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 contract by misrepresenting his age, but later claims that he is still a minor, he cannot be held liable because the law of contract is designed to protect minors from contractual liability, and thus this defence of estoppel cannot be used against them.Even if a minor has fraudulently misrepresented his age, he can still use his minority in defence.


No approval or ratification can be given to a contractual agreement if any person entering into a contract was a minor but has now attained the age of majority. Since the contract with a minor is void from the start, it cannot be made valid at a later stage, even if the minor party becomes a major.

A minor cannot become a partner in any firm or business. This provision is laid down under section 30 of the Indian Partnership Act, 1932. He can never become a partner, but he can avail himself of the benefits of a partnership if there is the mutual consent of all the other major partners.


The doctrine of restitution given under sections 64 and 65 of the Indian contract act lays down that when two parties enter into a voidable contract, one of them having the option rescinds it and the other party need not have to perform the promise further. The party rescinding such voidable contract must then repay any benefits received to the party from whom they were originally received.But in the case of minors entering into a contract, the contract automatically becomes void, hence any benefits or monetary advances received by the minor cannot be asked to be refunded.


Conclusion

As it can be observed through a detailed study, any agreement which is enforceable by law is formed with or by a minor and is considered void. Only people aged 18 and above are allowed to enter into the contract. There are various reasons why minors are not given the right to enter into any kind of contract. Since children who are below the age of eighteen are not earning any monetary value in their lives, Most of them have not even completed their higher education after matriculation. The maximum amount of time they are dependent on their parents or legal guardians, and hence they are incapable of fulfilling the obligations of any contract. All contracts come with some promise, which includes duties and obligations, along with some consideration, which is to be followed by both parties at all costs to save themselves from being held liable for the breach of such a contract and to save themselves from paying damages.


It is clearly understood that the person who is still at the lower level of their education and doesn't have enough mental and physical capability to earn a living in the outside world or is still dependent on their parents will simply be incapable of fulfilling such obligations and promises, and hence minors are not allowed to enter into any contract.

One of the other major reasons behind such a prohibition is the protection of minors who are entering into the contract. Most of them are unaware of the hoax and misleading nature of the outside world and how they can be easily cheated and benefited from. By putting such laws in their favor, they are being protected. The non-applicability of provisions like the rule of estoppel and the doctrine of restitution helps them to be shielded against those who may easily take advantage of them and their immaturity.



This article is written by Kirti Kumar of Lloyd Law College.

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