NATURE AND SCOPE OF MINORS AGREEMENT

WHAT IS A CONTRACT?

An agreement between two private parties which creates legal obligations for each other. A contract can be either written or oral. Oral contracts are more difficult to execute, however, and should be avoided whenever possible.
First and foremost, an offer is made by one party to another, which leads to the agreement upon acceptance by the party to which it is made.
If the agreement is enforceable in a court of law, it is referred to as a contract.
The Indian Contract Act, 1872, describes the term “Contract” as “An agreement enforceable by statute” under section 2(h).

ESSENTIALS OF CONTRACT

Section 10 of the act addresses which agreements are contracts. This says that all agreements are contracts if they include-:
1. By the free consent of the parties (i.e. their freewill) liable for contracting,
2. For lawful consideration and
3. For a lawful object, and
4. Are not expressly declared void
The section also mentions that nothing mentioned herein affects any law that is in effect in India and is not specifically repealed hereby requiring any contract to be signed in writing or in the presence of witnesses, or any law concerning the registration of records.

The agreement of a minor is a collection of commitments or a contractual arrangement that has one party as a minor. Under the Indian Contract Act , 1872, Minor is considered unfit to contract. It is so because minors are not mature enough to be responsible for legal matters.

Accordingly, one of the essential elements of a valid contract specified in the Indian Contract Act, 1872, is that the contracting parties should be competent to conclude the contract.

The following contracting authorities are qualified to:
1. Persons that are of a majority age
2. A person with a sound mind
3. Person not disqualified from any legislation

A minor is therefore not eligible to enter into an agreement with another party and any agreement he makes would be void ab initio (from the beginning).

WHAT IS A MINOR?

A person below majority age is a minor. A person reaches majority age when he turns 18 under normal conditions. However, when a child is cared for by a guardian appointed by the Court, the age of majority is 21. For example, the children brought up in orphanages have 21 as their majority age.
This case gives rise to a landmark judgment concerning the effect of the agreement of the minor and resolved the question of whether the agreement of the minor is void or voidable. In this case, when he was a minor, the plaintiff (Dharmodas Ghose) mortgaged his property to a money-lender, the defendant (Brahmo Dutt) to secure an Rs. 10,500 loan.
However, at that time, the money lender ‘s attorney knew about his minority’s reality. Money-lender was subsequently sued by the minor for asking that the loan be repaid. At the time of Appeal, Brahmo Dutt had died, and his executors were thus charged.

THE DEFENDANT SAID:-

1. Law of estoppels should be enforced against a minor because he fraudulently represented his age, and by taking a dual position, he can not deny his previous representation.
2. If the mortgage is canceled, the loan amount under Sections 64 and 65 of the Indian Contract Act, 1872 should be paid back to him by the minor.

The Privy Council dismissed the defendant’s allegation and held that:

1. Minor ‘s agreement was held to be void ab initio and it was not possible to have the plaintiff reimburse the defendant back. Minor was permitted to bargain for his minority and thus the deal was made void. In this case, the law of estoppels, as stated in Section 115, Indian Evidence Act, was not applicable as an attorney had the knowledge of the true facts and was not misleading.

2. Section 64 states that if a contract is voidable at a party’s discretion, cancels it, the other party does not have to fulfill the agreement and the rescinding party must return to other parties the benefits received by him under the contract. The Privy Council held that, in the event, this provision should not be applicable because it concerns voidable contracts and not void contracts.

3. In addition, the section applies to responsible parties and not to incompetent contracting parties as in the case at issue. Section 65, which says benefits accrued through a void agreement should be restored to the other party if any. In the present case, too, the Council rejected the applicability of this section and held that the minor could not be asked to pay back the amount of the loan.

4. The defendant argued that the loan money was refunded only under Section 41, Specific Relief Act, 1877, which allows the party to whom relief is given to render some payout to others on the adjudication of the cancelation of an instrument. The Privy held that because attorney knowledge of infancy was recognized, it was not necessary to refund the money advanced to the child. Hence, an agreement made with a minor is void ab initio

MINOR AS BENEFICIARY OR PROMISE

Minor may become a beneficiary or a pledge provided it gives the minor some benefit. Insurance, wills, for example, are valid contracts. Nothing in the Contract Act prevents the other party from becoming bound to the minor. Thus, a promissory note executed in favor of a minor is not invalid and may be sued by him because he thought that he was incapable of contracting can also receive it again.

RATIFICATION OF MINOR’S AGREEMENT

Ratification means acknowledging the actions that were committed beforehand. It can be done only for acts that were valid at the time of contract formation. A minor can not ratify a minority agreement until it reaches majority age. That is because the agreement is invalid from the start, that is, from the start and can not subsequently be ratified. A new consensus on reaching a majority must be achieved.
A void contract is a dead letter that can not come alive and can not be treated as true. A famous case in this regard is Suraj Narain v Sukhu Aheer. In this case, when he was a minor, a person borrowed money and then made a fresh pledge after obtaining the majority to pay back the sum along with interests.

The question to be answered was whether the consideration obtained during minority would constitute a successful consideration after majority attainment. The Allahabad High Court held that, after reaching the age of majority, consideration received by a person during a minority can not be a valid consideration and can not be eligible for a fresh pledge. The Promiser has been held not to be liable for such a promise that constitutes a void agreement.

RATIFICATION ON MINOR’S BEHALF

Section 183 of the Indian Contract Act, 1872 states that an agent may be employed by any person who is of sound mind and a major. Therefore, an agreement of a minor being void ab-initio, a minor can not employ an agent to work for him. Since once the acts have been ratified, it is important to ensure that the act can be legally authorized because of the validity of a previously ratified act.

NO ESTOPPEL AGAINST MINOR

When one person has deliberately caused or allowed another person to believe by his act that something is true, he or his representatives will not be allowed to deny that very fact in the future. This defines Estoppel ‘s law. However, minors are an exception to this rule and they can plead with a minority, even though they misrepresented their age at the time of making agreement.
The Madras High Court held in Vainkuntarama Pillai v Authimoolam Chettiar that a minor being unable to contract can not be held liable and that the law of estoppels can not override this provision.

NO RESTITUTION

When a contract is void, any person receiving any benefit under the contract must restore the same to the other party or render due compensation. They are excluded from the other party’s repayment of benefits.

NECESSITIES SUPPLIED TO MINOR

Minor is liable to pay out of his property for the other’s necessaries given to him. “Necessary” means goods necessary to a person’s life and to his specific requirements which are sold to him. For example, a house given to a minor on rent for his studies may be recovered from the property of a minor in necessity and rent.

 

FOOTNOTES

1. Mohori Bibee v. Dharmodas Ghosh (1903) 30 Cal. 539
2. Vaikuntarama Pillai Minor vs Athimoolam Chettiar (1914) 26 MLJ 612
3. Suraj Narain Dube vs Sukhu Aheer And Anr. AIR 1928 All 440

 

 

 

 

 

Author: Lavanya Rai,
ICFAI LAW SCHOOL, IFHE, HYDERABAD