|2.||WHO IS A MINOR?|
|3.||CAN MINORS ENTER INTO A CONTRACT?|
|4.||CONTRACTS OF BENEFICIAL NATURE|
|5.||BENEFICIARY TO A CONTRACT|
|7.||NO ESTOPPEL AGAINST MINOR|
|8.||RATIFICATION BY A MINOR|
|9.||VOIDABLE AT THE OPTION OF A MINOR|
The capacity to contract is a crucial aspect of contract law, which refers to the ability of a person to enter into a legally binding agreement. In other words, it is the legal competence or power of an individual or entity to enter into a contract that creates enforceable rights and obligations between the parties involved.
To be bound by a contract, the parties must have the legal capacity to agree. This means that they must have the mental capacity and legal status required to form a legally binding contract. The law recognizes that certain individuals or entities may not have the necessary capacity to enter into a contract, and therefore, any agreement they make may not be legally binding.
For example, minors, individuals with mental incapacities, and individuals under the influence of drugs or alcohol may not have the legal capacity to enter into a contract. In such cases, any contract they enter into may be deemed void or unenforceable. Similarly, corporations and other legal entities must also have the capacity to contract. This means that they must have the legal authority and power to enter into a contract, as well as the necessary authorization from their board of directors or shareholders.
Overall, the capacity to contract is a fundamental element of contract law, as it ensures that contracts are entered into freely and voluntarily by parties who have the legal competence and power to be bound by them.
WHO IS A MINOR?
According to Section 3 of the Indian Majority Act, of 1875, an individual is considered to have achieved the age of majority once they turn 18 years old, with the exception of two scenarios
- If a guardian has been appointed for a minor’s person or property under the Guardians and Wards Act, of 1890, then the minor will remain a minor until they complete the age of 21 years.
- If a Court of Wards has assumed the superintendence of a minor’s property, then the minor will also remain a minor until they complete the age of 21 years, even if they have already turned 18 years old.
Under the act, minors enjoy a privileged position whereby they can bind others to contracts, but cannot themselves be held accountable for any breaches. This means that a minor cannot be held personally responsible for any wrongdoing they may commit.
CAN MINORS ENTER INTO A CONTRACT?
According to Section 11 of the Indian Contract Act, of 1872, it is explicitly prohibited for a minor to enter into a contract. This prohibition means that any contract entered into by a minor, regardless of whether the other party was aware of their age, will be considered void-ab-initio, or invalid from the outset. This means that even if a minor is just one day away from turning 18, they will still be considered a minor in the eyes of the law, and any contracts they enter into will be deemed void.
Let’s take an example to understand the legal concept of minors and contracts;
In this case, Mr D, a minor, mortgaged his house for Rs.20,000 to a moneylender, who paid him only Rs.8,000. Subsequently, Mr D filed a lawsuit to set aside the mortgage agreement.
The court held that as per Section 11 of the act, a minor is not capable of entering into a contract, and any contract entered into by a minor is void. Therefore, the mortgage agreement between Mr D and the moneylender was void-ab-initio, as Mr D was a minor at the time of the agreement. The court further held that since the contract was void, Mr D was not liable to repay the moneylender any amount of the mortgage. The court allowed Mr D’s request to set aside the mortgage agreement, and the moneylender was not entitled to claim any rights on the property mortgaged by Mr D.
It is a well-established legal principle that minors are generally unable to enter into contracts, given their lack of legal capacity. However, there are two notable exceptions to this rule;
CONTRACTS FOR NECESSARIES
These are goods and services that are necessary for the minor’s support and maintenance. In such cases, a minor can enter into a contract for necessities, and the contract will be binding on the minor to the extent that it is reasonable and necessary.
CONTRACTS OF BENEFICIAL NATURE
This type of contract is entered into for the benefit of the minor and is therefore binding on the minor. Examples of such contracts may include contracts for education or to advance the minor’s business interests. It is important to note that in both cases, the contracts must be entered into for the benefit of the minor in order to be legally enforceable. These exceptions to the general rule regarding minors and contracts serve to protect the best interests of minors and ensure that they can enter into necessary and beneficial agreements. The principle that a minor cannot enter into a legally binding contract has been firmly established in various landmark cases. One such notable case is Mahori Bibi v/s Dharmodas Ghose, where the court held that a minor’s contract is void ab initio and unenforceable, even if the minor has misrepresented their age or misled the other party into believing that they were of age. The case has been widely cited and has played a pivotal role in shaping contract law in India, reaffirming the principle that minors cannot be held liable for obligations under a contract and can seek to have the contract set aside if necessary.
BENEFICIARY TO A CONTRACT
It is recognized that a minor can serve as a promisee or beneficiary in a contract and that a contract that is advantageous to a minor can be enforced by them. Notably, there are no limitations on a minor serving as a beneficiary, such as in the role of a payee or promisee within a contract. In light of these considerations, it follows that a minor possesses the ability to purchase real property and may initiate legal action to recover possession of the property after tendering payment for its purchase.
Where a minor has received benefits under a contract, he is bound to make restitution or return the benefits received. For instance, if a minor enters into a contract to purchase a car and has paid some amount of money, the seller is required to return the money to the minor and take back the car. If a promissory note is executed in favour of a minor, they have the right to enforce it accordingly.
Furthermore, a minor who has extended a loan to someone and experiences a refusal by the borrower to repay the loan based on the voided agreement has the entitlement to reclaim the loaned funds. In a legal context, these principles are crucial for contracts in which minors are involved. It is important to note that this legal principle regarding the capacity of minors in contracts has been demonstrated in various legal cases. For instance, the case of General American Insurance Co v/s Madanlal Sonulal illustrates how a minor was able to recover insurance funds after a loss, despite the fact that the goods in question had been insured on behalf of the minor. Such cases serve to affirm the legal rights and entitlements of minors in contractual matters.
NO ESTOPPEL AGAINST MINOR
The legal principle of estoppel is intended to stop a person from arguing something or asserting a right that refutes what they formerly said or agreed to by law. However, it is important to note that this principle does not apply to minors in the context of contractual agreements. Specifically, an infant or minor is not estopped from setting up the defence of incompetence due to minority. This is because the law of contract is designed to protect minors from incurring contractual liability, given their limited legal capacity. As such, the defence of estoppel cannot be used against minors in contractual matters.
In situations where a minor misrepresents their age and induces another party to enter into a contract with them, the minor cannot be held liable for the resulting contract. Specifically, no estoppel can be asserted against a minor in such cases. This means that the minor cannot be prevented from pleading their infancy as a defence in order to avoid the contractual obligation.
This is because the law recognizes the limited legal capacity of minors and aims to protect them from the consequences of their contractual agreements. As such, a minor cannot be held responsible for a contract that they entered into while still legally considered a minor, regardless of any misrepresentation that may have occurred. Ultimately, the principle of no estoppel against a minor serves to safeguard the rights and interests of minors in contractual dealings.
According to the ruling in Vaikuntarama Pillai v. Athimoolom Chettiar (1915 Madras H.C.), “There is a clear statutory provision that minor being incompetent to contract is incapable of incurring any liability for any debt, the law of estoppel cannot overrule this provision to make him liable.” This statement emphasizes that minors are not legally responsible for debts incurred through contracts and that the doctrine of estoppel cannot be used to make a minor liable for a contractual debt. The ruling underscores the importance of protecting minors in contractual matters and ensuring that they are not unfairly subjected to legal liabilities.
RATIFICATION BY A MINOR
Ratification refers to the act of confirming or validating a contract that was entered into while the person was a minor, after they have attained the age of majority. Once a minor attains majority, he or she has the option to either affirm or disaffirm the contract. If the minor chooses to affirm or ratify the contract, then the contract becomes binding and enforceable. By doing so, the minor becomes bound by the terms of the contract and can be held liable for any breach of the contract. It is essential to note that once a contract has been ratified, the right to disaffirm the contract is lost and cannot be exercised again. Ratification can be expressed or implied, and it can be done through words or actions. For example, if a minor purchases a car and continues to use it after attaining the age of majority, then it can be considered an implied ratification of the contract.
VOIDABLE AT THE OPTION OF A MINOR
In cases where a minor enters into a contract that is not for necessaries or of a beneficial nature, the contract is considered voidable at the option of the minor. This means that the minor has the option to either ratify the contract or repudiate it. If the minor chooses to repudiate the contract, then he or she is not bound by the terms of the contract and is not liable for any breach of the contract.
This provision is based on the understanding that minors are not legally competent to enter into binding contracts. Therefore, if a minor is to be held responsible for a contract, it must be a contract that is for necessaries or of a beneficial nature, or one that has been ratified after the minor has attained the age of majority. If a minor decides to repudiate a contract, he or she must do so before attaining the age of majority. Once the minor attains the age of majority, he or she can no longer repudiate the contract. If the minor does not repudiate the contract before attaining the age of majority, then the contract will be considered valid and enforceable.
It is important to note that if the minor ratifies the contract after attaining the age of majority, then the contract becomes binding on the minor, and he or she can be held liable for any breach of the contract. Therefore, it is essential for minors to carefully consider the consequences of their actions when entering into contracts, and to seek legal advice if necessary.
It is crucial to recognize that strict rules must be applied to contracts made by minors. It is often questioned why a minor who is one day away from attaining majority and has committed a breach in the contract should get away with it. However, it is important to understand that the law exists to provide a reliable framework to protect individuals’ rights when they have been infringed. Minors are considered to lack the capacity to make informed decisions as they are not yet fully accustomed to the complexities of the real world. Therefore, it is essential to ensure that minors are provided with adequate protection until they reach the age of majority. By adhering to these strict rules, we can create a consistent legal system that protects everyone’s interests, including minors who may be vulnerable in contractual relationships.
- The Majority Act, 1875, Act No. 9 of 1875
- The Indian Contract Act, 1872, Act No. 9 of 1875
- Mahori Bibi v/s Dharmodas Ghose, UKPC 12, (1903) LR 30 IA 114 (India).
- General American Insurance Co v/s Madanlal Sonulal, (1935) 37 BOMLR 461, 158 Ind Cas 554 (India).
- Vaikuntarama Pillai v. Athimoolom Chettiar, (1914) 26 MLJ 612 (India).
This article is authored by Sohini Chakraborty, a first-year law student at RGNUL Patiala.