NATURE AND EFFECT OF MINOR’S AGREEMENT

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By Neha Choudhary of 9^{^th} Semester of Gitarattan International Business School

ABSTRACT

In India, principles regarding contracts and agreements are regulated by the India Contract Act, of 1872. The legitimacy and enforceability of contracts are governed by the Indian Contract Act, of 1872. The act legally binds the parties with the promises made by them through an agreement. Agreements are an important aspect of today’s lives as they confer the rights and obligations between the parties and thus parties to the agreement must be competent. The provisions under the act specify the competency of the parties to enter into a contract. Contractual capacity refers to a party’s ability to enter into a valid contract legally. It basically explains the competency of a person to enter into a contract.

Keywords: Void, Voidable, Contractual Capacity and Competency, Legitimacy and Enforceability, Minority

INTRODUCTION

Agreements cover the major aspect of the Indian Contract Act as it legally binds the parties and confers rights and liabilities between the parties. The act also specifies the penalties for the breach of agreement and thus ensures that the parties adhere to the terms and conditions of the agreement. Agreements play a major role today as they prevent conflicts and ensure that the terms of the agreement are mutually beneficial for the contracting parties. The agreements enhance operational efficiency as it ensures that the parties are performing in compliance with the terms of the agreement and thus no deviation from the terms leads to operational efficiency.

The India Contract Act specifies certain essential features to enter into the agreement. According to Section 11 of the Indian Contract Act, 1972, “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.” The contract act explicitly mentions the person must be competent to enter into a contract otherwise the contract shall be held void

Contractual capacity or legal capacity refers to the capacity of the person to enter into the contract; it is an essential requirement to ascertain that the person is mentally competent to comprehend the terms and conditions of the contract. Contractual transactions and contracts are considered lawfully important and thus the parties involved in the act of signing up for a contract must have the capability to owe up to the responsibilities as well. Contractual obligations results in binding the parties to the agreement and compel them to respect it as breach in such commitment will lead to the defaulting party being held legally responsible and tried in court for their crimes. According to law, minors, people with unsound minds or those who have been disqualified from contracting do not possess the capacity to enter into the contract. The terms of the act are legitimately designed to safeguard the parties from abusers and any potential annoyance brought on by inexperience or a lack of knowledge.

NATURE AND EFFECT OF MINOR’S AGREEMENT

Competency of a Minor

According to the provisions of the Indian Contract Act, of 1872, minors are not competent and thus cannot enter into a lawful agreement. Minor refers to the person who hasn’t yet attained the age of majority. According to Section 3(1) of the Indian Majority Act, of 1875, the age of majority is from eighteen years onwards. From a legal standpoint, a child is seen as being unable to fully appreciate the nature and implications of a contract.

Accountability of a Minor

Minors are incapable of entering into a valid contract and thus cannot be held accountable for any contract violations since they lack the legal competence to engage in a binding contract and are void-ab-intio.

Insolvency

Minors lack the competency to contract and thus they cannot be held personally liable for their debts and dues payable as the result of which they cannot be held insolvent.

Ratification of Minor’s Agreement

The minor’s agreement is void-ab-intio which means from the beginning and thus cannot be ratified upon attaining the majority unless the law specifically allows the same. Moreover, the consideration provided to minors shall not be a valid consideration upon the majority.

Necessities to the Minor

The term “necessities” refers to items that minors essentially need. If any person provides the minor with the essentials like food, medication, clothes, etc. that person has the right to reimbursement from the minor’s assets. Moreover, expenses for minors’ education and funeral rituals may also be considered as necessities. However, if the minor does not possess any property, he is not required to make restitution for it.

Doctrine of estoppel

The notion of estoppel also falls under the jurisdiction of the minor’s agreements. This doctrine is not applicable in the case of minor’s agreement. Doctrine of estoppel forbids a person from making an allegation that is inconsistent with what he has already said. The Indian Contract Act makes it plain that a minor is incompetent to contract, hence a minor cannot be held liable under any contract, and the rule of evidence cannot be used to override Section 115 of the Indian Evidence Act, 1872, which establishes the law of estoppel.

Restoration of Benefits

Section 64 of the Indian Contract Act declares, “When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained in which he is the promisor. The party rescinding voidable contract shall, if he had received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received”. This only applies to contracts that may be voidable, and since a minor’s contract is void, thus is not applicable in the case of minor’s agreement. Additionally, Section 65 of the Indian Contract Act states that “When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it to the person from whom he received it.” This section did not apply to agreements with minors.

Minor as an Agent or a Principal

According to Section 184, a minor may be designated as an agent, but he shall not be personally responsible for his activities due to his lack of information and understanding. The principal shall still be obligated by the minor’s conduct; however he is not personally responsible in such a situation. Moreover, a principal must be competent i.e. must have attained the age of majority or must be of sound mind and minor lacks these essential and thus are ineligible to act as principal.

Minor as a Partner

Minors may not become partners in the company, but they may be allowed to the advantages of partnership by an agreement signed through their guardian. The minor shall be allowed to enjoy the benefits only when the majority of partners agree or approve, however, they may not sue the partners for the account of payment of his share of the property. Moreover, minor are also entitled to inspect the copies of company’s accounting books and has the right to determine whether he wants to join the business as a partner upon majority or not. The minor after attaining majority shall within six months publicly announce his choice of being a partner, provided, if the minor fails to announce his decision within the stipulated time; he shall become the partner after the expiry of six months. It is assumed that once a person reaches the age of majority, they become doli capax, or able to grasp the nature and consequences of their actions.

CASE LAWS

Kunwarlal Daryavsingh v. Surajmal Makhanlal And Ors.

In this case, the plaintiff sued defendants No. 1 and 2 (a father and son) in order to recoup overdue rent. The defendants argued that because defendant No. 2, a minor who had accepted the house as rent and was a defendant in the case, had the legal competence to enter into a contract, no rent could be collected. The court determined that the residence that was rented to the child so he could live there and finish his studies was a requirement, and as a result, the minor’s property may be used to pay the rent.

Mohri Bibi v. Dharmodas Ghose

In this case, a borrower and a moneylender entered into a mortgage agreement. The plaintiff was minor when he mortgaged his property to the defendant to get a loan for a sum of Rs. 20,000, however, it was later determined to be less than Rs 20,000. The defendant’s counsel was aware about the age of the minor at the time of the agreement. In this case the plaintiff requested to terminate the mortgage as the agreement was unenforceable as it was signed by the minor. The defendant died and his executors filed an appeal. The defendant claimed, among other things, that the plaintiff had misrepresented his age and that, as a result, no relief should be awarded to him. No agreement constitutes a contract, according to the court, unless the parties are competent, as specified by Section 10.

Khan Gul v. Lakha Singh

In this case, the defendant was minor and intentionally misrepresented himself as a major and consented to the sale of his property with the plaintiff. the case was file against the defendant when he refused to pay transfer the possession to the plaintiff after receiving the specific consideration. The court stated that law of estoppel will not be applied in the minor’s agreement as t would be unfair and will lead to injustice and granted relief against fraudulent minor.

Suraj Narayan v. Sukhu Ahir

In this case, the plaintiff signed a contract with the defendant while he was a minor. The suit was filed on the grounds of being void for want of consideration. The court referred the Mohiri Bibee’s case and stated that the contract by a minor is not only voidable but void and thus held that the contract in question is void for the want of consideration and cannot be enforced and ordered the plaintiff to pay costs.

Commissioner of Income Tax v. Dwarkadas Khetan and Co.

In this case, a minor person entered into the partnership firm and was described as full partner with all the rights and obligations in the documents of partnership firm. The income tax authority refused to register the firm. The court determined that a partnership agreement declaring a minor a full partner is unlawful as to all partners.

Jagar Nath Singh v. Lalta Prasad

In this case, the court stated that “the defendants deny that the plaintiffs were minors at the date of the sale and assert that the plaintiffs represented themselves to be of full age and thus induced them to purchase the property. They contend that the plaintiffs are estopped from maintaining the suit and that in any case they are bound to make restitution of the amount of consideration for the sale. The Court below found that the age of the plaintiffs was below 21 years on the date of the execution of the sale deed and that they were minors and incompetent to make the contract of sale. Following the ruling of their lordships of the Privy Council in Mohori Bibee v. Dharmodas Ghose 30 C, 539 (P.C.), the learned Subordinate Judge held the sale to be void. He, however, thought that the plaintiffs had made fraudulent misrepresentations to the purchasers as to their age and that they benefited from the sale. He accordingly made a decree for possession on condition that the plaintiffs should refund so much of the consideration for the sale as representing the value of the share decreed to them.” The court ruled that an invalid agreement cannot be upheld under the law of estoppel.

Gurusaran Lal v. Seral Kumar

In this case, the defendants alleged that the plaintiff had advanced money from the plaintiff with the promise to return with the half share in the profits in the business. The court ruled that it is valid for a guardian of a child to agree to receive a portion of the partnership’s earnings in place of interest on the minor’s money that the guardian had lent to the business.

Ajudhia Prasad v. Chandan Lal

In this case, the mortgage deed was signed by minor and intentionally misrepresented the fact of them being minor. In this ruling, the court stated that the mortgagee is not entitled to a mortgage decree or a decree for the principal money under any equitable principles and passed the decree in favor of minor.

CONCLUSION

The India Contract Act, of 1872 regulates the basic concepts of contracts and agreements and governs whether contracts are valid and enforceable. The agreement’s pledges made by the parties are rendered legally binding by the act. Agreements are a crucial feature of modern life since they establish the rights and responsibilities of the parties, making the competence of the parties to the agreement a must. The act’s provisions outline the parties’ legal capacity to sign a contract. The terms capacity to contract relate to the parties’ capability under law to enter into a valid contract. Contracts have legal significance and thus parties to a contract must be capable of upholding their end of the bargain. According to the law, persons who are under the age of 18 or are of unsound mind or have been previously barred from entering into contract lack the ability to sign contracts. The provisions of the legislation are lawfully intended to protect the parties from abusers and any potential inconvenience caused by inexperience or ignorance.

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