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      VALIDITY OF MINOR’S CONTRACT

  

This article is scripted by Shruti Sharma a student in the eighth semester at PDM University during her internship in La Droit India.

CONTRACT

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law of the land.

MINOR

A minor is an individual below the age of 18 who is considered a minor under the law. Even a person who is 17 years and 364 days old would be regarded as a minor. The age of majority, defining when a person becomes an adult, is determined by the Indian Majority Act of 1875.

Minor according to the Indian Contract Act

 According to the Indian Contract Act 1872, minors are deemed legally incompetent to enter into any form of contract. This means that contracts involving minors are considered void and unenforceable. The law recognizes the need to protect the interests and well-being of minors by limiting their contractual capacity until they reach the age of majority.

Nature of minor’s contract

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.

An agreement entered into by a minor is considered void and has no legal effect. As a result, it lacks any enforceable contractual obligations on both parties.

Therefore, neither party is legally bound by any contractual obligations or duties arising from such an agreement. The concept of a void minor’s agreement ensures that the legal framework recognizes the minor’s limited capacity to enter into binding contracts, providing protection and safeguarding their rights and interests.

The Privy Council dismissed the respondent’s contention and held that:

  • Minor’s agreement was held to be void ab initio and the offended party cannot be made to reimburse the sum back to litigant. Minor was permitted to argue his minority and consequently, the understanding was made void.
  • The law of estoppels, as expressed in Section 115 of, the Indian Evidence Act, was not appropriate for this situation, as a lawyer had the information on the verified realities and was not deceived.
  • Section 64 says that if an agreement is voidable at the option of a party, rescinding it, the other party need not fulfill the promise, and the party rescinding it, must re-establish the benefits accumulated by him under the contract to the other party. The Privy Council held that this Section would not be appropriate for the present case since it relates to voidable agreements and not void agreements. In addition, the section relates to competent parties and not incompetent parties.
  • Section 65, says that benefits, if any, accumulated through a void contract, must be restored to the other party. The Council dismissed the appropriateness of this section too in the current case and held that the minor can’t be approached to reimburse back the advance sum.
  • The respondent guaranteed a refund of the loan under Section 41, Specific Relief Act, 1877, which requires the party to whom relief is allowed to make any remuneration to others on the adjudication of cancellation of an instrument. The Privy held that since information on the earliest stages was known to a lawyer, hence the return of money to the minor was not required.

Henceforth, an agreement made with a minor is void ab initio.

Effects of minor’s contract

Minor’s agreement is a void through which both the parties involved in the contract are not obligated to perform therefore, all the effects of this agreement work independently of the contract.

There are the following effects of the minor’s agreement :

  • No estoppel against a minor :

For a minor who enters a contract under pretense and claims to be a major, there will be no estoppel against him and he legally does not need to prove his age in front of the court. The reason behind this is to protect the minors from the liability they owe to the major.

The cases involved- This was held in the following case of           Jagar Nath Singh v. Lalta Prasad that no estoppel shall be invoked in the case of a minor as the contract, by law, is already void ab initio.

  • No Liability in Contract or Tort Arising Out of Contract A minor :

A minor is incapable of giving his consent to enter a contract and therefore, in a contract without consent, no legal action can be taken whatsoever as the contract is void (contract being non-consensual). Hence, an infant who falsifies his age to enter a contract is not liable to pay the compensation.

The cases involved- This was held in the following case of           Burnard v. Haggis: an undergraduate (a minor) from Cambridge hired a horse for riding and during the contract mentioned that he would not use it for jumping. He further lent it to his friend who used the horse for jumping and the horse injured itself.

 It was held that the infant was liable as an act that caused the injury was outside the range of the contract and could not be used to prove that it was a breach of the contract. It was not an abuse of the contract.

  • Ratification of a Contract There is no such thing as ratification of a minor’s contract:

If a person, during the time of entering into the contract is minor, then the contract is void. The minor after becoming a major, cannot rectify the contract (the contract if rectified, will not be valid). It cannot be rectified as it is believed that if a minor does not have the mental capacity to enter into a contract, he shouldn’t be given the authority to rectify it. In addition to this, if the parties who entered into the contract, show interest can make a new contract with the condition that In addition to this, if the parties who entered into the contract, show interest can make a new contract with the condition that the consideration in this new contract will be a fresh one as the previous consideration cannot be used again.

the case involved Kundan Bibi v. Sree Narayan case, a minor enjoyed the benefits of a contract during his minority years and after attaining majority as well. It was held by the court that because there is valid consideration (after attaining a majority), the contract is valid.

The doctrine of Restitution:

 If a minor misrepresents his age and claims to be an adult and also enters into a contract, he can be asked to restore the goods in his possession that were part of the contract, as long as they are in his possession (not sold/given to someone else or converted them) If asked to do so otherwise, it would mean enforcing a void contract i.e., minor’s agreement.

In addition to these four main effects, there are some other effects as well-

  • The parents of a minor will not be held liable if the minor falsifies his age but they will be held liable if the minor was entering into the contract on his parents’ accord.
  • A minor cannot declare bankruptcy
  • A minor cannot hold, buy/sell any shares in a company but a major who is the minor’s guardian can do it on his behalf.

ROLE OF MINOR AS  A  PROMISEE OR BENEFICIARY

  • A minor can be a promisee or beneficiary in a contract and have the right to enforce such a contract. There are no restrictions on a minor being a beneficiary, such as being a payee or promisee in a contract. Therefore, a minor is capable of purchasing immovable property and can sue for the recovery of possession upon tendering the purchase money. Similarly, a minor in whose favor a promissory note has been executed can enforce it.

Section 30 of the Partnership Act is that with the due consent of all the partners, the minor can be admitted to the benefit of the partnership for the time being. As he will not be liable for any of his acts.

 The way a contract creates a partnership, and the essential of a contract is that both the parties should be of the age of majority.

Contract by minor’s 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. However, 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.

MINOR AS SHAREHOLDER

The law of contract debars a minor to become a shareholder as he is incompetent to enter into the contract. But if by mistake any minor became the shareholder then the company or firm has the right to rescind the transaction agreed upon. However, he(minor) can become the shareholder on behalf of his guardian. Moreover, the minor cannot effectively purchase any shares in the company, the said shares must be gifted or transferred to him of which personal liability will not be on him. It is the right of the guardian to safeguard and protect the shares of a minor.

Insolvency

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

Joint contract by a Minor and an Adult

In the case of a joint contract between an adult and a minor, executed by the guardian on behalf of the minor, the liability of the contract falls on the adult.

 Minor’s parents. Agreements made by a minor are not enforceable against his parents, even though they are for the necessities supplied to the minor. However, if the minor is acting as an agent for his/her parents, then the parents would be bound by the obligations agreed to by the minor.

Exception to general rule

For protecting a minor, his agreement is void. But there are certain exceptions as well.

  • When a minor has performed his obligation: In a contract, a minor can be a promisee but not a promisor. So if the minor has performed his part of the promise, but the other party hasn’t the minor being in the position of a promisee can enforce the contract.

A contract entered into by the guardian of the minor for his benefit:

  • In that case, a minor can sue the other party when it does not perform its promise. In the case of Great.

American Insurance v. Madan Lal the guardian on behalf of  But later the minor claimed that because of his minority, the contract was void, and he demanded the possession of land. But the court held that this contract was for the benefit of the minor and was entered into by his guardian; his mother and thus was a valid one.

Landmark case

Mohiri Bibi v. Dharmodas Ghosh

The case goes back to the year 1903 in which, for the first time, the Privy Council held that a minor’s contract is void-ab-initio that it is void from the beginning.

Facts of the case – the plaintiff Dharmodas Ghosh, when he was a minor, mortgaged his property to the defendant, a moneylender. At that time, the defendant’s attorney knew the plaintiff’s age. The plaintiff later paid only Rs 8000 but refused to pay the rest of the money. The plaintiff’s mother was his next friend (legal guardian) at that time, so he commenced an action against the defendant saying that at the time of making a contract, he was a minor, so the contract being a void one, he is not bound by the same.

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

  • Srikakulam Subramaniam v. SubbaRao

Facts of the cases – To pay off, the promissory note and mortgage debt of his father, minor, and his mother, the minor sold a piece of land to the holders of the promissory note in satisfaction of the debt. He paid off the mortgage and got possession of the land. But later the minor claimed that because of his minority, the contract was void, and he demanded the possession of land. But the court held that this contract was for the benefit of the minor and was entered into by his guardian; his mother and thus was a valid one.

Conclusion

A minor’s agreement is void ab initio since they need foresightedness, information, and aptitudes to go into a lawfully binding agreement. Except in instances of necessities, apprenticeship, and guardian’s agreement, a minor’s agreement is a dead letter and has no bearing upon the parties to the contract. A minor can be admitted to the benefits of the agreement but cannot continue liabilities. As an agreement becomes a contract just when made with the free assent of capable parties which is enforceable by law, an agreement made with the “incompetent” minor becomes nullified or invalid.

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