.


WHO IS A MINOR?

According to Section 3 of the Indian Majority Act, 1875, a person attains majority when he completes the age of 18 years. A person below the age of 18 is considered to be a minor and is incompetent to enter into a contract. The Indian Law states that minor’s agreement is void-ab-initio, meaning that it is null and void right from the beginning and it cannot be enforced by either party to the contract. The rationale behind Section 11 of The Indian Contract Act, 1872 is that a mature mind is important for this purpose and minors would find it arduous to comprehend and fulfil their obligations, thus, the law prohibits agreement with minor parties. However, in case of a person who has been appointed a guardian by the court of law, then the age of majority is 21 years.


MOHIRI BIBI V. DHARMODAS GHOSE (1903)

Dharmodas Ghose (plaintiff) was a minor and a sole owner of immovable property. His mother was authorized as his legal guardian/custodian by the Calcutta High Court. Dharmodas Ghose mortgaged his property in favour of an appellant, Brahmo Dutta (defendant). Dharmodas, being a minor, mortgaged the property and secured the mortgaged deed for Rs. 20,000 at 12% interest rate per annum. The defendant’s attorney had a complete awareness of the plaintiff’s age. Later, the plaintiff paid only Rs. 8000 and refused to pay the rest of the money. The plaintiff’s mother being his legal guardian initiated an action against the defendant on the terms that Dharmodas was a minor when the agreement was signed. Since an agreement with a minor is void, he is not bound and obligated to carry out the same. The court stated that a minor’s contract is void-ab-initio and that unless the parties have competence under Section 11 of the Act, no agreement is a contract.



EFFECTS OF MINOR’S AGREEMENT

A minor’s agreement being null and void raises any effects. If there is no contract, no liability can arise on account of breach of contract. There exists no obligation to carry out the agreement from either side. Therefore, it is essential to take observe certain effects that are a part of the minor’s capacity to contract.


1. ESTOPPEL AGAINST A MINOR –

The term “estoppel” is a legal principle that prevents and bars someone from arguing something or asserting a right that contradicts what they previously claimed or argued in the law. Estoppel is a contradictory statement claimed by the wrongdoer to save and protect himself from the law. When a minor professes to have attained majority, the question uprooting in such a case is, if the law of estoppels applies against him, so as make sure that he doesn’t allege that he was a minor at the time of entering into the contract. it is important to make sure that person doesn’t contradict his statements. Section 115 of The Indian Evidence Act states, “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 representatives shall be allowed in any suit or proceeding between himself and such person or his representative to deny the truth of that thing.”[4] In Mohiri Bibi v. Dharmodas Ghose, the principle of estoppel does not apply to owe to the premise that the defendant knew the real facts about the plaintiff, that is, the plaintiff being the minor.


2. ACTION IN CONTRACT CANNOT BE CONVERTED INTO AN ACTION IN TORT –

If the breach of contract is directly related to breach of a tort, then it cannot be asserted that the minor will be sued in Law of torts. One cannot convert a contract into a tort for the sake of suing a minor. An agreement with a minor is void-ab-initio and is devoid of all legal effects. In the case of, Johnson v. Pye (1665),[5] a minor falsely stated that he was of the age of majority to obtain a loan of 300 pounds. Later, it was held that the minor cannot be asked to repay the loan by bringing an action in the tort of deceit against him. Thus, an action of a minor in contracts cannot be converted into torts.


3. DOCTRINE OF RESTITUTION –

Section 65 of the Indian contract act 1872 mainly deals with the doctrine of restitution and it relates to the obligation of the person who has received some advantage under the void agreement or contract.[6] If a minor fraudulently take into possession the property or goods belonging to someone else, he can be ordered to restore them. However, money is not traceable easily and the minor cannot be asked to restore it. In the case of Leslie v. Sheill[7], a minor was successful in deceiving some money lenders to obtain some money by misrepresenting his age. Later, it was held that since money was involved, there was neither any possibility of restoring nor tracing it. Restitution doesn’t imply when monetary aspects are present.


EXCEPTIONS TO MINOR’S CONTRACTS


1. BENEFICIAL CONTRACTS TO MINOR –

If a contract is beneficial or advantageous to a minor in some way then the contract will be legally binding. If the other party fails to comply with the rules and regulations, and terms and conditions of the contract, then the plaintiff (minor) can sue the defendant for breach of contract. It does not make a difference certain disadvantages are arising out of the contract to the minor, as long as it benefits him, he can sue the defendant for breach. As in the case of Raghava Charior v. Srinivasa[8], a mortgage was executed in favour of a minor who had advanced the mortgage money. The question that arose was if the contract was legally binding and enforceable in law? The unanimous decision of the Full Bench suggested that the contract was lawful as it was beneficial on part of the minor. WALLIS CJ opined: “The provision of law which renders minor incompetent to bind themselves by contract was enacted in favour of their protection and it would be a strange consequence of this legislation if they are to take nothing under transfers in consideration of which they have parted with their money.[9]”


2. CONTRACT OF MARRIAGE –

Contracts of marriage are understood to be beneficial to minors and therefore are legally enforceable. A contract of marriage is customary amongst most of the communities in India and in respect of that; the law has to adapt itself to the habits and customs of the people. The case of Khimji Kuverji v. Lalji Karamsi[10], the question that was put before the Bombay High Court was whether the contract of marriage of a minor girl entered into by her parents on her behalf with a major guy could be enforced and if she could sue for the breach of contract. In this case, her action was allowed.


3. CONTRACTS OF APPRENTICESHIP –

The Indian Apprentices Act, 1850, provides for such contracts that benefit minors. These contracts are legally binding. Contracts of Apprenticeship are made by parents or guardians on behalf of the minor for it to be valid in the eyes of law. Under the English Law, contract of service and apprenticeship are taken as the same. In Roberts v. Gray[11], the defendant was a minor who agreed to hitch a knowledgeable and professional billiards player in a world tour together and compete against one another. The plaintiff put in his time and money to make the arrangements but the defendant renounced the contract. It was held that the defendant was liable as the contract was in a way benefitting him by good teaching and instruction. The plaintiff, therefore, succeeded in recovering the loss for the breach of contract.


4. NECESSITIES SUPPLIED TO A MINOR –

A minor will be liable to a person who supplies necessary items to the former. This obligation is dealt with under Section 68 of The Indian Contract Act, 1872. There is a common doctrine of Necessaries that states that a parent or a spouse is liable for the price of goods sold or the services provided to the child or the other spouse as a basic necessity. As Pollock and Mulla state: Necessaries must be things which the minor needs; therefore, it is not enough that they are of a kind which a person of his condition may reasonably want for ordinary use, they will not be necessary if he is already sufficiently supplied with things of that kind, and it is immaterial whether the other party knows this or not[12]. In the case of Kuwarlal v. Surajmal,[13] it was held that the house given to the minor on rent to continue his studies is a part of necessities and therefore he is entitled to make the payment to the defendant. Taking the case of Chapple v. Cooper,[14] it was held that the term “necessities” include the things without which an individual cannot exist, such as, food, clothing, shelter etc. It is essential to note that necessaries include not only those things that are necessary for survival but as well as those things that are required for reasonable sustenance and existence.


MINOR AS A SHAREHOLDER, PARTNER AND A TRANSFEREE

A minor is barred from holding shares of a company in his name under the Companies Act. Although, a guardian can purchase shares on behalf of the minor. As per Section 30 of the Indian Partnership Act, a minor can become a partner in the company with the consent of all the partners. The minor, however, cannot be made liable for the losses in the company. It is important to take into consideration that after attaining majority, the person, if decides to stay in the partnership, his decisions will have a retrospective effect and he will be considered a full and fledged partner right from the day he had first entered the partnership. He will be liable for all his decisions and acts and losses of the firm during this period.


Section 13, 14 and 127 of the Property Act, 1872 deals with the transfer of property to the minor. Section 13 and 14 talk about Rules against perpetuity and states that a property can be transferred to an unborn person through a living person. Section 127 on the other hand, deals with an onerous gift to a minor. In such cases, the minor person has the discretion to either accept or reject the gift.


CONCLUSION

A minor is someone who has not attained the age of 18 years and thus, an agreement with a minor is termed as an unlawful contract and is void-ab-initio. As discussed, the case of Mohiri Bibi v. Dharmodas Ghose laid out a foundation of rules and for the first time, the Privy Council held that a minor’s contract is not binding and lawful from the beginning. A minor’s contract has effects of estoppel and restitution. Contract with a minor cannot be converted into Torts. A minor is free from getting sued under the Law of Torts and no liability can arise on his part since the agreement is a nullity. However, there are certain conditions wherein a minor or a guardian of his’ can be held liable. These areas include beneficial contracts, contracts of service or apprenticeship, contact of marriage and necessity contracts.


It is essential to note that the Indian Contract Law has its origin from the English Law, but the interpretation of the same in both countries differs in various aspects. Indian Law is not as precise and wide as compared to the English Law.


[1] Indian Contract Act, 1872. [2] Section 10: ICA, 1872. [3] https://www.legalmatch.com/law-library/article/what-is-a-contract.html [4] Section 115 of The Indian Evidence Act [5] Johnson v. Pye (1665) 1 Sid 258 [6] https://blog.ipleaders.in/what-is-the-doctrine-of-restitution/ [7] Leslie v. Sheill, (1914) 3 KB 607 [8] Raghava Charior v. Srinivasa, (1916) 40 Mad 308 [9] Raghava vs. Srinivasa (1916) 40 Mad 314 COPY PASTED CITATION [10] Khimji Kuverji v. Lalji Karamsi, AIR 1941 Bom 315 [11] Roberts v. Gray, (1913) 1 KB 520 [12] 4. Indian Contract and Specific Relief Acts 116 (1972). [13] AIR 1963 MP 58 [14] (1844) 13 M&W 252, 258 COPY PASTED CITATION

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