Introduction
The Indian Contract Act of 1872 holds immense importance in overseeing commercial law in India, particularly in the realm of contractual relationships and obligations. However, a notable complexity arises concerning agreements involving minors, as the Act imposes limitations and restrictions in such cases. Navigating contracts with minors under the Indian Contract Act presents a challenge due to the absence of explicit permission for such agreements. Thus, it becomes imperative to grasp the precise rules and provisions that dictate dealings with minors to adhere to the legal framework effectively
Technological advancements have empowered individuals to access vast amounts of information even before reaching adulthood. However, in India, being a minority is a reality without the same privileges as in some other countries. According to the Indian Contract Act, minors lack the capacity to enter into contracts. Legal recognition is bestowed upon agreements made by competent parties. Minors, due to their lack of legal capacity, cannot form binding contracts, with some exceptions. Consequently, minors are released from any contractual obligations arising from such agreements. The rationale behind this legal principle is that individuals under 18 years of age may not possess the maturity to comprehend the implications of contractual agreements or discern right from wrong. The law seeks to safeguard minors from potential exploitation, as they may lack sufficient experience to navigate complex legal matters or recognize fraudulent schemes. Thus, legal provisions aim to protect minors by limiting their ability to make legally binding decisions
Minor and Minor Agreement
Who is a Minor?
The term ‘minor’ is nowhere defined in the contract act. According to Section 11, a minor is a person who has not attained the age of majority . The age of majority of a person is regulated by section 3 of the Indian majority act, 1857.
As per section 3 of the Indian Majority Act, 1875 (amended in 1999):
(1) Every person domiciled in India shall attain the age of majority on his completing the age of eighteen years and not before.
(2) In computing the age of any person, the day on which he was born is to be included as a whole day and he shall be deemed to have attained majority at the beginning of the eighteenth anniversary of that day . Thus, to enter into a contract, even a day less than the majority age disqualifies the person from being a party to the contract. So, if a person is of 17 years and 364 days old, he will be still a minor in the perspective of law.
What is a Minor's Agreement?
Any agreement made with minor is void-ab-initio i.e. void from the very beginning. It is not at all a contract. It is an agreement which is not enforceable in court of Law. Even if the minor attains the majority, the same agreement cannot be ratified by him. Section 11 of the act expressly forbids a minor from entering into a contract. The effect of this express prohibition is that any contract entered into by a minor is void-ab-initio regardless of whether the other party was aware of his minority or not.
Section 10 states, “The parties of contract must be competent and the consent must be free." Therefore, the competency of the parties to a contract is most essential ingredient of a contract.
Mohiri Bibi vs Dharmodas Ghose
Before 1903, there was uncertainty regarding whether contracts entered into by minors were void or voidable. However, a significant ruling by the Privy Council in 1903, particularly in the case of Mohiri Bibi VS Dharmodas Ghose, established that contracts entered into by minors are void ab initio. This landmark decision clarified the legal standing of minors in contractual matters.
Facts
In this case, Dharmodas Ghose, the respondent, was a minor, meaning he had not yet reached the age of 18, and he was the sole owner of his immovable property. Dharmodas Ghose's mother was authorized by the Calcutta High Court to act as his legal guardian.
When Dharmodas Ghose mortgaged his own immovable property to Brahmo Dutta, the appellant, he was still a minor. This mortgage was for Rs. 20,000 at an interest rate of 12% per year. Brahmo Dutta, a money lender at the time, obtained a loan of Rs. 20,000, with the management of his business under the control of Kedar Nath, who acted as Brahmo Dutta's attorney.
Dharmodas Ghose's mother notified Brahmo Dutta about Dharmodas Ghose's minority at the commencement of the mortgage deed. However, the actual amount of loan provided was less than Rs. 20,000.
The representative of the defendant, who acted on behalf of the money lender, knowingly provided money to Dharmodas Ghose, who was a minor, fully aware of his incapacity to enter into a contract or mortgage his property legally.
Subsequently, on September 10, 1895, Dharmodas Ghose and his mother filed a lawsuit against Brahmo Dutta, arguing that the mortgage was executed when Dharmodas Ghose was a minor, rendering it void and improper, and therefore should be cancelled.
During the proceedings, Brahmo Dutta passed away, and the appeal was continued by his executors.
The plaintiff contended that no leniency should be granted to the defendant because they alleged that the defendant deceitfully misrepresented his age, and if the mortgage were to be cancelled at the defendant's request, it would be unfair.
Issues
1) Whether the deed was void under section 2, 10 and 11 of the Indian Contract Act, 1872 or not?
2) Whether the defendant was liable to return the amount of loan which he had received by him under such deed or mortgage or not?
3) Whether the mortgage commenced by the defendant was voidable or not?
Judgement
According to the trial court's ruling, the mortgage contract between the plaintiff and the defendant was deemed void because it was entered into by a minor
Dissatisfied with the trial court's decision, Brahmo Dutta appealed to the Calcutta High Court. However, the High Court upheld the trial court's verdict and dismissed Brahmo Dutta's appeal.
Subsequently, Brahmo Dutta appealed to the Privy Council. However, the Privy Council also rejected Brahmo Dutta's appeal, affirming that no valid contract could exist between a minor and an adult
The final decisions made by the Privy Council were as follows: 1. Any contract involving a minor is considered void or void ab initio (void from the beginning). 2. Since the minor was legally incapable of entering into such a mortgage, the contract is deemed void and invalid. 3. Dharmodas Ghose, the minor, cannot be compelled to return the money advanced to him, as he was not bound by the contractual promise.
Principles of Law
The principles of law that were laid down in this case are:
• Any contract with a minor or an infant is neither valid nor voidable but is void ab-initio (void from the beginning).
• Section 64[7] of Indian Contract Act,1872 is only applicable in the case, where the parties entering in contact are competent to make such contract and is not applied to cases where there is no contract made at all.
• The legal acts done by a representative or any knowledge of an agent means that such acts done or having knowledge of anything is of his principal.
Effects of a Minor's Agreement
VOID AB INITIO: An individual under the age of 18 is termed as minor and if comes into contract with any party, the agreement will be termed as void. Now when we say void ab initio, the meaning of the ab initio is that it is void from the very beginning. Non existing from the very beginning, whomsoever will enter into the contract with the minor, that particular agreement cannot be enforceable in the eyes of law.
In case of Mohiri Bibi v. Dharmodas Ghose, the Privy Council passed the final decision saying any sought of contract with a minor or infant is void from beginning. The plaintiff, Dharmodas was incompetent to make such mortgage hence cannot be forced to give back the amount of money being advanced to him, because he was not bound by the promise that was executed in a contract. The court held it void under section 10 and 11.
RATIFICATION OF THE ACT DONE IN MINORITY: A Minor after attaining the age of majority cannot ratify an agreement made by him when he was a minor. ‘Ratification’ means the subsequent approval or adoption of something. If a minor, on attaining the majority age, grants approval to his earlier void agreement, the approval will not make it a valid contract.
For example, in the case of Suraj Narain Dube vs. Sukhu Aheer, Sukhu Aheer, while still a minor, borrowed money from Suraj Narain and issued a promissory note. Four years later, upon reaching adulthood, Sukhu Aheer executed a second promissory note covering the original loan amount plus accrued interest.
The court determined that the initial agreement between the parties, formed when Sukhu Aheer was a minor, was void, absolving him of any liability under that agreement. Although Sukhu Aheer provided consideration in the form of a promise and a promissory note, minors lack the authority to validate contracts made during their minority upon reaching adulthood. Consequently, the second agreement was also deemed void due to a lack of consideration.
DOCTRINE OF ESTOPPEL: There is no estoppel against a minor. Estoppel is a legal rule of evidence which prevents a party from alleging something that contradicts what he previously stated6 . Section 115 of the Indian Evidence Act, 1872, establishes the principle of estoppel. This principle dictates that if a minor deceitfully enters into a contract by misrepresenting themselves as an adult when they are actually underage, they reserve the right to later use their minority status as a defence and cannot be barred from doing so.
For example, in the case of Khan Gul v. Lakha Singh , the defendant, who was a minor, deceptively hid his true age and entered into a contract to sell a plot of land to the plaintiff, receiving Rs. 17,500 as consideration. Subsequently, he refused to fulfil his obligations under the contract. The plaintiff sought either possession of the land or a refund of the consideration.
The court ruled that because a contract made by a minor is void, specific performance could not be enforced. However, the court did order the defendant to refund the consideration received from the plaintiff.
LIABILITY UNDER TORT LAW: No liability arising out of either tort as a minor is incapable of giving consent, and the nature of minor’s agreement is void and hence, cannot be enforced.
DOCTRINE OF RESTITUTION: It means restoring to the party the benefit which the other party has received under a decree subsequently held to be wrong.
If a minor falsely represents their age and acquires property or goods, they can be compelled to return it, especially if the property is still in their possession. This principle is known as the equitable Doctrine of Restitution. However, if the minor sells or converts the goods into cash, they cannot be compelled to repay the full value of the goods as it would essentially enforce a void contract. In certain cases where a minor seeks the cancellation of a legal instrument, the court may require the minor plaintiff to provide compensation to the other party involved. This requirement is outlined in Section 33 of the Specific Relief Act, 1963:
“On adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted, to restore, so far as may be any benefit which he may have received from the party and to make any compensation to him which justice may require.” Thus, the Court will compel restitution by a minor when he is a plaintiff.
MINOR AS A PARTNER: According to Section 30(1) of the Indian Partnership Act, 1932, partnerships arise from the mutual agreement of partners. As minors are unable to enter into contracts, they cannot be full-fledged partners in a firm. Nevertheless, with the unanimous consent of all other partners, a minor may be allowed to partake in the benefits of the firm without being held fully liable as a partner
MINOR AS AN AGENT: According to the general principle, given under Section 183 of ICA, “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”. Hence, a minor cannot enter into a contract as an agent. An agent acts as an intermediary between a principal and third parties. Hence, according to Section 184 of ICA, a minor can be designated as an agent. However, the minor won't bear personal responsibility for their actions as an agent. It's important to highlight that the principal remains accountable to third parties for the minor agent's actions conducted within the normal course of business.
SPECIFIC PERFORMANCE OF AGREEMENT MADE BY MINOR’S GUARDIAN: Specific performance refers to carrying out a contract according to the intentions of the parties involved. In cases where a guardian acts on behalf of a minor in making an agreement, that agreement may be enforced, and specific performance may be ordered under certain conditions. For the court to consider ordering specific performance of a minor's agreement, the following conditions must be met:
1) The agreement is made by the guardian on behalf of the minor.
2) The guardian is legally competent to enter into the agreement.
3) The agreement is in the best interest of the minor. However, there are limitations to the competence of guardians in making agreements. For example, guardians cannot enter into agreements that involve a minor's service or create personal liabilities for the minor. It's worth noting that the judicial perspective on this matter has not always been consistent over time.
LIABILITY FOR NECESSARIES TO A MINOR: According to section 68 of Indian Contract Act, the necessaries supplied to the minor “should be suited to the condition in life”. We're all aware of the numerous essentials crucial for our existence, without which survival would be impossible. These essentials encompass goods and services vital for the health and safety of minors. The determination of what constitutes a necessity can be influenced by the financial circumstances of the individual.
For example, in the case of Kunwarlal vs. Surajmal, the plaintiff Kunwarlal rented out a house to a minor. Subsequently, Kunwarlal filed a lawsuit against the minor and his father to recover the rent. According to Section 68, it was acknowledged that providing the house to the minor for the purpose of accommodation and continuing his education was considered a necessity, appropriate for the minor's circumstances. As a result, the court permitted the recovery of the rent for the house.
Conclusion
In conclusion, the nature of a minor's agreement in contract law is a nuanced and multifaceted topic that reflects the intricate balance between legal protection and personal autonomy. Through the lens of the Indian Contract Act and similar legal frameworks worldwide, it becomes evident that minors are afforded special considerations due to their presumed lack of maturity and experience in navigating complex legal matters. Throughout this assignment, we have explored various aspects of minor's agreements, beginning with an overview of the legal framework governing such contracts. The Indian Contract Act explicitly states that minors lack the capacity to enter into binding agreements, with certain exceptions. This foundational principle underscores the importance of protecting minors from potential exploitation and ensuring that they are not unduly burdened by contractual obligations that they may not fully comprehend. The case of Mohiri Bibi vs Dharmodas Ghose is a landmark case when it comes to prove the validity of a minor’s agreement and has been the basis of laying down the principles regarding a contract with a minor.
It's commonly understood that minors are still developing mentally and may not fully grasp the consequences of their actions. Consequently, the law aims to protect minors from exploitation by ensuring that agreements they enter into cannot be used against them. The Indian Contract Act of 1872 reflects this protective stance by granting minors certain privileges regarding their agreements. Minors are not held personally liable for their agreements and are entitled to benefit from them. Furthermore, the entire legal system is geared towards safeguarding their interests, with judges acting as their advisors, juries as their assistants, and the law serving as their guardian. However, it's also important to ensure that while protecting minors, undue hardships are not imposed on those who enter into agreements with them.
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