CRITICAL ANALYSIS OF MINOR AGREEMENTS
This article discusses the Minor agreements and their validity under Indian contract act. This article is written by Ritwik Tyagi, a 2nd year law student National Law University, Nagpur.
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| minor agreements |
ABSTRACT
Minors are assets to any society and are significant to the growth and development of any nation. They have been rightly referred to as national wealth. To transform them into contributing members of society in the future, it is necessary to provide them with proper care, protection and nourishment. In such a scenario, it is quite congruously the duty of the law to safeguard the interests of minors as they are considered to be incompetent to contract in the eyes of law. It is presumed by the law that minors have insufficient capacity of mind to think of their own best interests while contracting, therefore the law has been swayed to favour them and mitigate their hardships. As India enters its rich 37-year period of demographic dividend and an economic boom is expected to propel India’s growth story, the success hinges largely upon the current crop of children.
It is essential then to examine the status of minors under the Indian law, particularly that relating to contracts. It has been the foremost priority of the lawmakers to keep the interests of minors above everything else. In this paper, the researcher has attempted to provide an overview of the legal standing of minors, primarily under the Indian law of contract. This has been done with due emphasis on two cases, Mohori Bibi v. Dharmodas Ghose and Mathai Mathai v. Joseph Mary, which have largely changed the landscape of contract laws relating to minors.
Keywords: Minor, Contract, Demographic Dividend.
INTRODUCTION
A minor, in the eyes of law, is someone who has not yet attained the age of majority as stipulated by the law in context. The age of majority is dynamic, i.e., it isn’t fixed, it is laid down by the law differently depending upon the circumstances. Take for instance, all the rights and laws relating to child labour. According to these, the minimum age for employment is fourteen years only, which means that a child attains majority for employment purposes at fourteen itself. In contrast to this is the fact that a child cannot enter into a contract – such as that of employment – until the age of eighteen. This is a highly controversial issue in a country where millions of children are engaged in child labour at hazardous places from tender ages.[1] For marriage, the legal age has been put down at eighteen for girls and twenty-one for boys by the Hindu Marriage Act, 1955.[2] In Indian Contract law, the age of majority is governed by the Indian Majority Act, 1875 – section 3 of this Act mandates the age of majority for individuals in India.[3]
Any person domiciled in India who is under the age of eighteen years, is considered as a minor. In certain specific instances, a person continues to be dealt with as a minor until he/she attains the age of twenty-one. The law provides special protection to minors in relation to them entering into contracts and agreements with others. The special protection is given to them as they are not considered legally capable to provide consent. The rationale behind this is that minors are not mature enough to think of their own interests and therefore, it is the duty of the law to safeguard their interests.
The Indian Contract Act, 1872 does not specifically deal with agreements with minors. However, as per section 11 of the Act – persons who have not attained the age of majority are not competent to contract.[4] Thus, minors are forbidden from entering into contracts. Any contract entered into by a minor is void ab initio, i.e., is void from the very beginning. Such contracts cannot be enforced, even if the other party to the contract was not aware of the minority and intended to deal fairly.[5]
The moot point here is that restricting minors from entering into contracts is actually intended to be in their interest and not against their freedom, as might be implied. It comes under the ambit of the law to ensure that no one is able to take advantage of the position of a minor.
- ANALYSIS
One of the most important cases in the realm of minor agreements is Mohori Bibi v. Dharmodas Ghose of 1903. The Privy Council’s decision gave much-needed clarity upon the issue of the voidability of minor’s agreements and their legal standing. Subsequent cases have resolved substantial questions that plagued this area of law.
The complete legal viewpoint on minor agreements under the Indian law is developed from merely three provisions, which are sections 10, 11 and 68. Section 10 states, “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.”[6]
Section 11 reads as follows, “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.”[7] As discussed above, majority here is regulated by the Indian Majority Act, and has been stipulated at eighteen years of age. If in case a guardian has been appointed, then the age of majority becomes twenty-one.
Section 68 of the Act provides “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.” This provision encounters the concept of contract for necessities. This enables a minor, or any other person incapable of entering into a contract by purview of section 11, to deal with other persons and make arrangements for necessities of life.
Prior to the decision in the Mohori Bibi case, a lot of confusion and uncertainty prevailed over aspects of contract law with regard to minors. For instance, there was no clarity on the nature of a minor’s agreement – whether the agreement was completely void or if it was voidable at the option of the minor. Two interpretations to this effect
are advanced from the proposition that a minor is not competent to contract. One, that the minor is completely incompetent to contract which suggests that the contract is completely void. The other view is that a contract with a minor is a voidable one since the minor is not liable on the contract, which means that it is voidable at the option of the minor.[8]
are advanced from the proposition that a minor is not competent to contract. One, that the minor is completely incompetent to contract which suggests that the contract is completely void. The other view is that a contract with a minor is a voidable one since the minor is not liable on the contract, which means that it is voidable at the option of the minor.[8]
A) Mohori Bibi v. Dharmodas Ghose[9]
The facts of this case are as follows: Dharmodas Ghose, a minor, mortgaged his property to the defendant Brahmo Dutt, a moneylender, for attaining a loan amount of Rs. 20,000. The fact that Ghose was a minor and incompetent to contract was known to the agent of the other party at the time of entering into the agreement and performing the transaction.
Dharmodas Ghose then brought a legal suit against Brahmo Dutt alleging that the mortgage was executed when he was a minor and legally incapable of mortgaging the property, therefore the entire transaction was void and the contract should be rescinded. The defendant’s claim was carried forward by his executors after his death. They contended that Ghose had intentionally misrepresented his age and consequently no relief should be provided to him. However, it was proved during the course of the trial that the minority of Ghose was known to the defendant’s agent. Further, they put forward that if the contract is revoked, then Dharmodas Ghose should be directed to repay the sum of Rs 10,500 that was loaned to him.[10]
The trial court ruled in the favour of Dharmodas Ghose in saying that the contract between the two parties was void and unenforceable as Ghose had not attained the age of majority as per the Indian Majority Act, 1875. In an appeal to the Calcutta High Court, the judges agreed with the trial court and dismissed the appeal. Finally, the Privy Council was approached and in 1903, the judgement was delivered which clearly laid down that any sort of contract with a minor is void ab initio. The Privy Council also stated that Dharmodas Ghose cannot be directed to return the amount of money loaned to him since a contract never existed between the two parties and any such direction would point otherwise.[11]
This was a landmark case in Indian legal history as it strictly defined that for a contract to be legally enforceable, all contracting parties must be competent to contract. It is clear from this that any person who has not attained the age of majority at the time of making of contract is not legally competent to enter into any sort of contract. If at all any minor forms a contract with another party, then that contract will be deemed void ab initio. The minor cannot be held liable for its enforcement and the rule of estoppel cannot be applied.
In the case of Ram Ashish Chaudhary v. State of Uttar Pradesh[12], by an agreement a person was appointed as a teacher. But it was found that he was a minor at the time of his appointment as a teacher. The Court held that the agreement was void ab initio due to the minority of the person, in light of the principle laid down in Mohori Bibi’s case.
An exception to the rule derived from section 11 of the Indian Contract Act, 1875 that minors are incapable of providing free consent to enter into a contract is that of ‘necessity’. In simple words, this means that a minor is allowed to enter into any contract with another party that is meant for his/her benefit and is a necessity. As the main aim of the court is to protect the interests of minors, the laws have been interpreted in such a manner as to allow for the enforcement of contracts that are beneficial to, and necessary for the minor.
For example, if in a case the minor has performed his/her part of the con
sideration and the other party refuses to reciprocate, then the other party can be compelled to perform their obligations in order to protect the minor. In most of the cases where a minor is the beneficiary to a contract, they are held to be valid and enforceable.[13]
sideration and the other party refuses to reciprocate, then the other party can be compelled to perform their obligations in order to protect the minor. In most of the cases where a minor is the beneficiary to a contract, they are held to be valid and enforceable.[13]
“Necessaries must be things which the minor actually needs therefore it is not enough that they be of a kind which a person of his condition may reasonably want for ordinary use, they will not be necessary if he is already sufficiently supplied with things of that kind, and it is immaterial whether the other party knows this or not.”[14] The English Sales of Goods, 1979 defines necessaries as goods suitable to the life and condition of the minor and to his actual requirements at the time of sale and delivery.[15]
Further, Section 68 of the Indian Contract Act states that – “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.”[16] Thus, any contract made for the procurement of essentials for the minor is perfectly valid and enforceable. It creates no personal liability for the minor and only his/her estate will be liable.
B) Mathai Mathai v. Joseph Mary[17]
The facts of this case are: The Appellant in this case pleaded that his mother had paid Rs. 7000 to his uncle, which was the amount of dowry paid to her upon marriage. For this amount, the uncle had mortgaged certain piece of land as security to his mother. It is an undisputed fact that at the time of execution of the mortgage, mother of the Appellant was just 15 years of old, i.e., a minor as per Indian Majority Act, 1875 and incompetent to contract according to Section 11 of Indian Contract Act, 1872. Both these have provisions and others related to them have already been discussed in detail above. It is to be noted however that the age and minority of the mother were never called into question and it was never made a subject of argument.[18]
Going by the appellant, his mother had been in possession of the said piece of land for over fifty years now and thus, on the back of these facts, he filed an application to be declared as a deemed tenant under Section 4A of the Kerala Land Reforms Act, 1963. According to the provisions of this Act, the Appellant was entitled to procure a purchase certificate and also, to receive statutory rights enabling him to purchase that land at pre-determined rates.
The Supreme Court rejected the case of the Appellant after considering the principles of executed contracts laid down in the celebrated case Mohori Bibi v. Dharmodas Ghose and decisions of other courts. The Court found that these represented an ‘erroneous application of the law’. They decided that the mortgage deed formed was actually void ab initio and that the Appellant cannot claim any relief.
“Many courts have held that a minor can be a mortgagee as [mortgage] is transfer of property in the interest of the minor. We feel that this is an erroneous application of the law keeping in mind the decision of the Privy Council in Mohori Bibee case. As per the Indian Contract Act, 1872 it is clearly stated that for an agreement to become a contract, the parties must be competent to contract, wherein age of majority is a condition for competency. A deed of mortgage is a contract and we cannot hold that a mortgage in the name of a minor is valid, simply because it is in the interests of the minor, unless she is represented by her natural guardian or guardian appointed by the court. The law cannot be read differently for a minor who is a mortgagor and a minor who is a mortgagee as there are rights and liabilities in respect of the immovable property would flow out of such a contract on both of them. Therefore, this Court has to hold that the mortgage deed… is void ab
initio in law and the Appellant cannot claim any rights under it.”[19]
initio in law and the Appellant cannot claim any rights under it.”[19]
The above is a passage from the Supreme Court judgement in this case, where the Court states that the law should not be interpreted differently for minors as a mortgagor and as a mortgagee. However, I find myself in disagreement with this rationale. The facts of the case suggest that the principle of executed contracts should come in place and by virtue of Section 4(a) of Kerala Land Reforms Act, 1963, the Appellant should have a claim on the said piece of land.
The judgement of Mohori Bibi that is relied upon by the Court in the above case does not suggest that minors cannot be party to contracts in any case whatsoever. Rather, clear exceptions have been laid down such as those of executed contracts, contracts for necessities of life and contracts for the benefit of the minor. In Mohori Bibi, it has also been laid down that the Court can enforce minor contracts in certain specific cases. The judgement in this case was quite surprising and many eminent legal thinkers have regarded it as a step backwards.
C) Minor in Partnership Firm
Explicitly, a minor is not allowed to become a partner in a partnership firm. However, by virtue of section 30 of the Indian Partnership Act, 1932 a minor can be admitted to the benefits of such a firm through an agreement executed by the minor’s guardian, provided that all partners of the firm furnish their consent for the same. A minor admitted to the partnership in this manner has a right to a share of the property and profits of the firm as may be agreed upon. Further, such minor may also have access to and inspect any accounts of the firm.[20]
As per section 30(3), a minor can never be held personally liable for acts of the firm, i.e., only his/her share in the property of the firm can be liable. Section 30(4) mandates that a minor may not sue the partners of the firm to which he/she has been admitted as partner for payment of his/her share, except when exiting or severing ties with the firm. When leaving the firm, the proportion of the minor’s share in the firm is calculated by a valuation conducted in accordance with the rules prescribed under section 48.
Within six months of attaining knowledge of being admitted to the benefits of the partnership firm or of attaining majority, whichever comes later, the minor must give a public notice clearly stating his/her intention either to become a partner or not to become a partner in the firm. If such a notice is not produced, then the minor will be taken to have become a partner in the firm on the expiry of six months.[21] The rights and liabilities of a minor, upon electing to become or not to become a partner in the firm, are decided in accordance with section(s) 30(7) and 30(8).
Section 30(7) states “Where such person becomes a partner – (a) his rights and liabilities as a minor continue up to the date on which he becomes a partner, but he also becomes personally liable to third parties for all acts of the firm done since he was admitted to the benefits of partnership, and (b) his share in the property and profits of the firm shall be the share to which he was entitled as a minor.”[22]
Section 30(8) provides “Where such person elects not to become a partner – (a) his rights and liabilities shall continue to be those of a minor under this section up to the date on which he gives public notice, (b) his share shall not be liable for any acts of the firm done after the date of the notice.”[23]
- CONCLUSION
The law has been so developed as to allow for the protection of minors, so that their interests can be taken care of. Minors are considered to be incompetent to contract and hence there is a need for them to be protected from the consequences of their agreements. Children constitute up to thirty-eight percent of the nation’s population and they are national assets, who need to be safeguarded as their mental faculties are not fully developed. They are innocent in their actions and it is the duty of the law to protect them from exploitation.
Therefore, a privilege has been given to minors in respect to their position on forming agreements. In Mohori Bibi, the Privy Council decided that any contract entered into with a minor is void ab initio. This was an important step in shielding minors from liability that they might possibly incur as a consequence of their agreements. It is also ensured that other parties entering into contracts and agreements with minors do not suffer any unneeded hardships on account of the agreement. However, in the Mathai Mathai case, the Supreme Court took a very different approach and overlooking several provisions, ruled that many of the decisions relying on Mohori Bibi, were erroneous applications of the law.
The position of law taken by the Privy Council in 1903 was in complete interest of minors and several principles were laid down to that effect, such as the exceptions of executed contracts and necessities that were developed for the benefit of minors. The outlook of the courts since has been to protect interests of minors.
[1] MADABHUSHI SRIDHAR, Discussion Paper on Legal Provisions Regarding Age of Child: To Protect the Rights of the Children, NALSAR University of Law, Hyderabad.
[2] Section 05(iii), The Hindu Marriage Act, 1955.
[3] Section 03, The Indian Majority Act, 1875.
[4] Section 11, The Indian Contract Act, 1872.
[5] HIMANSHU ARORA, Legal Position of Minor and Minor’s Agreements, Vol. 02, International Journal of Management and Commerce Innovations, October 2014 – March 2015, pp. 481-486.
[6] Section 10, The Indian Contract Act, 1872.
[7] Section 11, The Indian Contract Act, 1872.
[8] FREDERICK POLLOCK and DINSHAW FARDUNJI MULLA, Indian Contract and Specific Relief Acts, 4th ed. 1919, pp. 146-147.
[9] ILR (1903) 30 Cal 539 (PC).
[10] ANIL KUMAR DIXIT, Contractual Liability of a Minor in India, Vol. 03, International Journal of Advanced Educational Research, March 2018, pg. 437.
[11] Supra note 11.
[12] (2003) All. LJ.330.
[13] HIMANSHU ARORA, Legal Position of Minor and Minor’s Agreements, Vol. 02, International Journal of Management and Commerce Innovations, October 2014- March 2015, pg. 483.
[14] FREDERICK POLLOCK and DINSHAW FARDUNJI MULLA, Indian Contract and Specific Relief Acts, 4th ed. 1919.
[15] Section 03(ii), Sale of Goods Act, 1979.
[16] Section 68, The Indian Contract Act, 1872.
[17] Mathai Mathai v. Joseph Mary, (2015) 5 SCC 622.
[18] ANIRUDH WADHWA, Mathai Mathai v. Joseph Mary: A Step Backwards, Vol. 01, NLS Business Law Review, pp. 135-136.
[19] Supra note 20.
[20] Section 30(1), The Indian Partnership Act, 1932.
[21] Section 30(5), The Indian Partnership Act, 1932.
[22] Section 30(7), The Indian Partnership Act, 1932.
[23] Section 30(8), The Indian Partnership Act, 1932