Short essay on Minor’s Agreements

The law regarding 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 Das 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.

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 for the cancellation of an instrument, require the minor plaintiff to make compensation to the other party to the instrument. This is as per Section 33 of the Specific Relief Act, 1963, which states as follows:

“On adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted, to restore, so far as may be any benefit which he may have received from the party and to make any compensation to him which justice may require.”

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).

It may be emphasized that Section 33 of the Specific Relief Act, 1963, is framed so as to afford relief in only a case where the minor himself as plaintiff seeks the assistance of Court and the Section is inapplicable as he happens to be merely a defendant in a suit by the person who dealt with him when he was a minor. This Section is based on the well known principle that “he who seeks equity must do equity.”

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 promise 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 duly executed transfer by way of sale or mortgage in favour of a minor, who has paid the whole of the consideration money, is enforceable by him or by any other person on his behalf (Raghava Chariar vs. Srinivasa).

(b) Where a minor purchaser of immovable property was, subsequent to his purchase, disposed by a third party, it was held that the minor could recover from his vendor the sum which he has paid as purchase money (Walidad Khan vs. Janak Singh).

(c) A minor purchaser of immovable property was held entitled to recover possession of property purchased from his vendor, when refused by vendor (Collector of Meerut vs Hardian).

(d) A promissory note executed in favour of a minor is valid and can be enforced in a court (Sharaft Ali vs. Noor Mohd.)

(e) 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 Lai).

Contracts of apprenticeship and service by a minor :

A contract of apprenticeship stands on a different footing than an agreement of service by a minor. A contract of apprenticeship is valid and binding upon a minor because such a contract is protected by the Apprentices Act, 1961, provided the case falls within the terms of that Act. The Act, inter alia, provides that the minor must not be less than fourteen years of age and the contract must be entered into on behalf of the minor by his guardian.

The Act was passed with a view to enabling children to learn trades, crafts and employments, by which, when they come to full age, they may gain a livelihood. So far as an agreement of service by a minor is concerned, it is void because a minor’s promise to serve would supply no consideration for the promise of the defendant to pay him/her a salary (Raj Rani vs Prem Adib).

In that case the court said that the contract of apprenticeship entered into by the guardian is protected by the Apprentices Act, provided the case falls within the terms of that Act, but no such exception is made in the case of contracts of service… Of course, where a minor has already served under a contract of service, he is entitled to enforce the contract not virtue of the contract of service, (i.e., by reason of a quasi-contract) under Section 70 of the Contract Act.

3. No ratification on attaining the age of majority:

Ratification means the subsequent adoption and acceptance of an actor 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 v.v Kailash).

“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). In Arumugam Chetti vs Duraisinga Tevar, it was held that there can be no ratification of a transaction which is void owing to the promisor possessing no contractual capacity at the time nor can a void deed from a good consideration for a fresh contract made by the minor on attaining majority.

Similarly, in Suraj Narain vs Sukhu Ahir, where a minor borrowed a sum of money by executing a promissory note, and after attaining majority, executed a second bond in respect of the original loan, the court majority executed a second bond in respect of the original loan, the court held that a suit upon the second bond was not maintainable as that bond was without consideration.

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.

But if services are rendered or an advance is made to a minor during his minority and the services are continued or a further advance is made after he attains majority a promise to pay for such services or amount as a whole would be valid and enforceable (Sindha vs Abraham).

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

Section 115 of the Indian Evidence Act explains “Estoppel” as follows: “Where one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, neither he nor his representatives shall be allowed, in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.” 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, 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 anything 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 men’ (Khan Gul vs. Lakha Singh). Whenever the infant is still in possession of any property in specie which he has obtained by his fraud, he will be made to restore it to its former owner.

But I think that it is incorrect to say that he can be made to repay money which he has spent, merely because he received it under a contract induced,by his fraud” (Lawrence J., in Leslie vs Sheill). Similarly, the infant will be made to restore to the person deceived, any property purchased out of, or money received as a result of, sale proceeds of the goods obtained by his fraud (Stocks vs Wilson).

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.

The necessaries would also include the infant’s lodging expense, medical attendance, and cost of defending a minor in civil and criminal proceedings. Loans taken by a minor to obtain necessaries also bind him. But where a minor is engaged in trade, contracts entered into by him for trading purposes are not for necessaries and are not binding on him.

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’ 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’s benefit, may be specifically enforced by either party to the contract. Similarly, in Ramalingam vs. Babanambal, it was held that a Hindu minoi is bound by a contract entered into by his mother as his guardian for sale of his property. However, a guardian has no power to bind the minor: (i) by a contract, for the purchase of immovable property (Mir Sarwarjan vs. Fakruddin), and (ii) by a contract of service on his behalf (Raj Rani vs. Prem Adib), and therefore such contracts cannot be specifically enforced by or against the minor.

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 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 supplies to him, he is not personally liable, only his property is liable (Sec. 68).

10. Contract by minor and adult jointly:

Where a 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 Sain 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).

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 over-riding, he was not held liable (Jennings vs. Rundall). The court observed in that case, “if an infant in the course of doing what he is entitled to do under the contract is guilty of negligence, he cannot be made liable in tort if he is not liable on the contract.” But if the wrongful action is of a kind not contemplated by the contract, the minor may be held liable for tort.

Thus, where a minor hired a horse for riding under express instructions not to jump, he was held liable when he lent the horse to one of his friends who jumped it, whereby it was injured and ultimately died. The court observed, “… it was a bare trespass, not within the object and purpose of the hiring, for which the defendant was liable”. (Burnard vs. Haggis).