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CAPACITY TO CONTRACT IN RELATION TO A MINOR

Introduction

To lead a happy and stress-free life, we need to have basic facilities like food, clothing, and a house. To earn these, one has to have access to equal opportunities in work, labor, and business, which helps to earn a monetary amount to carry on their lives. All these activities related to employment, living, and owning other material things that support daily life do often include the participation of the outer world, which consists of strangers. It's simply impossible to carry out one's life without engaging with people outside of the family. It's a common human psyche that they don't trust outsiders, and the number of responsibilities and liabilities that come with such acts of indulgence in employment, owning and purchasing things, etc., makes such thinking justifiable too. So, to create a sense of safety and justification among the people, the term agreement, which is enforceable by law, comes into the picture. It is also called a contract.


A "contract" as a term can be defined as any piece of a verbal or written agreement that is enforced by the law and creates duties and obligations for the parties involved in it. Contracts are formed for the transfer of any services, goods, leases, or any business, labor, or employment contracts, and these contracts are usually done in exchange for some kind of consideration from one party to another.The good part about such an agreement is that if any of the parties tries to breach the promises and terms of the contract, the other party can claim damages or seek judicial remedies since it is legally enforced. Hence, this creates a sense of safety among the people to indulge with outsiders and gives them an opportunity to avail the facilities completely and safely.


In the Indian legal system, the term "contract" is defined under the Indian Contract Act, 1872. Under Section 2(h) of the act, the term "contract" is defined as "an agreement enforceable by law". If it is to be understood widely, then it means that any agreement made out there which is obligatory to the law of land, meaning the Indian legal system, can be called a contract. And the term agreement is also defined under Section 2(e) of the act as, "every promise and every set of promises, forming the consideration for each other" and the term promise is defined under Section 2(b) of the act, "when the person to whom the proposal is made signifies his assent thereto, the proposal becomes an accepted proposal." A proposal, when accepted, becomes a promise." It can be easily derived that any proposal made by a person to another is accepted by them, then the proposal becomes a promise, and any such promise made by forming consideration is termed an agreement, and any such agreement which is enforceable by law becomes a contract.

Contract: An agreement (offer + acceptance) that is legally binding.


Competent to contact

Contracts can take many forms, and we come across many in our daily lives.A contract for leasing an apartment, a contract for purchasing a car, a contract in a hospital, a business contract, a contract for selling and purchasing in the market, and many others are examples of contracts.But not every citizen has the right to enter into these legally enforced agreements. The Indian Contract Act lays down the essentials of competency for any contract. Under Section 11 of the act, there are the main three categories of persons who are not considered competent to enter into any contract, which are explained in detail further:

minor under the laws of the country of which he or she is a citizen

A person is of unsound mind while entering into a contract.

A person is disqualified by law.


Definition of minor.

In our country, any citizen who is less than the age of eighteen years is termed a minor, and hence it is considered that any minor person is incapable of understanding the nature, responsibilities, and liabilities arising out of a contract. Any contract which is completed, including a minor, is termed a void contract, and it is considered void ab initio, which means even from the beginning.

The Indian majority act of 1875 defined the age of majority as the person who has attained the age of 18. He will be called a major and the day on which he is born will be counted as the whole day while calculating the age of majority. But if a guardian or custodian is appointed by any court for a minor before the age of 18, then such a child would be considered a major at the age of 21 instead of 18.


Though the age of the majority differs from country to country, sometimes religion also plays an important role in deciding the majority age. Countries like Iran, Yemen, and Indonesia have set the age of majority at 15 years. Pakistan, China, Vietnam, and Cambodia are some of the countries that have 16 as the majority age of children. North Korea keeps 17 as the majority age. Most countries in the world, including the USA, India, Russia, China, Germany, etc., have 18 as the majority age of their children. According to some religions, Islam considers that when a male hits puberty, they are considered adults, and females are considered adults once their menstruation starts. In Judaism, the age of 13 for boys and the age of 12 for girls is considered to be major due to religious purposes.


As we can see, most of the countries have the majority age of 18 because at this age they are almost developed physically as well as mentally since at this age most of the students passed their higher education. Since 2015, some countries have considered lowering the majority age to 16, as nowadays, kids are much more educated and informed about the internet, as well as they are raised by more educated parents too.

Minor’s capacity to contract

Mohori Bibee V/S Dharmodas Ghose.

This was the landmark case in which the privy council had laid down that any contract done by a minor would be considered void-ab-initio.


Facts:

The respondent, Dharmodas Ghose, was a minor and the sole owner of his immovable property, and his mother was his legal custodian, which was authorised by the high court of Calcutta.

Bhramo Dutta, the plaintiff, was the moneylender.

The respondent mortgaged his property when he was a minor in favor of the plaintiff for the deed amount of Rs. 20,000 at 12% interest per year.


The management of the plaintiff’s business was under the control of Kedar Nath, who was also the attorney for the plaintiff.

The mother of the respondent has sent a notification to the plaintiff addressing that her son, who is the owner of the property, is still minor while the deed is done.

But the actual loan amount which was given to the plaintiff by the defendant’s attorney was less than 20,000, and this attorney also had knowledge that the owner of the property was minor and incompetent to enter into any contract.



On September 10th, 1895, the boy, along with his mother, filed a suit against Brahmi Dutta by claiming that the mortgage that was done by the plaintiff was executed when he was a minor, and hence it is void or improper and shall be revoked.

The plaintiff argued that no relaxation or aid should be given to the defendants as they had dishonestly misinterpreted his age.

Issue:

Is the deed of mortgage voidable or not?

Whether the deed is void under Section 2, section 10(5), or section 11(6) of the Indian Contract Act, 1872?

Whether the plaintiff was liable to return the amount of the loan which he had received under such a mortgage deed?


Judgment:

The trial court held that the deed that was commenced between the parties was void as one of the parties was a minor at the time of execution.

The respondent, unsatisfied with the decision of the trial court, had filed an appeal to the High Court, which was dismissed, and after that, filed an appeal to the Privilege Council, which was dismissed as well.

The final decision given by the privy council was that any contract with a minor is void-ab-initio and since the minor is incompetent to make such contact, it shall be void and invalid before the eyes of the law. Even the plaintiff, Dharmodas Gosh, can't be forced to give the loan amount back because, being a minor, he was not bound to fulfil the promise laid in the contract.


T. Raghava Chariar V. O. A. Srinivasa Raghava Chariar.

Facts:

The plaintiff was the minor who entered into a contract with the defendant, who was a major, and the contract was for the mortgage.

The plaintiff has paid the monetary amount and fulfilled his part of the promise, but the other party refused to fulfil his obligation.

The plaintiff had filed the suit in front of the Madras High Court.


Issue:

Whether the mortgage executed in favor of the plaintiff who has paid the sum amount enforceable by him or other people on his behalf or not?

Judgment:

The Court held that since the mortgagee has fulfilled his obligations provided under the contract, the consideration of the promise is enforceable.

Here the reasoning is that though the minor is not allowed to enter into a contract as it would make the contract void, then this doesn't abstain him from becoming the promisee as the requirement of competence to contract is only required for the promisor.


Provisions related to a contract with a minor

Any contractual agreement made with or by a minor is considered to be void from the start, which was laid down in the case laws discussed above.

The rule of estoppel can not be used against a minor who is entering into a contract. This rule states that any party to the case can say or allege something at a later stage that is contradictory to what was stated earlier. So, if a minor enters into a contrac