Fourteen important laws regarding to minor’s agreements

The law regarding to the minor’s agreements may be summed up as under:

1. An agreement by a minor is absolutely void and inoperative as against him:

Law acts as the guardian of minors and protects their rights, because their mental faculties are not mature they don’t possess the capacity to judge what is good and what is bad for them.

Accordingly, where a minor is charged with obligations and the other contracting party seeks to enforce those obligations against minor, the agreement is deemed as void ab-initio. In the leading case of Mohori Bibi vs Dharmo Dos Ghosh a minor executed a mortgage for Rs 20,000 and received Rs 8,000 from the mortgagee.

The mortgagee filed a suit for the recovery of his mortgage money and for sale of the property in case of default. The Privy Council held that an agreement by a minor was absolutely void as against him and therefore the mortgagee could not recover the mortgage money nor could he have the minor’s property sold under his mortgage.

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No restitution except in certain cases. A minor cannot be ordered to make compensation for a benefit obtained under a void agreement, because Sections 64 and 65 of the Contract Act, which deal with restitution, apply only to con­tracts between competent parties and are not applicable to a case where there is not and could not have been any contract at all (Kanta Prasad vs Sheo Gopal Lai).

The court may, however, in certain cases, while ordering for the cancellation of an instrument, at the instance of a minor, require the minor plaintiff to make compensation to the other party to the instrument.

Thus, the Court will compel restitution by a minor when he is a plaintiff. For example, if a minor sells a house for Rs 50,000 and later on files a suit to set aside the sale on the ground of minority, he may be directed by the Court to refund the purchase money received by him before he can recover possession of the property sold (Jager Nath Singh vs Lalta Prasad?).

2. Beneficial agreements are valid contracts:

As observed earlier, the court protects the rights of minors. Accordingly, any agreement which is of some benefit to the minor and under which he is required to bear no obligation, is valid.

In other words, a minor can be a beneficiary e.g., a payee, an endorsee or a promisee under a contract (Goekda Latcharao vs Vishwanadham Bhomayya).

Thus money advanced by a minor can be recovered by him by a suit because he can take benefit under a contract.

The Hindu Minority and Guardianship Act, 1956, also provides to the same effect, namely, a natural guardian is empowered to enter into a contract on behalf of the minor and the contract would be binding and enforceable if the contract is for the benefit of the minor.

Illustrations:

(a) A promissory note executed in favour of a minor is valid and can be enforced in a court (Sharafat Alivs Noor Mohd).

(b) Where a minor had performed his part of the agreement and delivered the goods, he was held entitled to maintain a suit for the recovery of their price (Abdul Gafar vs Piare LaP).

3. No ratification on attaining the age of majority:

Ratification means the subsequent adoption and acceptance of an act or agreement. A minor’s agreement being a nullity and void ab-initio has no existence in the eye of law.

It cannot be ratified by the minor on attaining the age of majority, for, an agreement void ab-initio cannot be made valid by subsequent ratification (Mohendra vs Kailash).

Thus, if an advance is made to a minor during his minority, a promise to pay for such amount after he attains majority would not be enforceable.

“The consideration which passed -under the earlier contract cannot be implied into the contract into which the minor enters on attaining majority” (Nazir Ahmed vs Jiwan Dass).

Since ratification relates back to the date when the contract was originally made, it is necessary for a valid ratification that the person who purports to ratify must be competent to contract at the time of the contract.

4. The rule of estoppel does not apply to a minor:

In the words of Lord Halsbury: “Estoppel arises when you are precluded from denying the truth of anything, which you have represented as a fact, although it is not a fact.”

The rule of estoppel does not apply to a minor, i.e., a minor is not estopped from pleading his infancy in order to avoid a contract, even if he has entered into an agreement by falsely representing that he was of full age (Sadiq Ali Khan vs Jai Kishore).

In other words, where an infant represents fraudulently or otherwise that he is of full age and thereby induces another to enter into a contract with him, then in an action founded on the contract; the infant is not estopped from setting up infancy.

But if any thing is traceable in the hands of minor, out of the proceeds of the contract made by fraudulently representing that he was of full age, the court may direct the minor to restore that thing to the other party, on equitable considerations, for ‘minors can have no privilege to cheat man’ (Khan Gul vs Lakha Singh).

Thus, if a minor obtains a loan by fraudulent representation and purchases a motorcar out of that, although the loan transaction is invalid, the court may direct the minor to restore the motorcar to the lender.

But once the identity of the property or money has been lost because it has been spent wastefully, it is no longer possible to invoke the aid of the ‘equitable doctrine of restitution’. Again, it may be noted that restoration is allowed only when a minor commits fraud by misrepresenting his age because Section 65 expressly prohibits restoration in cases which are known to be void.

5. Minor’s liability for necessaries:

The case of necessaries supplied to a minor is governed by Section 68 of the Contract Act which provides that “if a person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.”

Illustrations:

(a) A supplies B a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.

(b) A supplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property.

Thus, Section 68 confers a quasi-contractual right on the supplier of “nec­essaries” to a person incapable of entering into a contract, or to any one whom he is legally bound to support. But a minor is not personally liable; it is his property only which is liable.

Therefore if a minor owns no property, the sup­plier will lose the price of necessaries. Even where a minor owns property, the supplier will get a reasonable price and not the price agreed to by the minor.

“What is a necessary article,” is to be determined with reference to the status and circumstances of the particular minor. Objects of mere luxury are not necessaries, nor are objects, which though of real use, are excessively costly. Food and clothing may be taken as simple examples of necessaries.

6. Specific performance:

Specific performance means the actual carrying out of the contract as agreed. Since an agreement by a minor is absolutely void, the court will never direct ‘specific performance’¹³ of such an agreement by him.

But a contract entered into, on behalf of a minor, by his guardian or by the manager of his estate, is binding on the minor and can be specifically enforced by or against the minor, provided: (a) the contract is within the authority of the guardian or manager; and (b) it is for the benefit of the minor.

Thus it was held in Gujoba Tulsiram vs Nilkanth, that a contract of sale of immovable property by the guardian of minor, for the minor benefit, may be specifically enforced by either party to the contract.

7. Minor partner:

A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Indian Partnership Act, he can be admitted to the ‘benefits of partnership’ with the consent of all the partners by an agreement executed through his lawful guardian with the other partners.

Such a minor will have a right to such share of the property or profits of the firm as may be agreed upon and he would have access to and inspect and copy any of the accounts of the firm.

The minor cannot participate in the management of the business and shall not share losses except when liability to third parties has arisen but then too upto his share in the partnership assets. He cannot be made personally liable for any obligations of the firm, although he may after attaining majority accept those obligations if he thinks fit to do so.

8. Minor agent:

A minor can be an agent (Sec. 184). He shall bind the principal by his acts done in the course of such an agency, but he cannot be held personally liable for negligence or breach of duty. Thus in appointing a minor as an agent, the principal runs a great risk.

9. Minor and insolvency:

A minor cannot be adjudicated an insolvent, for; he is incapable of contracting debts. Even for necessaries supplied to him, he is not personally liable, only his property is liable (Sec. 68).

10. Contract by minor and adult jointly:

Where & minor and an adult jointly enter into an agreement with another person, the minor has no liability but the contract as a whole can be enforced against the adult (Jamna Bai vs Vasanta Rao). In Sani Das vs Ram Chand, where there was a joint purchase by two vendees, one of whom was a minor, it was held that the vendor could enforce the contract against the major vendee.

11. Surety for a minor:

Where in a contract of guarantee an adult stands surety for a minor, the adult is liable under the contract, although the minor is not (as for there is a direct contract between the surety and the third party) (Kashiba vs Shripat).

In fact in such a case there cannot be a contract of guarantee in the true sense. The Bombay High Court considered the question in Manju Mahadeo vs Shivappa Manju, and held that”… if a minor could not default, the liability of the guarantor being secondary, does not arise at all”. Similar decision has been given by Madras High Court in Edvavan Nambiar vs Moolaki Raman²¹.

12. Position of minor’s parents:

The parents of a minor are not liable for agreements made by a minor, whether the agreement is for the purchase of necessaries or not. The parents can be held liable only when the child is contracting as an agent for the parents.

13. Minor shareholder:

A minor, being incompetent to contract, cannot be a shareholder of the company. A company can also refuse to register transfer or transmission of shares in favour of a minor unless the shares are fully paid.

It follows from it that a minor, acting through his lawful guardian, may become a shareholder of the company, in case of transfer or transmission of fully paid shares to him. Logically also, if a minor could legally hold property in his name, it would be wrong to debar him from holding fully paid up shares in his own name.

14. Minor’s liability in tort:

A ‘tort’ is a civil wrong (not having its genesis in contractual or equitable relationship) for which the ordinary remedy is damages. A minor is liable for his tort, unless the tort is in reality a breach of contract. Thus, where a minor hired a horse for riding and injured it by over­riding, he was not held liable (Jennings vs Rundall).