CAPACITY TO CONTRACT IN RELATION TO A MINOR

INTRODUCTION

Section 11 of the Indian Contract Act 1872 says that every person is competent to contract who has

⮚ attained the age of majority

⮚ is of sound mind

⮚ is not this qualified from contracting by any law to which he is subject.



Capacity to Contract

Capacity means the competence of the party to enter into a valid contract. There are 3 essentials which are applied to determine the capacity of parties to enter into a valid contract i.e age, soundness and disqualification.

All person accepts the following are competent to contract

● Minor

● Person of unsound mind

● Persons disqualified from law to which they are the subject



Who is a minor?

According to the Indian majority act 1875, a minor is a person who has not completed his or her 18 years of age.

In certain cases he attains majority at the age of 21 years they are

✔ Where the guardian of a minor person is appointed under guardians and Ward act 1890

✔ Where the superintendence of a minor's property is assumed by the Court of wards.



Minor Agreement

Section 11 clearly states that a minor is not competent to contract and if any person enters into a contract with a minor then such contract is void ab initio.

Law protects the minor since minors need protection because they have no experience of legal issues involved in a contract.

A minor can receive the benefit of action but is not bound by any obligation or is not answerable for any action. The law goes to the extent that even if a minor enters into a contract by telling a lie then no legal action can be taken against him.

But according to Section 68 the property of a minor is liable to pay if necessity is required by the minor. The main purpose of the section is to protect the rice of those supplying these necessities to the minor. But what is important to note is that the minor personally cannot be held liable that it is his property that is liable not the minor.



Effects of Minor’s Agreement

An agreement by a minor is void ab initio

A contract with a minor is absolutely void because according to Section 11 a minor is not competent to make a contract.

If a minor receives some money and promises to do something in return then he cannot be enforced by the law to perform the act for which he has received money or to return the money.

This can be explained in the famous case of Mohiri BiBi vs. Damodar Ghosh

Damodar Ghosh, a minor mortgaged his house for Rs 20000 to a money lender. At the time of the contract, the legal representative who acted on behalf of the moneylender was aware that the party was a minor. The minor bought a suit against the money lender stating that he was a minor at the time of the contract and their for the contract was void and incompetent. But at the time of the appeal to the Privy Council, the defendant died and the appeal was filled by his wife Mohiri Bibi. The private Council by clearing the air in the above case said that the minor agreement is void ab initio i.e void from the beginning.



Minor as Beneficiary

A minor can be a beneficiary. Any agreement which provides some benefit to the minor and under which he is required to bear no obligation is valid. As per the law, the minor is not incompetent for accepting a benefit.

Great American insurance vs. Madan Lal

The Guardian on the behalf of a son entered into an insurance policy for the burning of a minor's house. When the land was destroyed and the minor demanded coverage the Insurance Company refused by arguing that the deal with the minor was invalid. Later however the court ruled that the contract was enforceable and that it was liable to pay penalties.



Roberts vs. Gray

A minor made a contract with the professional billiard player under which the professional player agreed to teach the minor (Roberts) the game and take him along on his foreign tours for an agreed amount of money. The court held the contract valid because it was for the benefit of the minor.


Contract for Necessities of life

Section 68 specifies that a contract made by a minor for the procurement of the necessaries of life is a valid contract.

A minor personally cannot be held liable; it is his property that is liable for the payment of necessaries. If the minor does not own any property then the provider or suppliers of this necessity cannot recover his price.



The necessaries depend on the economic condition and lifestyle of the minor. Necessary means those things that are essentially needed by a minor. They cannot include luxurious or costly or unnecessary articles. Food and clothing, the expense for medicine, rent for the house, money spent on birth or death rituals, travelling expenses, expenses on maintenance of property etc. are recognised as necessities under Indian law.

But if the minor is in possession of any or some of these necessities a loan taken by the minor to buy such necessities is not taken to be a valid contract.



Contract by Parents or Guardians of the minor

A contract made by the Parent or Guardian of a minor for the benefit of the minor is the valid contract. Such a contract can be enforced by the minor but before enforcement, the following conditions need to be met

the minor Guardian has the right to make a contract on the behalf of the minor

The contract is made lawfully and is for the benefit of the minor only.

Any contract made on behalf of or for a minor is void if the minor on becoming a major can prove that such contract was not made for the benefit of the minor or gain.



Doctrine of estoppel

Section 115 of the Indian Evidence Act explains as "when one person either by his act or omission or by declaration has made another person believe something to be true and persuaded that person to act upon it then in no case can he or his representative deny the truth of that thing later in the suit or in the proceedings".

In simple words estoppel means one cannot declare, contradict or deny to be false the previous statement made by him in the court.


The Doctrine of Estoppel does not apply to Minor

If a minor has by misrepresenting his age-induced a party to make a contract with him he cannot be sued for making the contract or for fraud.

If a loan or some property is obtained by the minor by fraud or misrepresentation and the agreement is set aside the court can direct him on equitable considerations to restore the money or property to the other party.

While the law gives protection to minors it does not give them the liberty to cheat.



Sadiq Ali khan vs. Jai Kishori

In this case, a minor executed a deed in favour of the plaintiff who was unaware of his minority. The defendant, the minor, had represented that he was a major and the plaintiff acted on that misrepresentation. The law of contracts afforded its protection to the defendant despite his fraudulent misrepresentation.

But this does not mean that minors can cheat and enjoy the fruit of their fraud. As per section 33 of the Special Relief Act, 1963 court will order equitable consideration for restitution if the minor is still in possession of the things or money. The minor shall have no liability where money is spent on things that cannot be traced in his hands.

For example, a minor fraudulently overstates his age and takes delivery of a motor car after executing a promissory note in favour of the seller of the car. Though the minor cannot be compelled to pay on the promissory note but the court on the equitable ground may order the minor to return the car to the seller.



Ratification of a contract

Ratification means subsequent adoption and acceptance of an act or agreement.

A minor agreement is void ab initio and hence cannot be ratified even after attaining the majority.

By subsequent ratification of a minor contract upon attaining majority, a void contract cannot be given validity.

For example, a minor X makes a contract with Y that the latter pays him Rs 2000 which he will return when he becomes a major such contract is void and X does not incur any legal obligation to return the money.



Minor as an Agent

A minor can be appointed as an agent but according to Section 184, the person appointing the minor(or the principal) would be held responsible for the minor's activity.

The principal cannot by law hold a minor agent responsible for carelessness, willfully neglect or miss performance of his duties.

A minor may be appointed as an agent but he cannot appoint an agent i.e a minor can be an agent but he cannot be the principal.



Minor as Partner

According to Section 30 of the Indian Partnership Act, a minor cannot enter into a partnership contract but if other partners agree a minor may be admitted to share the benefits of an existing partnership and can claim the agreed share of profit from the partnership firm.

Minor can not personally be held responsible for non-performance of any duty assigned to him by the firm or for the loss that may accrue to the firm as a result of such non-performance.

Within 6 months of attaining the age of majority, he is obliged to declare whether or not he wants to continue his partnership based on which new status will be decided. If he gives no such public notice he will be deemed to be a partner of the firm and have the same obligation as the other partners.



Minor as Shareholder

Under the Companies Act 2013 a minor is barred from holding any share in his own name. Next company can refuse to register transfer of shares in favour of a minor unless shares are fully paid up. But the guardian can purchase shares on behalf of a minor and whole them as a trusty for the minor.


Surety's Liability for Minor

If a person has agreed to stand surety or be a guarantor for a minor such person would be regarded as the principal debtor and would be liable to pay personally as the minor is not liable to pay.

The surety must always be an adult.



In the case of Kashiba vs. Shripat where an adult had given a guarantee for a minor, the court held the surety as the principal debtor since there could be no proceeding against the minor.


Position of Minor in a Negotiable Instruments

According to section 26 of the Negotiable Instrument Act, a minor can be a promisor and can draw, deliver or endorse a bill of exchange, check or promissory note.

In case of such a document being dishonoured a minor cannot be held liable where the associated parties if any are liable for its payment.



Minors Liability for Torts

A tort is a civil wrong.

A minor is liable for a tort only if minus action is not as per the terms of the contract.


Burnard vs. Haggis

The defendant who was an undergraduate and a minor lenter horse to go for a ride. He clearly mentioned that he did not want the horse to jump. The defendant then gave the horse to his friend who used the horse for jumping with the result that it fell and was injured. The defendant was held responsible under tort as the act resulting in the injury of the horse was outside the purview of the contract and in indirect relation with the contract.



Ballet vs. Mingay

An infant hired certain instruments and passed them to a friend. When he failed to return them he was held liable for the tort of detinue.


Landmark Case laws

Suraj Narayan v. SukhuAheer:

In this case, a person borrowed some money when he was a minor and after attaining the age of majority, he made a new promise to pay that amount with interest thereon, but this contract was not enforceable due to the reason that consideration received during when the person is a minor is not a good consideration.



Kundan Bibee v. Sree Narayan:

In this case S, when he was a minor received some goods from K in connection with his business and was indebted to him, when he became major, he took some more money from him and made a bond for paying the total amount to K. In order to recover the amount, it was contended by S that he was not liable to pay the amount as they purported to be in his minority. However, S was made liable to pay the entire amount as there was a new consideration attached.



Kuwarlal v. Surajmal:

Regarding necessities provided to minors it was held that the house given to a minor for rent for living in it and to continue his studies is part of necessities, and therefore he is entitled to payment of rent from the minor’s property.



This article is written by Simran Verma of Delhi Metropolitan Education.

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