Contract Act: Position of Minor

 

CAPACITY TO CONTRACT

 

Section 11 of the Indian Contract Act clearly states as to who shall be competent to contract. It provides that every person is competent to contract

(i)                 who is of the age of majority according to the law to which he is subject,

(ii)        who is of sound mind, and

(ii)              who is not disqualified from contracting by any law to which he is subject.

Thus, a person to be competent to contract should not be

i)       a minor, or

ii)     of an unsound mind, or

iii)   disqualified from contracting

Let us now consider each of the aforesaid elements of competency to contract.

3.1 POSITION OF A MINOR

3.1.1 Who is a Minor?

According to Section 3 of the Indian Majority Act, 1875 a person is deemed to have attained majority

(i) when he completes 18 years or

(ii) where a guardian of person or property or both. has been appointed by a Court of Law (or where his property has passed under the superintendence of the Court of Wards), he attains majority on completion of 21 years.

In other words, normally a person shall be treated as minor if he has not attained the age of 18 years.

In the' following two cases, however, he is treated as minor until he attains the age of 21 years.

i) where a guardian of a minor's person or property is appointed under the Guardians and Wards Act, 1890, or

ii) where the superintendence of minor's property is assumed by a Court of Wards.

3.1.2 Position of Agreements by a Minor

Section 10 of the Contract Act talks about the competency of the parties and Section 11 talks about persons who are not allowed to enter into a contract. But neither section makes it certain, what will be the consequences of a minor entering into an agreement, whether it would be voidable at his option or altogether void. Thus, these provisions had created a legal conundrum about the nature of a minor’s agreement. The Privy Council finally resolved this controversy in the year 1903 through the landmark case of Mohori Bibee vs Dharmodas Ghose(1903)30 IA 114

 

Facts:

Here Dharmodas Ghose, a minor, mortgaged his house for Rs. 20,000 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 brought a suit against the moneylender stating that he was a minor at the time of the contract and, therefore, the contract was void and incompetent. But at the time of Appeal to the Privy Council, the defendant died and the Appeal was filed by his wife, Mohori Bibi.

 

Issues:

1.      The Agreement is void or not?

2.      Should the Law of Estoppel be applied?

3.      Should the minor refund the loan (compensation)?

Rules:

1.      Section 10 & 11 of Indian Contract Act, 1872

2.      Section 115 of Indian Evidence Act,

3.      Section 64&65 of Indian Contract Act, 1872

           Section 39 & 41 of Specific Relief Act, 1877

 

Analysis:

The Privy Council by clearing the air in the above case said that the minor’s agreement is void ab initio i.e., void from the beginning. The general belief that “every man is the best judge of his own interest” is excluded in the case of a minor.

1)      contract with or by a minor is absolutely void and the minor therefore cannot bind himself by a contract:

According to Section 11, as stated earlier, no person is competent to contract who is not of the age of majority. In other words, a minor is not competent to contract. In fact, the law acts as the guardian of minors and protects their rights because they are not mature and may not possess the capacity to judge what is good and what is bad for them. Hence the minor is not bound by any promises made by him under an agreement. Under Sec 11 of ICA, minors contract is void ab initio.

The Privy Council in the case of Mohiri Bibee v. Dharmodas Ghosh held that a minor's agreement is altogether void.

2)      Fraudulent representation by a minor (Law of Estoppel):

Will it make any change in case minor is guilty of deliberate misrepr6sentation about his age thereby inducing the other party to contract with him?

In the present case, it was found that the plaintiff was a minor at the time of making of the agreement was known to the defendant’s agent. It was held that the Law of Estoppel under Sec 115 of Indian Evidence Act was not applicable here.

3)      Refund/compensation

Their Lordships observed that Sec 64 was applied in case of voidable contract. Minor’s agreement being void, Sec 64 was not applicable. For Sec 65, it was applicable to a contract/agreement between competent parties which was not the case here. So, 65 is not applicable. For Sec 41, it gave discretion to the court to order compensation, but under the circumstances of this case, justice did not require the return of the money advanced to the minor.

The claim for refund under the Specific Relief Act, 1877 was disallowed.

 

General Rule for Position of a Minor

1.      Void ab initio

the minor’s agreement is void ab initio i.e., void from the beginning. The general belief that “every man is the best judge of his own interest” is excluded in the case of a minor. Contract with or by a minor is absolutely void and the minor therefore cannot bind himself by a contract:

According to Section 11, as stated earlier, no person is competent to contract who is not of the age of majority. In other words, a minor is not competent to contract. In fact, the law acts as the guardian of minors and protects their rights because they are not mature and may not possess the capacity to judge what is good and what is bad for them. Hence the minor is not bound by any promises made by him under an agreement. Under Sec 11 of ICA, Minor’s contract is void ab initio.

 

2.      Ratification of the minor's agreement

A minor's agreement being void ab initio, it is incapable of being validated by a subsequent ratification after the minor has attained the age of majority. The consideration furnished in respect of a transaction during minority cannot be considered to be a valid consideration for a subsequent promise after attaining majority and thus no ratification is of a promise made by a person during his minority. A contract by a minor is void. A void contract which is a dead letter cannot be revived and cannot constitute a valid consideration for a subsequent contract, and, therefore, a transaction entered into by a minor during minority, cannot be ratified.

Every contract needs a separate consideration, and consideration which passed under the earlier contract cannot be imported into the contract which the minor entered on attainment of majority.

In Suraj Narain v. Sukhu Aheer A.I.R. 1928 All. 440, the question before the Allahabad High Court was, whether consideration received by a person during his minority can be good consideration for a fresh promise by him after attaining majority. It was held by a majority of 2: 1, that the consideration received by a person during his minority could not be called consideration in its strict term within the meaning of Section 2(d), and there was no question of that consideration being considered valid for a fresh promise. The promisor, therefore, could not be made liable in respect of such a promise.

In Kundan Bibi v, Sree Narayan, (1906-7), 11 Cal. W.N. 135, If a person has received a part of the benefit during the minority and a part after attaining majority, a promise by him to pay for the both, if made after attaining majority, is with valid consideration and enforceable.

In Nihalchand v. Mir Jan Mahomed Khan, A.L.R. 1937 Sind 310, though a contract by a minor is void, it is quite competent for such a person to carry on the transaction started during minority, even after attaining majority in such a way as to bind himself for the whole transaction.

Irvine v. Union Bank of Australia, (1877) 3 Cal. 280 A minor's agreement being void ab initio, neither he can himself enter into contract nor authorize an agent to do so on his behalf. As a minor is incapable of either making a contract himself, or authorizing the same, he cannot legally ratify an act done on his behalf.

3.      No Estoppel against a minor

When a minor misrepresents at the time of contract that he has attained the age of majority, the question which arises in such a case is, does the law of estoppel apply against him, so as to prevent him from alleging that he was a minor when the contract was made?

Section 115, Indian Evidence Act, which lays down the law of estoppel is as under:

"Where one person has by his declaration, act or omission intentionally caused or permitted another person to believe a thing to be true, and to act upon such belief, neither he nor his representatives shall be allowed in any suit or proceeding between himself and such person or his representative to deny the truth of that thing."

 

According to the rule contained in Section 115, Indian Evidence Act, if you make a statement today which misleads another person, you are not allowed to deny the statement tomorrow when the question of your liability arises.

From the various decisions of the different High Courts, we find that the consensus is that the law of estoppel does not apply against a minor. He is allowed to plead minority as a defence to avoid liability under an agreement even though at the time of making the agreement, he falsely stated that he has attained the age. In Vaikuntarama Pillai v. Authimoolam Chettiar, L.L.R. (1915) 38 Mad. 1071; Gadigeppa V. Balangowda, A.LR, 1931 Bom, 561

In Khan Gul v. Lakha Singh, A.I.R. 1928 Lahore 609, the Lahore High Court also held that the law of estoppel does not apply against a minor. The reason advanced by Sir Shadi Lal, C.J. is, however, different. According to him, the law of estoppel, which is a rule of evidence, is a general law and this has to be read subject to the special law contained in the Indian Contract Act, according to which the agreement by a minor is void.

In Lakhwinder Singh v. Paramjit Kaur, A.I.R. 2004 P. & H. 6.the plaintiff- respondent, a daughter of one Avtar Singh, now deceased, inherited a part of his property constituting land. While minor, she executed general power of attorney in favour of her mother Smt. Rattan Kaur, who executed a sale deed of land belonging to her daughter in favour of defendant-appellant. Finding that the plaintiff respondent was a minor at the time of execution of power of attorney nor her mother obtained specific permission from the District Court, sale of land share by the mother was held void.

 

4.      Return of benefit secured by a fraudulent minor (The Doctrine of Restitution/Compensation)

 

According to English law, if a minor has obtained undue benefit in any transaction, he is required to restore back the benefit so received by him, under the equitable doctrine of restitution. Under the doctrine he is asked to restore back the exact things taken by him. It is applicable only to goods or property received by a minor so long as they can be traced, and are still in his possession. Since it is difficult to identify money and to prove whether it is the same money or different one, the doctrine does not apply to money. Even as regards goods or property, if the same have been consumed or transferred and are no more traceable, the doctrine of restitution does not apply there. Leslie v. Sheill, (1914) 3 K.B. 607. explains the doctrine.

Indian Law: Compensation by a minor

a.       Whether a minor can be asked to pay compensation under Sections 64 & 65 of Indian Contract Act for the benefit obtained by him under a void agreement?

The question, whether a minor can be asked to pay compensation to the other party, under Sections 64 and 65, Indian Contract Act had arisen in Mohori Bibee v. Dharmodas Ghose. While discussing this case, it has already been noted that in this case the Privy Council had held that the question of compensation under Sections 64 and 65, Indian Contract Act, arises where the parties are competent to contract, and these provisions do not apply to the case of a minor's agreement.

b.      Can a minor, who has enjoyed the benefit as contemplated under Section 70, be required to pay compensation under that provision?

Section 70 of the Indian Contract Act, 1872 recognizes quasi- contractual liability to compensate a person at whose cost some benefit has been enjoyed. According to that provision, where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. It has been held that Section 70 cannot be invoked against a minor. The minor is excluded from the operation of Section 70 for the reason that his case has been specifically provided for by Section 68. Besides, in the case of a minor, even the voluntary acceptance of the benefit of work done or thing delivered which is the foundation of the claim under Section 70 would not be present, and so, on principle, that Section cannot be invoked against a minor.

 

c.       Whether a minor can be asked to pay compensation in view of the provisions contained in Sections 39 and 41, under Specific Relief Act, 1963

Compensation under Specific Relief Act, 1963 Whether a fraudulent minor can be asked to pay compensation in view of provisions of Sections 39 and 41, Specific Relief Act, 1877, came in for consideration in some cases. Before discussing the case, the relevant provisions may be noted:

Section 39:

"Any person against whom a written instrument is void or voidable, who has reasonable apprehension that such instrument, if left outstanding, may cause him serious injury, may sue to have it adjudged void or voidable; and the Court may, in its discretion, so adjudge it and order it to be delivered up and cancelled."

Section 41:

"On adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require."

In Mohori Bibee's case, the minor had applied for the cancellation of the mortgage deed, executed by him, under Section 39, Specific Relief Act and the Privy Council considered the question of compensation to be paid by him under Section 41 of that Act. It was held that since in this case the loan had been advanced to the minor with the full of his minority, the question of payment of compensation to such a money-lender did not arise.

On the question of compensation under Section 41, Specific of High Courts, Khan Gul v. Lakha Singh A.LR. 1928 Lahore 609. The minor was held liable to refund the same. While deciding the case, Sir Shadi Lal, C.J. made a liberal interpretation of the above stated statutory provisions and also the points in the case needs a mention:

(i) According to Section 39, Specific Relief Act, 1877, a minor may sue for the cancellation of an instrument pertaining to a void agreement, and when he so goes to the Court (as a plaintiff) to claim the relief, the Court may ask the minor to pay compensation to the other side under Section 41. In this particular case the minor was not the plaintiff but was the defendant. The Lahore High Court still held that the minor should be asked to pay back the money. In its view the other party deserves to be compensated by a fraudulent minor, in equity, irrespective of the fact that the minor is the plaintiff or the defendant.

(ii) Sir Shadi Lal, C.J. also made a significant departure from the English doctrine of restitution and the decision of Leslie v. Sheill, according to which there can be only restoration of specific property wrongfully obtained by a fraudulent minor, if the same can be traced in his hands, and he cannot be asked to pay back money as the same cannot be identified, otherwise it would amount to enforcing an agreement which is void.

According to the decision in the present case, asking a minor to return the ill gotten gain in the form of money, is not the enforcement of contract, but it is only the restoration of the pre-contract position. The relief is allowed not because there is a contract between the parties, but it is because there is no contract but one of the parties has unjustly benefited at the cost of the other.

In accordance with the recommendation of the Law Commission, the principle of compensation has now been incorporated in Section 33, Specific Relief Act, 1963. This provision now requires the payment of money compensation by a minor irrespective of the fact whether the minor is the plaintiff or the defendant in the case.

In view of the above stated provision, the present position in India can be summarized as under:

 

1. If a minor goes to the Court as plaintiff for the cancellation of an instrument, the Court may, on adjudging the cancellation, require such a minor, to restore the benefit and to make such compensation to the other party as justice may require. The object of the present provision is to restore the parties to their original position, as far as possible

2. When the minor is the defendant in a case and he resists the enforcement of the suit on the ground that he is incompetent to contract, the Court may ask him to restore such benefit to the other party, to the extent his estate has been benefited thereby.  Through this provision the parties are tried to be put to the pre-contract position. Moreover, compensation in terms of money is also permitted. In other words, it means that the rule of English law laid down in Leslie v. Sheill' is not applicable in India.

 

MINOR'S LIABILITY FOR NECESSARIES

It has already been noted that a minor's agreement is void ab initio, and he is incapable of making a contract to pay for any services rendered or goods supplied to him. However, for the necessaries supplied to a minor, reimbursement is permitted to the person supplying such necessaries. This is not on the basis of any contract between the parties but because it is deemed to be a quasi-contractual obligation.

Section 68 in that Chapter makes a provision for the reimbursement for the necessaries supplied 10 a minor. The provision is as under

"If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person."

This Section permits reimbursement if:

1. Necessaries are supplied;

2. To a person who is incapable of making a contract, e.g., a minor or a lunatic; or

3. To a person who is dependent upon such person incapable of making a contract;

4. For reimbursement, no personal action can lie against the minor, etc., but reimbursement is permitted from the property of such incapable person.

Illustrations¹ (a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B's property.

(b) A supplied the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B's property.

What are necessaries

According to Section 68, the necessaries supplied to minor "should be suited to his condition in life." It does not mean bare necessities of life, but means such things as may be necessary to maintain a person according to his condition in life.

In Jagon Ram v. Mahadeo Prasad Sahu, L.L.R. (1909) 36 Cal. 768.  it has been held that wedding presents for the bride of a minor are necessaries although similar things supplied otherwise may not be so.it was observed: Necessaries means goods suitable to the condition in life of the defendant and to his actual requirements at the time of the sale and delivery, and whether an article supplied to an and upon its suitability to the particular infant's station in life.

In Clyde Cycle Co. v. Hargreaves, (1898) 78 L.T. 296 it has been held that a racing cycle is necessary for an infant apprentice. Similarly, in Chapple v. Copper, it was held that an infant widow is bound by a contract for the burial of her husband as the contract is for a necessity.

In Kunwarlal v. Surajmal, (1844) 13 M. & W. 252 it has been held that the house minor on rent for living and continuing his studies is deemed to be supply of necessaries suited to the minor's condition given to a in life, and the rent for the house can be recovered.

In Sham Charan Mal v. Chowdhry Debya Singh, A.I.R. 1963 M.P. 58 money was advanced to a minor for defending himself in certain criminal proceedings against him on a charge of dacoity. The minor executed a bond in respect of his loan, and then used this amount for the purpose of his defence. It was held that the amount borrowed was in connection with his personal liberty and it comes within the term

In Kidar Nath v. Ajudhia Persad, L.L.R. (1909) 36 Cal loan was given to a minor on the mortgage of his property with a view to saving the minor's property from sale in execution of a decree. It was held that this loan was for necessaries suited to the minor's condition in life, and therefore, even though the mortgage was void, the mortgagee had still a right of lien over the property mortgaged to him by the minor.

The goods supplied should not only be suited to the minor's condition in life but they should also be required by him at the time of supply. If the minor is already having sufficient supply of goods and does not need them any further, further supply will not be considered to be necessaries. In Nash v. Inman' (1908) 2 K.B 1, a minor, who was already having sufficient supply of clothing suitable to his position, was supplied further clothing by a tailor. It was held that the price of the clothes so supplied could not be recovered.

In Ryder v. Wombwell, (1868) L.R.3 Ex 90 the defendant, an infant, having an income of only 500 per year was supplied a pair of crystal, ruby and diamond solitaires and an antique silver goblet. It was held that these things could not be considered to be necessaries. It was observed that certain things like ear-rings for a male, spectacles for a blind person, or a wild animal, cannot be considered as necessaries."