NATIONAL LAW INSTITUTE UNIVERSITY, BHOPAL

(Academic Session: 2020-2021)

SEMESTER: II (Mid Term)

SUBJECT: Law of Contract-I

TOPIC: Position of a minor in general contract v. In Partnership

Contract

Submitted To: Submitted By:

Ms. Padma Singh Juhi Mandhare

Asst. Professor of Law Roll No. 47

NLIU, Bhopal
 CERTIFICATE

This is to certify that the research for the project titled “Position of a minor in general contract
v. In Partnership Contract” has been undertaken by Juhi Mandhare, of Semester-II roll no.
2020BALLB47 of the National Law Institute University, Bhopal. The research is her own
work and has been carried out under the guidance of Ms. Padma Singh. All the sources used for
the research have been duly acknowledged in the footnotes and bibliography.

(2020B.A.L.L.B.47)

(Signature of the Student)

 ACKNOWLEDGMENT

I would sincerely like to acknowledge and thank the Vice Chancellor Dr V Vijaykumar, and
Dean Undergraduate Studies Dr Ghayur Alam as well as the Professor for Political Science,
Prof. Raka Arya for giving me this opportunity to work on such a project that enlightened me in
not just one but many ways and helped me understand the concept of research in detail.

I would especially like to extend my gratitude to my teacher for guiding me throughout the due
course of the project and helping me out wherever possible.

Last but not the least I would like to acknowledge the efforts of my family and friends for
helping me make this project happen.

NLIU, Bhopal

March 28th, 2021

 CHAPTER I

SYNOPSIS

 INTRODUCTION

Under the Indian Contract Act and the general rule of a contract a minor i.e. a person under the
age of 18 (India) and in cases of appointed guardians by court 21 years, or the specified limit
according to different jurisdictions in different countries, cannot be a party to the contract. This
is a compulsory rule and hence cannot be changed by any express clause within the agreement.
Under the Indian Contract Act, 1872 it is according to Section 11 that a minor is stated to be not
a competent party to enter into a contract. The contract with a minor is void ab initio.

However a minor is allowed to be a part of a partnership contract i.e. a minor can be admitted to
the benefits of the partnership through a guardian.

But the two instances are not just limited to the above mentioned. There is an array of rules and
governances to a minor’s position in a contract as well as to his position in a partnership. There
have been instances that have originated on case to case basis following which the legal
principles have been interpreted by the judiciary. Thus in this project we would further
understand the position of a minor in general contracts versus the position of a minor in a
contract of partnership and learn about how far the principle of the Indian Contract Act, 1872
has assigned in the minor’s capacity to enter into a contract.

 STATEMENT OF PROBLEM

The extent of a minor’s capacity to enter into is a contract is close to zero on a grading scale and
the contract with a minor is usually not entertained however under what principle can a minor
reap benefits of a contract as in the case of a partnership agreement.

 HYPOTHESIS

In the cases of a partnership agreement a minor is a party to a contract and hence can be held
liable for his personal acts as well as the acts of the company.
  RESEARCH OBJECTIVES

1. To understand the position of the minor as a party to a contract under the Indian Contract
Act.
2. To understand the position of the minor as a party to a contract under the partnership
Act.
3. To differentiate between general contracts and partnership contacts vis-à-vis a minor.
4. To determine under what principle is the minor allowed benefits of a contract.

 RESEARCH QUESTIONS

1. What are the constituents under which, if so, a partner can become a party to a contract
of partnership?
2. What is the extent of a minor’s liability under the quasi-contracts, firstly can the minor
be held liable?

 LITERATURE REVIEW

1. Contracts and Specific Relief by Avtar Singh (Ed. 12)

The book gives detailed explanations of the provisions of the Indian Contract Act, 1872 along
with the provisions of the Specific Relief Act, 1963 along with the case laws. It has released its
various editions with updated case laws and provides an extensive insight into the two acts as
well as additional information about each of the provision. For the project the book has been
used to gain additional information on minor’s ability to contract along with various judicial
interpretations in this context.

2. Indian Partnership Act, Pollock & Mulla

An academic writing, the book inculcates an elaborate explanation to the provisions of the
Indian Partnership Act, 1938. The book is widely used source to look upon the judicial
interpretations of the provisions and has the paragraphs from the book have also been quoted by
judges while writing judgments. For the purpose of this project the book has been used to refer
to the sections relating to a minor’s role in a partnership, its extent and limitations and has also
been used to gain interpretive reference to other provisions.
*More sources would be added to the literature review as the project progresses.

CHAPTER 2

POSITION OF MINOR UNDER THE INDIAN CONTRACT ACT

The Indian contract act, 1872 is a recognized authority the provisions of which forms the
principles of the contract and any contract’s validity is governed under the provisions of the
same. The definition of a contract under the act is given in section 2(h) 1 of the act stating that
any agreement which is enforceable by law is a contract. Section 10 2 of the act further provides a
clarification as to what agreements may be termed as contracts:

“10. What agreements are contracts.—All agreements are contracts if they are made by the
free consent of parties competent to contract, for a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void.”

Thus for a valid contract there must be free consent, parties must be competent to contract and
the consideration as well as the object of the contract must be lawful or legal. For the purpose of
the project we would be taking into account the requirement of competence to contract in light
of a minor’s capacity to contract. The definition of minor in India is accepted, as given under the
Indian Majority Act, 1875 i.e. According to section 3 of the act:

“Age of majority of persons domiciled in India. - Subject as aforesaid, [every minor of whose
person or property, or both, a guardian, other than a guardian for a suit within the meaning of
Chapter XXXI of the [Code of Civil Procedure], has been or shall be appointed or declared by
any Court of Justice before the minor has attained the age of eighteen years, and every minor of
whose property the superintendence has been or shall be assumed by any Court of Wards before
the minor has attained that age] shall, notwithstanding anything contained in the [Indian
Succession Act or in any other enactment, be deemed to have attained his majority when he shall
have completed his age of twenty-one years and not before.”

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Thus any person above the age of eighteen years is considered to be a major in the eyes of law,
however in cases where the child has been appointed a guardian by the court is an exception and
the age of attainment of majority for such persons is twenty one years.

The general position of a minor under the Indian Contract Act, 1872 has been stated in Section
11 of the Act that establishes a person under the age of majority as non-competent to enter into a
contract. This establishes that the contract cannot be legally enforced in court nor can it be
enforced once the minor attains the majority. Thus the nature of an agreement with a minor is
void.

In the case of Mohori Bibee V/S Dharmodas Ghose 3 where the respondent Dharmodas Ghose, a
minor and the sole owner of his immovable property, mortgaged the same in the name of
Brahmo Datt (who in the appeal was represented by his executors after death). The house was
mortgaged for a sum of Rs.20,000 however the actual loan amount was less than 20,000. The
attorney acting for Brahmo Datt i.e. Kedar Nath was aware of Dharmodas being a minor.

Later Dharmodas filed a suit against the Brahmo Datt stating that the agreement was signed
when he was a minor and hence it is void. The court granted the decision in favor of Dharmodas
following which an appeal was filed by Brahmo Datt, which was contended by his executors.
The Privy Council held that according to section 10 & 11 of the Indian contract act, 1872 that a
contract with a minor is void ab inito as opposed to voidable.

However the rule established in Mohori Bibee is limited to the situations where the contract is
being enforced against the minor. Thus those contracts wherein the minor is a promisee or a
beneficiary form an exception.

 CONTRACTS FOR THE BENEFIFT OF THE MINOR

A general rule is that contracts with minors are void or according to the decision in Mohori
Bibee void ab initio, however a guardian to a minor has the capacity to contract in his/her behalf
as long, the contract is for the benefit of the minor and such contracts have been held to be valid
and thus both the parties must perform their obligation under the said contract. For example in
the case of Great American Insurance v. Madan Lal 4, the minor’s mother entered into an
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insurance contract of minor’s property against fire, however when the minor approached the
company for the insurance claim, the company refused performance stating that a contract with a
minor is void. The court held that since the contract is for the benefit of the minor, the company
is liable to pay.

 A MINOR CAN ACT AS A PROMISEE

The basic reason behind declaring a contract as void is to protect the minor from any sort of
contractual liability i.e. the minor should not be burdened with the responsibility for
performance of a contract, here the incompetence is limited to minor’s non-performance.
However if a minor is a promisee i.e. the one to whom the offer was made by the other party,
and has performed his part of the agreement he may approach the court for specific performance
of the same.

 EFFECT OF A MINOR’S AGREEMENT

1. Principle of Estoppel is not applicable

Estoppel is a legal principle that prevents someone from arguing something or asserting a right
that contradicts what they previously said or agreed to by law. 5 This principle however is not
applicable in cases where a minor has misrepresented his age. The minor is allowed to absolved
from the liability as he is incompetent tot contract and it is the duty of law to protect them from
any contractual liability and hence they’re free from the doctrine of estoppel.

2. Action in contract not an action in tort

This means that an agreement with a minor which is unenforceable cannot be enforced as a
tortious liability or an action in tort. The leading in this regard is Johnson v. Pye 6, were the
plaintiff lent 300 USD to an infant who misrepresented his age. Since a person cannot sure a
minor, the plaintiff brought a suit against the infant under the tort of deceit. However the court
here held that the infant cannot be made liable for an action of contract under tort.7

3. Doctrine of Restitution
5
Will Kenton, ‘Estoppel’ (Investopedia, 28 November 2020), https://www.investopedia.com/terms/e/estoppel.asp
accessed 29th March, 2021
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In this respect the doctrine of equitable restitution is applicable under which if by representation
the minor has received any goods and benefits, he is bound to restore the same but only to the
extent of its traceability i.e. if the goods have been sold or converted then the minor could not be
compelled to pay nor can he be compelled in cases where he has received benefits in monetary
terms and not goods.
 CHAPTER III

OTHER CONTRACTS

 CONTRACTS OF APPRENTICESHIP

Contracts of Apprenticeship fall under the Indian Apprentices Act, 1950 which are made for the
benefit of a minor who is looked after by public charity like poor children and orphans, to equip
them with some skills, trades and crafts so that they may be capable to obtain employment when
they grow up.

The contract is necessitated to be made by a guardian on behalf of the minor according to

section 9 of the act. Though in India a minor is not made to pay for breach of contract as under
the pretext of section 11 of the Indian Contract Act, 1872 he cannot be made liable, in England
the position of apprenticeship is at the same level as a contract of necessaries and hence the
apprentice can claim damages for breach.

 MINOR’S POSITION UNDER QUASI-CONTRACTS

As the name suggests quasi contracts are the ones which resemble a contract but are not proper
contracts since a number of elements required for a valid contract are missing from them,
however they are recognized and enforced like any legal contracts.

A minor is also capable of a quasi-contractual relationship and this has been included under
section 68 of the Indian Contract Act, 1872 which states:

68. Claim for necessaries supplied to person incapable of contracting, or on his account.—If a
person, incapable of entering into a contract, or any one 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.8

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It has been established that a minor is deemed to be incapable of contracting thus if a person
supplies a minor with ‘necessaries’ he becomes entitled to be reimbursed for the expenses from
the property of the minor. The definition of necessaries has not been established by act but by a
judicial opinion in Chapple v. Cooper.9 The term was established to mean “those without which
an individual cannot reasonably exist.”10 This would include food, water, shelter etc. however
according to the judgment opinion as well as the provision 68 of ICA, it has been stated that
necessaries also depend upon a person’s rank, status and his needs. The opinion also stated that
“articles of mere luxury are always excluded, though luxurious articles of utility are in some
cases allowed.”11 In India the liability lies upon the minor’s estate to reimburse and this
relationship between a minor and his provider, as mentioned, is deemed to be quasi-contractual
and thus a minor has to make the payment.

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 CHAPTER IV

PARTNERSHIP CONTRACTS

The Indian Partnership Act, 1932 while defining partnership states that "Partnership" is the
relation between persons who have agreed to share the profits of a business carried on by all or
any of them acting for all.”12 Thus a partnership is a profit sharing relationship between two
persons of a business.

The Indian Partnership Act, 1932 is the governing authority of the Partnership Agreements in
India. Through the provisions of this act we would trace a minor’s position within a partnership
agreement.

 CAN A MINOR BE A PARTNER?

The Indian Partnership Act, 1932 has its own set of rules regarding the position of a minor in a
partnership agreement, however the general principles that govern a contract cannot be
overlooked in any condition, thus a minor cannot be an explicit partner in the firm but can only
be admitted to the partnership as a beneficiary under certain set of rules. This was further
clarified in CIT v. Dwarkadas & Co13, where the Supreme Court stated that:

“Section 30 of the Indian Partnership Act, clearly lays down that a minor cannot become a
partner, though, with the consent of the adult partners, he may be admitted to the benefits of
partnership. Any document which goes beyond this section cannot be regarded as valid for the
purpose of registration.”

Following this in S.C. Mandal v. Krishnadhan 14 while giving a combined reading of section 4
and 30 of the Indian Partnership Act, 1932 stated that a partnership has to exist independently

12
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i.e. for a minor to even be admitted as a beneficiary an independent contract between two or
more adults must exist, a minor cannot be the only other party in the contract.

Thus a minor can only be a beneficiary to a contract of partnership and not a partner itself. This
is based on the principle that a minor cannot be held liable before he attains majority and
according to the principles of partnership a partner can be made personally liable thus the minor
is only entitled to be a beneficiary.

 RIGHTS OF A MINOR IN PARTNERSHIP

1. The minor enjoys all rights in line with that of the adult partners in the firm.
2. Minor has the rights to the profits of the firm as well as he can access and inspect
accounts and documents related to the firm, however nothing apart from those can be
viewed.
3. The minor is not allowed to sue the partners of the firm for his share and benefits until he
serves ties with the firm.
4. A minor on attaining the age of majority is allowed to become a partner in the firm and is
supposed to give a public notice about his decision within six months, if he does not do
so he would automatically become a partner in the firm.

 LIABILITY OF A MINOR

A minor cannot be held personally liable for the acts of the firm i.e. a minor has no liability;
however his liability is limited only up to his shares in the partnership assets and profits i.e. his
personal property cannot be included in any acts of the firm.

The act also has provisions that dictate the minor’s liability on attaining majority which would
be subject to either of the two conditions i.e. when he accepts to become a partner and when he
doesn’t accept to becoming a partner.