Minor / Minority and capacity to contract

Minor/Minors:

The term “minor/minors” is no where defined in the Contract Act. But taking into consideration
the wordings of Section 11, a minor is a person who has not attained the age of 18 years. The age
of majority of a person is regulated by Section 3 of the Indian Majority Act, 1857.  But where
a guardian has been appointed to the person or property of the minor by a Court or when the
minor’s property is under supervision of Courts of wards, the age of majority of such a person is
21 years and not 18 years.

Section 11 of the Act expressly forbids a minor from entering into a Contract. The effect of this
express prohibition is that any contract entered into by a minor is void ab initio regardless of
whether the other party was aware of his minority or not.

Case – Mohoribibi vs. Dharmodas Ghose – 

The Privy Council ruled that – the Act makes it essential that all contracting parties
should be competent to contract, and especially provides that a person who by
reason of infancy is incompetent to contract cannot make a contract within the
meaning of this Act. It was accordingly held that a mortgage made by a minor was
void, and a money-lender who has advanced money to a minor on the security of
the mortgage is not entitled to repayment.

The law dealing with minor’s agreement is based on two principles –

a) that the law must protect the minor against his own inexperience, which may
enable an adult to take unfair advantage of him,  or to induce him to enter into a
contract which, though in itself is fair, is simply imprudent (e.g. – if the minor for a
fair price buys something which he cannot afford); and

b) that the law should not cause unnecessary hardship to adults who deal fairly
with minors.

Keeping in mind this fact the privy council changed its stand later into a more
equitable one –

Case – Srikakulam Subrahmanyam vs. Kurra Subha Rao –

In order to pay off the promissory note and the mortgage debt of his father, the minor
son and his mother sold a piece of land to the holders of the promissory note in
satisfaction of the note and he was also able to pay off the mortgage debt, and
regain possession of the land. Afterwards the minor brought an action to recover
back the land. Lord Morton held that Section 11 and Mohoribibi case leave no
doubt that a minor cannot contract and if the guardian had taken no part in this
transaction it would have been void. But the contract being for the benefit of the
minor and within the power of the guardian was held to be binding upon him.

No estoppel against a minor:

If a minor enters into any agreement by representing that he is of full age, is he estopped
by Section 115 of the Indian Evidence Act, 1872 from setting up that he was a minor when he
executed the agreement? In other words can he be precluded (prevented) from disclosing his true
age in any subsequent litigation resulting from the Contract?  

The point was raised but not decided in Mohoribibi vs. Dharmodas Ghose  case but the point
was settled in Sadik Ali Khan vs. Jai Kishore  where privy council observed that – a deed
executed by a minor is a nullity and incapable of founding a plea of estoppel. The principle
underlying the decision being, there can be no estoppel against a statue.

The position is – even if a minor has entered into a contract by misrepresenting his age, he can at
any later stage plead “minority” and avoid the contract. Minority in India is a fact and not a
privilege (as in England) and this fact can be proved at any stage of the proceedings, regardless
of the surrounding circumstances.

No liability in a contract for minor:

A minor is in law incapable of giving consent and, there being no consent. There being no
contract at all and hence no liability in an agreement entered by the minor.

No ratification:

A minor’s agreement being void ab initio, there can be no ratification of the agreement on his

reaching the age of majority. Ratification can only be of acts which are “valid in law” at the time
of commission and also at the time of ratification. Since an agreement entered into by the minor,
during his minority is not valid in law, he cannot on his reaching the age of majority ratify it – as
in the eyes of law the agreement does not exist at all.

Limited application of “Restitution” in case of minor’s agreement:

If a minor obtains property or goods by misrepresenting his age he can be compelled to restore it,
but only so long as the same is traceable in his possession. This is known as the equitable
doctrine of restitution.

Where the minor has sold the goods or converted them, he cannot be made to repay the value of
the goods, because that would amount to enforcing a void agreement. So also, the doctrine will
not apply where the minor has obtained cash instead of goods.
The Specific Relief Act authorized the Courts to order any compensation that justice required to
be paid by the party at whose instance a contract was cancelled.

The first land mark case decision on this issue was Mohoribibi’s case where it was held that –
justice did not require ordering the return by the minor of the money advanced as the same was
advanced with the full knowledge of infancy.

Second land mark case was – Khan Gul vs. Lakha Singh –where the defendant while still a
minor, fraudulently concealing his age, contracted to sell a plot of land to plaintiff. He received
the consideration of Rs. 17,500/- and then refused to perform his part of bargain. The plaintiff
prayed for recovery of possession or refund of consideration. There could be no question of
specific enforcement, the contract being void ab initio.

There is no real difference between restoring the property and refunding the money, except that
the property can be identified but cash cannot be traced.

As per Section 33(1) of the Specific Relief Act, 1963 if a minor comes to the Court as a plaintiff,
he can be compelled to disgorge (to surrender) his gains under the agreement.

As per Section 33(2) if the minor is brought before the court as a defendant, he can be compelled
to account for such portion of money or other benefits received by him has gone to benefit him
personally, such as education or training or has resulted as accretion to the estate.

It must be remembered that while in India all contracts made by infants are void and scope of
application of the equitable doctrine of restitution is comprehensive.    

Effects of contracts beneficial to minor:

Case – Raghavachariar vs. Srinivasa – 

A minor is allowed to enforce a contract which is of some benefit to him and under which he is
required to bear no obligation.  In the said case full bench of Madras High Court unanimously
decided, that a mortgage executed in favour of a minor, who has advanced the whole of
mortgage money, is enforceable by him or any other person on his behalf.

Again it is important to note that where the contract is still executory or the consideration is still
to be supplied, the principle of Mohoribibi’s case would thwart (prevent) any action on the
contract. For instance – Raj Rani vs. Prem Adib – the plaintiff, a minor, was allotted by the
defendant, a film producer, a role in a film. The agreement was made with her father. The
defendant ultimately allotted that role to another artist and terminated the contract with the
plaintiff’s father. Held, that neither the plaintiff not her father could sue on the promise. If it was
a contract with the plaintiff, she being the minor, it was a nullity. If it was a contract with her
father it was void for being without consideration.
The Indian Apprentice Act provides for contracts in the nature of contracts for service which are
binding on minors. Section 9 of the Act requires such contracts to be made by a guardian on
behalf of the minor.

Another contract which is prima facie for the benefit of minor is a contract for his/her marriage.
It is customary amongst most of the communities in India for parents to arrange marriages
between their minor children and law has to adapt itself to the habits and customs of the people
[Khimji Kuverji vs. Lalfi Karamsey]. The contract of marriage could be enforced against the
other contracting party at the instance of the minor but it cannot be enforced against the minor.

A minor has the option of retiring from a contract in beneficial nature on attaining majority
provided he exercises the option within a reasonable time.

Liability of minors for necessaries:

Section 68 provides that a person who supplies necessaries suited to minor’s condition of life is
entitled to be reimbursed from the property of such minor.

This Section is applicable only to the supply of “necessaries” but this term has not been defined
anywhere in the Act.

Case Chappel vs. Cooper – 

Things necessary are those without which an individual cannot reasonably exist. In first place,
food, raiment (clothing) lodging and the like. Articles of mere luxury are always excluded,
though luxurious articles of utility are in some cases allowed.

“What is necessary” is a relative fact to be determined with reference to the fortune and
circumstances of the particular minor. Hence a “Gold Watch” may be an article of necessity in
one case and an item of luxury in another depending on the status of minor. The importance of
making differentiation is the seller would be able to recover the cost of the watch in first case and
he will have to suffer a loss in the second case.

A minor in India can never be made personally for any goods supplied to him. If he does not
property sufficient to satisfy the debts, the seller will have to suffer a loss.

To render a minor’s estate liable for necessaries two conditions must be satisfied:

1. the contract must be for goods reasonably necessary for his support in his station in life; and

2. he must not have already a sufficient supply of these necessaries.

Case – Nash vs. Inman—

The supplies has to prove not only that the goods supplied were suitable to the condition in life
of the infant, but that he was not sufficiently supplied with the goods of that class.
Minor as a shareholder:

Under the Companies Act, a minor is barred from holding any shares in his own name. Even if
his name is entered in the register of members, he will not be treated as a member and his name
will be struck off from the register. But a guardian can purchase shares on behalf of a minor,
which he will then hold as a trustee for the minor.

Minor as a partner:

u/s 30 of the Indian partnership Act, a minor can be made a partner for the benefits of a firm,
with the consent of all the partners. A minor partner is entitled to a specified share of profits but
cannot be made liable for the partnership losses.

Within 6 months of his attaining majority or his becoming aware of his status as a minor partner
firm, whichever is later, he is required to elect from two options –

1. whether he would like to continue as a partner of the firm, or

2. else would like to opt out.

If he decides to opt out, then he ceases to be a partner from the date of election and would no
longer be entitled to the share in partnership profits.

If he decides to continue as a partner, then his decision will have a retrospective effect, i.e. he
will be deemed to be a full fledged partner from the day he had first entered the firm (as a
minor). He then becomes liable for all acts and losses of the firm during this period.

This retrospective effect seems to be against the spirit of the Contract Act, since in effect it
means that the minor had entered into a valid contract of partnership during his minority. This is
in conflict with Section 11 of the Contract Act, which specifically lays down that a minor’s
contract is void ab initio. This anomaly is extremely unfortunate and may have arisen because
Indian Partnership Act follows the English Partnership Act to the dot, and in England unlike
India a minor’s contract may be valid, void or voidable depending on the nature of the contract.
The legislature in framing this section seems to have failed in taking notice of this basic
difference between the contract laws of these two countries.

Minor as a transferee:

Under the Transfer of Property Act, 1872, Section 13, 14 and 127 deal with transfer of property
for the benefit of minor.

Section 13 and 14 deal with Rules against perpetuity and state that property can be transferred to
an unborn person via the media of a living person, i.e. first the property goes to a person living at
the time of transfer and after his death to a person who is unborn at the time of first transfer. This
unborn person should be at least conceived at the time when the first interest comes to an end
and he acquires full interest in the property on his attaining majority.
Section 127 deals with onerous gift to a minor person. An onerous gift is one which has both
burden and benefit attached to it (e.g. – a mortgaged house). In such cases the minor is given an
option on his attaining majority either to accept the gift or to reject it. If he accepts the gift, he
will be liable for the burdens attached to the gift, but if he rejects it then he cannot be made liable
for any obligations arising out of the gift. A minor has to make his election within a reasonable
time of his attaining majority.     

Minor as a trade union member:

A minor over the age of 15 years and below the age of 18 years can be a member of registered
trade union, and can enjoy all rights and privileges available to such members. 

Minor under Insolvency Act:

A minor in India cannot be declared insolvent or bankrupt, nor can his properties be attached.

Minor under various Labour laws:

Under the Factories Act, 1948; the Mines Act, 1952 and Plantation Act, 1951 a minor of 14 years
to 18 years can be employed at factory, mines and plantation as a worker.