Contracts with the minor

Capacity to contract : 

Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT 1 Capacity to contract Contracts with the minor

Who are competent to contract : 

2 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Who are competent to contract Sec 11 of the Indian contract Act 1872. Who are competent to contract – 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.

Cont… : 

3 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… Thus, the section declares the following persons are not competent to contract minors, persons of unsound mind persons disqualified by law to which they are subject. Age of majority: The age of majority is generally eighteen years.

Cont.. : 

4 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont.. Sec. 3 of the Indian Majority Act, 1875 provides as follows: “Every person domiciled in India shall be deemed to have attained his majority when he shall have completed his age of eighteen years, and not before.

Cont… : 

5 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… Sec 10 requires that the parties to a contract must be competent and sec 11 declares that a minor is not competent but neither section makes it clear whether, whether if a minor enters into an agreement, it would be voidable at the option or altogether void. What agreements are contracts – Sec 10- 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. Nothing herein contained shall affect any law in force in [India] and not hereby expressly repealed by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.

Cont… : 

6 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… Sec 10 and Sec 11 had, therefore, quite naturally given rise to a controversy about the nature of minor’s agreement. The controversy was only resolved in 1903 by the judicial committee of the Privy Council in their well-known pronouncement in Mohoribibi v Dharmodas Ghose.

Mohoribibi v Dharmodas Ghose (1903) Privy Council : 

7 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Mohoribibi v Dharmodas Ghose (1903) Privy Council The plaintiff, a minor mortgaged his houses in favour of the defendant a money lender, to secure a loan of Rs. 20,000/-. A part of this amount was actually advanced to him. While considering the proposed advance, the attorney, who was acting for the money-lender, received information that the plaintiff was still a minor. Subsequently the infant commenced this action stating that he was under age when he executed the mortgage and the same should, therefore, be cancelled. The relief of cancellation had to be granted as the plaintiff was entitled to it. .( Under sec 39 of the original Specific relief Act 1877 courts were authorised to order cancellation of void contracts. Now Sec. 31 of the Act of 1963).

Slide 8: 

8 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT The money lenders only request was that the relief should be made subject to the condition of the minor’s repaying him the sum of Rs. 10,500/- advanced as a part of the consideration for the mortgage. Sec. 64 and sec 65 of the Indian contract act 1872 and Sec 41 of the Specific Relief Act 1877 [ S. 33 of 1963] were in question. Arguments: Judgment:

Developments after Mohribibi case : 

9 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Developments after Mohribibi case In its subsequent pronouncement in Subramanyam v Subba Rao AIR 1948 PC 25. the Privy council overruled earlier decisions and entertained no doubt that it was within the powers of the mother of a minor as a guardian to enter into a contract of sale for the purpose of discharging his fathers debts. Following this decision the Orissa HC in the case of Durga Thakurani v Chintamani, AIR 1982,158, held that

Cont… : 

10 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… endowment of property for religious purposes by guardians on behalf of minors, being within their competence of was specifically enforceable. The other High Courts have also expressed the view that the doctrine of mutuality should not have been imported into the matter where the contract was within the competence of the guardian and that there is no scope for this doctrine under sec. 20 of the Specific Relief Act 1963.

Slide 11: 

11 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT In today's society it does not seem to be possible, much less desirable for law to adhere to the categorical declaration that a minors agreement is always “ absolutely void”. Minors are appearing in public life today more frequently than even before.

Cont.. : 

12 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont.. The Privy council had therefore to modify its earlier decisions. This trend is evidenced by the decision of their Lordships in Srikakulam Subramanyam v Kurra Subba Rao (1949) 75. Lord Morton held that Sec. 11 of the Indian Contarct Act 1872 and the Mohribibi case leave no doubt that a minor can not contract and that if the guardian and the mother had taken no part in this transaction it would have been void. The contract being for the benefit of the minor and within the power of the guardian was held to be binding upon him.

Effects of minor’s agreement : 

13 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Effects of minor’s agreement No Estoppel against minor No liability in Contract or in Tort arising out of Contract: If the tort is directly connected with the contract and is the means of effecting it and is a parcel of the same transaction, the minor is not liable in tort. Doctrine of Restitution: If an infant 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. This is known as equitable doctrine of possession.

Cont… : 

14 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… Again the doctrine of restitution is not applied where the infant has obtained cash instead of goods. The well known authority is Leslie (R) Ltd. V Sheill (1914) 3 K.B An infant succeeded in deceiving some money-lenders by telling them a lie about his age, and so got them to lend him 400 pound on the faith of his being an adult. Their attempt to recover the amount of principal and interest as damages for fraud failed. The attempt also failed under quasi-contract and doctrine of restitution. Rejecting the contention, lord Sumner said: I think this would be nothing but enforcing a void contract.

Beneficial Contracts : 

15 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Beneficial Contracts A minor is allowed to enforce a contract which is of some benefit to him and under which he is required to bear no obligation The person on whose behalf certain goods were insured was a minor court allowed the minor to recover the money. Contract of marriage: contract of marriage could be enforced against the other contracting party at the instance of the minor it can not be enforced against the minor Contract of apprenticeship: The Indian Apprentices Act 1850 provides for contracts in the nature of contracts of service which are binding on minors.

Trade Contracts not included in Beneficial Contracts : 

16 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Trade Contracts not included in Beneficial Contracts In a general sense contracts which can be brought within certain categories and are also for the benefit of the infant can be supported. A trading contract does not come within any of these categories. The only contracts of an infant which can be enforced are which relate to the infant’s person, as contracts by which he provides himself with clothes, food, or lodging or contracts of marriage, apprenticeship and service.

Option to retire from beneficial contracts on majority : 

17 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Option to retire from beneficial contracts on majority A minor will have the option of retiring from a contract of beneficial nature on attaining majority provided that he exercises the option within a reasonable time. Where a minor in pursuance of a marriage settled his after acquired property and after attaining majority he received large sum of money under the will of his father which came under the settlement, and , therefore, he attempted to repudiate the settlement, The House of Lords held that the repudiation coming after 5 years after attaining majority was too late

Ratification : 

18 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Ratification A person can not on attaining majority ratify an agreement made by him during his minority Ratification relates back to the date of the making of the contract and, therefore, a contract which was then void can not be made valid by subsequent ratification It would be contradictory in terms to say that a void contract can be ratified. It is necessary, a fresh contract should be made on attaining majority

English Law : 

19 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT English Law It is a presumption at law that every person is entitled to enter into a contract unless an exception applies. One of those excpetions is for minors. The age of contractual capacity for individuals is the age of 21 at common law, however this was reduced to the age of 18 in 1969 by Act of Parliament. Reaching the age of 18 is known as attaining 'majority'. Minors are those who have not attained the age of 18.

Cont…. : 

20 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont…. Minors are permitted to enter into contracts for limited purposes, and the test is one that focuses on the nature of the transaction, and whether the minor is of an age such that they capable of understanding it.

Cont… : 

21 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… The general law states that contracts entered into by children that are for 'necessaries' are binding on children, as are those for apprenticeship, employment, education and service where they are rightly said to be for the benefit of the child.

Cont… : 

22 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Cont… Contracts for necessaries are for the supply of food, medicines, accommodation, clothing, amongst other things but generally excludes conveniences, and products and services for comfort or pleasure. Commercial or 'trading' contracts are excluded. These latter contracts are voidable at the option of the minor, and whether the minor may avoid the contract depends on the nature of the contract.

Slide 23: 

23 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Contracts where the minor may avoid the affect of the contract are for the acquisition of a legal or equitable interest in property of a permanent nature, such as shares, land, marriage and partnerships. Other contracts require positive ratification in order to be enforceable, which includes contracts for debts and the sale of goods that are not for necessaries. The ratification must take the form of an acknowledgement that the debt is binding after attaining the age of 18. Fresh consideration is not required for the ratification to be complete. Restraints of trade may be unenforceable against a minor, even if they would be enforceable against an adult.

Slide 24: 

24 Thursday, October 15, 2009 Dr. Tabrez Ahmad, KLS, KIIT Thanks