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Contract with Minor - Void or Voidable or Illegal?

Law Assumes that minor needs to be protected as a consequence it makes provisions to protect their interest. The Indian contract act is no different.

Indian Contract Act, Section 10 Provides that “all agreements are contracts if they are made by the free consent of the parties competent to contract’

Thus, it requires that the parties must be competent to contract competency to contract is defined in Section 11. It declares that “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”.

Thus following person are incompetent to contract.

(1) Minors

(2) Persons of unsound mind

(3) Persons disqualified by any law to which they are subject.

Minor’s Agreement

According to Section 3 of the Indian Majority Act, 1875, a minor is a person

who has not completed 18 years of his age, except

  1. when a guardian of a minor’s person or property is appointed by the court or

  2. when a minor’s property has passed under the superintendence of the Court of wards.

In these two exceptional cases a person becomes major after the completion of 21 years of age.

However, by an amendment in 1999 to the Indian Majority Act, 1875 the age of majority is fixed as 18 years for every person (irrespective of the fact of appointment of guardian)

Neither Section 10 nor Section 11 makes it clear whether if a minor enters into an agreement, it would be voidable at his option or altogether void. However, after the decision in Mohoribibi case, it is now well settled that a minor’s agreement is absolutely void.

In Mohori Bibee v. Dharmodas Ghose (1903) the minor appeared as a plaintiff for cancellation of the mortgage of his house which he had entered ,into as a minor and had obtained some money.

They defendant’s plea for return of this money was not entertained by the Court because it appeared from the facts of the case that he was aware that he was dealing with a minor.

A landmark case on the relief available against a fraudulent minor is the decision of the High Court of Lahore in Khan Gul v. Lakha Singh, AIR 1928, where a minor by Fraudulently concealing his age, contracted to sell a plot of land to the plaintiff. He received the consideration of Rs. 17,500 and then refused to perform his part of the bargain. In the interest of Justice, the principle of restitution of cover cases of money also.

Effect’s of Minor’s Agreement

A minor’s agreement being void, ordinarily it should be wholly devoid of all effects (except where the contract is for the benefit of minor), As there is no contract, all the effects of a minor’s agreement must be worked out independently of any contract.

(1) No Estoppel against Minor: When a minor misrepresents at the time of the contract that he is a major, the question arises-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? It is well settled that there is no such estoppel against the minor even if he has acted Fraudulently. There can be no estoppel against a statute.

In Khan Gul v. Lakha Singh’, held that the law of estoppel, which is the rule of evidence, is a General law and this has to be read subject to the special law contained in the Indian Contract Act.

(2) No Liability in Contract or in Tort Arising Out of Contract: The minor will not be liable for a tort arising out of contract, for the reason that such liability is an indirect way of enforcing his agreement. But where the tort is independent of the contract that mere fact that a contract is also involved, will not absolve the minor from liability.

Thus where an infant borrowed a mare for riding only, he was held liable when he lent her to one of his friends who jumped & killed her [Burnard v. Haggis]. Here the defendant was liable on the ground that the act resulting in injury to the mare was quite outside the contract.

(3) Doctrine of Restitution: The proposition that “the lack of capacity goes to the root of the contract & invalidates it completely” is subject to the equitable doctrine of restitution and the beneficial contracts in the case of a minor.

English Law: If the minor has unjustly enriched himself, equity demand that such property or goods be restored. The English Courts developed the equitable ‘doctrine of Restitution’ to deal with the matter.

In Leslie Ltd. v. Shill, 1914 the Court laid down following propositions:

(i) If the 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.

(ii) 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 contract.

(iii) Doctrine of restitution is not applied where the minor has obtained cash instead of goods, for Restitution stops where repayment begins.

The above rules are confined to cases where the minor is the defendant Where the minor appears as a plaintiff before the Court, the Court may grant the relief subject to the condition that he shall restore all benefits obtained by him under the contract, or make suitable compensation to the other party.

The English doctrine of restitution is contained in the Indian Law, though some modifications.

(a) Khan Gul v. Lakha Singh (AIR 1928). In this case, the Court observed that the doctrine of restitution would not be of any help unless it was extended in India to cover money cases also.

(b) Section 33, the Specific Relief Act, 1963 clears the position. The law Commission of India (9th Report) preferred the view enunciated in Khan Gul case and accordingly the controversy has now been set at rest by the new Specific Relief Act, 1963.

The principle of Restitution is contained in Section 33 of the new Act:

(1) Where a void or voidable contract has been cancelled at the instance of a party thereto (i.e., minor goes to the court as plaintiff for cancellation of contract), the Court may require him to restore such benefits as he has received under the contract and to make any compensation to the other party which justice may require.

(2) Where the minor is 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 benefits to the other party, to the extent he or his estate has benefited thereby (Clause b).

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