Effects of Minor’s Agreement – Law of Contracts

Effects of Minor’s Agreement

Contracts by and with minors are generally avoided. This is because of the reason that Indian Contract has some express provisions regarding contracts by minors. The Act under Section 11 prohibits minors from making any contract. Section 11 of the Act states 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.’

Who is a ‘Minor’?

In India any person who is below the age of 18 is considered to be a minor according to Section 3 of Indian Majority Act, 1875.

Nature of Minor’s Agreement

Section 11 of the Indian Contract Act, 1872 declares that a minor is not competent to contract. But it nowhere mentioned the effect of the contract signed by the minor. This controversy was finally resolved in 1903 by the judgement delivered in the case of Mohiri Bibee v. Dharmodas Ghosh, where it was held that the minor is incompetent to contract and hence, all contracts made by minors are void ab initio.

Judicial philosophy concerning contracts by minors

There are three fundamental rules that govern judicial philosophy towards minors. These are-

I. Law must protect the minors : First rule says that the law must protect the minors against the world and their own inexperience.

II. No unnecessary hardship should be caused to the other party by law :  Second rule says that while protecting the minor the law should not cause damage to the other party as the cost of saving the minor.

III. A contract by minor can be enforced if it has a minor as beneficiary : A minor can enforce an agreement made by him being a beneficiary thereunder but with the condition that minor should have performed his promise under the agreement.

Rules regarding Agreement with a Minor

Rules regarding agreements made by minors can be listed as follows :

  • Contracts are void ab initio
  • Minor can be a beneficiary
  • No ratification possible
  • Restitution or compensation can be claimed
  • No application to rule of estoppel
  • No plea for specific performance
  • Contract on behalf of minor
  • No liability of parents/guardian
  • No insolvency for minor
  • Liability for tort
  • No personal liability for necessaries of life supplied to him

 

  • Contracts are void ab initio

All the contracts made by minors are void ab initio[i]. These agreements are nullity in the eyes of law. And therefore can not be enforced.

In  Mohori Bibee v. Dharmodas Ghose , it was held that the contract with a minor is ‘void ab initio’ and can not be enforced in court of law. In the current case Dharamodas Ghosh, a minor mortgaged his property for Rs 20,000/- in favour of Brahmo Dutta who was a money lender. At the time of forming the mortgage deed one Kedar Nath, manager of Brahmo Dutta, acted as his attorney who had full knowledge of the fact that Dharmodas Ghosh was a minor. Later, the mother of the minor bought a suit in court seeking the revocation of mortgage deed contending that the deed was entered by her son being a minor and hence appealed to declare it void. The court held that the contracts made by minors are void and therefore Dharamodas Ghosh cannot be compelled to pay the amount.

See also  Rights and liabilities of partners - Indian Partnership Act 1932
  • Minor can be a beneficiary 

    A minor can enforce an agreement in which his position is of a beneficiary. But this is to the condition precedent that the minor must have performed his promise under the agreement.

In Raghava Chariar v. Srinivasa, a mortgage deed was executed in the favour of a minor who had advanced the entire of the mortgage money. The issue here was whether the mortgage executed in favour of the minor was enforceable by the minor or by another person on his behalf. It was held that the transaction in this case was enforceable by or on behalf of the minor.

  • No ratification possible 

Ratification[ii] is not possible in contracts by minors. The rule of ratification says that only the valid acts may be ratified and as the contracts by minors are void ab initio, they can not be ratified in case. Even after attaining the age of majority no ratification can be done.

In Suraj Narain v. Sukhu Aheer, Suraj Narain lent some money to Sukhu Aheer, a minor and the minor in return executed a promissory note against the money borrowed. When Sukhu Narain attained the age of majority, he and his mother executed a second promissory note in favour of the lender, Suraj Narain in respect of the original loan plus the interest accumulated over the years. The matter was taken into court where it was held that the first agreement was void as it was made by a minor and therefore, he had no liability under that agreement. Now, the second agreement that is formed on the basis of the first agreement is also void as a past void contract can be ratified in future and contracts by minors are void and cannot be ratified after attaining the age of majority.

  • Restitution or compensation can be claimed 

Restitution in case of minor and claiming and compensation is possible. This means that if a minor has received any benefits under a contract then he can be compelled to restore thode benefits to the other party to the extent possible, at the time of the rescission of the contract. Minor can be asked to pay it to the extent of the property he has.

  • No application to rule of estoppel 

A minor is not bound by the rule of estoppel[iii]. This means that a minor can always plead his minority and at any time. Even if he has falsely represented himself as a major and has induced the other party , he can later deny the stand. Neither he can be sued in contract and nor in tort.  Also, the aggrieved party cannot sue for a contract as the contract by minor is void ab initio and enforcement of void agreements is not possible.

Illustration  –  A, a minor fraudulently induced B by representing himself to be a major and borrowed  Rs 10,000 /- from B. Now B cannot sue A for the recovery of the amount lent as rule of estoppel does not apply to minors.

  • No plea for specific performance 

Minor’s agreements are void and therefore the court cannot order for specific performance[iv] in contracts of minors.

Illustration-  A, a minor sold a shop to B, an adult. A received the consideration but the sale deed was not registered as A was a minor. B thereafter filed a suit for specific performance of the agreement. It was held that the agreement being void cannot be enforced and a minor can not be compelled for specific performance.

  • Contract on behalf of minor 

A minor’s parent/ guardian/manager can enter into a contract on behalf of the minor for the condition provided that-

(i). the parent/ guardian/manager acts within the scope of their authority; and

(ii). the contract is for the benefit and advantage of the minor

  • No liability of parents/guardian

The parents/guardian of a minor cannot be held liable for the agreements made by the minor/their ward unless, the minor has made the agreement as their authorised agent.

  • No insolvency for minors 

A minor can never be adjudged insolvent as he can never enter into a contract personally. Also, he can not be held liable for the necessaries of the life supplied to him, such expenses can only be reimbursed from his property.

  • Liability for tort 

If the tort committed by the minor is in direct relation to the contract made by him then he cannot be held liable. But, if the tort is independent of the contract then he is liable for the tort committed by him.

In Burnard v. Haggis, a minor hired a mare for riding with the express agreement

that “the mare was going to be used just for the purpose of riding and not for jumping and larking.” The mare was made to leap over a fence where she was impaled and eventually was killed.  It was observed that the minor was liable for negligently killing the mare as his act was independent of the contract made by him with the other party.

  • No personal liability for necessaries of life supplied to him

A minor is incompetent of entering into a contract and therefore is not personally liable to the necessaries of life supplied to him or his dependents. Such expenses can be reimbursed from his property and the liability of the minor is limited to the extent of his property only. But, to recover that cost the person supplying the necessaries must satisfy the following conditions –

(i). the things supplied must be necessaries of life

(ii). the things must be suitable to the conditions in life of the minor

(iii). the minor must be in need of those things

In Ryder v.  Wombwell, an infant, having an income of only 500 Pounds per annum was supplied with a pair of crystal, ruby and diamond solitaire and an antique silver goblet. Held that, these things can not be considered as necessaries of life and the recovery of damages was not allowed.

Position of minor in different contracts made by him

  • Minor as agent
  • Minor as partner
  • Minor as surety
  • Minor as joint promisor
  • Minor as shareholder
  • Minor as trade union member
  • Minor in a service contract
  • Minor under Negotiable Instruments Act
  • Minor’s contract for apprenticeship

 

  • Minor as agent – A minor can be appointed as an agent by a person competent to contract. Minor can bind his principal liable for his acts but the principal in return can not hold him personally liable. A minor can not appoint an agent as the rule of agency requires that only a competent person can appoint an agent.
  • Minor as partner – A minor can not be a full fledged partner in a firm. Minor can only be admitted to the benefits of the firm with consent of all the partners.
  • Minor as surety – A minor can never be as surety as the surety is personally liable for the default of the defaulter but a minor can not be held personally liable in any ways. But, a contract of guarantee in the favour of a minor is valid.
  •  Minor as joint promisor – A minor can be a joint promisor with an adult or a major. But, the minor can not be held personally liable for the promise and to his co- promisor whereas the major promisor can not escape his liability.
  • Minor as shareholder – A minor can not apply for allotment of shares as he is forbidden by law to enter into a contract.
  • Minor as trade union member – Any person in spite of being a minor can be a member of a trade union after attaining the age of 15 years provided that the rules of that union allow him to do so.
  • Minor in a service contract – A contract for personal service by a minor is void. Minor can not sue the other party to the contract on the ground that it is for his benefit.
  • Minor under Negotiable Instruments Act – A minor can draw, make or negotiate instruments (cheque, promissory note, beneficiary note, etc.) but will not be personally liable for the same. But, in case any negotiable instrument is executed in favour of a minor then minor can enforce that.
  • Minor’s contract for apprenticeship – A of apprenticeship[v] is for the benefit of the minor and therefore can be enforced by him through his guardian.

Conclusion 

A minor is incompetent of entering into a contract as it is forbidden by law. Agreements by minors are not enforceable in the court. If a minor makes a contract with any person (adult) then that contract will be void ab initio. But, a minor can enforce the same if it is for the benefit of the minor. The costs incurred by the other party can be recovered by the minor’s property only, because a minor is not personally liable in any case.

 

[i] Void from the very beginning

[ii] Approving or conforming or accepting a past contract

[iii] Rule of estoppel says that when a person by his words or actions falsely represents and makes the other person believe in certain facts then the person falsely representing the facts can not be allowed to deny the existence of that particular thing or fact.

[iv] Performance of the contract as per the terms specified in the contract by the other party

[v] Training for a specific art or trade or work ; internship

Author: Poorva G Chaturvedi,
Modi Law College, Kota Second Year

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