NATURE AND CONSEQUENCE OF A CONTRACT WTIH A MINOR

WHO HAS MISREPRESENTED HIS AGE

Project submitted to:

Mr. Vishal Dixit

Project submitted by:

Deepanshu Bansod
Batch 2012

Hidayatullah National Law University

Raipur, Chhattisgarh

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 INDEX
1. Acknowledgement … ………………………………………3
2. Research methodology & objective………………………..4
3. Chapter I ..............................................................................5
4. Chapter II ...……...………………………………………..6
5. Chapter III............……………………………………….....12
6. Chapter IV………………………………………………....13
7. Chapter V..............................................................................15
8. References ………………………………………… ……..16

ACKNOWLEDGEMENT
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The successful completion of task would be incomplete, without the mention of people who
made it possible and whose constant guidance and encouragement crowned my effort with
success. I would like to thank my course teacher Mr. Vishal Dixit for providing me the topic.
Secondly, I would like to thank our Vice Chancellor for providing the best possible facilities of
I.T and library in the university. I would also like to extend my warm and sincere thanks to all
my colleagues, who contributed in numerable ways in the accomplishment of this project.
Deepanshu Bansod
Batch 2012

Chapter I : Introduction

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Practically every personal business activity involves a contract; the purchase of a color TV , the
renting of an apartment , buying a property. In each transaction relating to the acquisition of raw
materials, their manufacture, and the distribution of the finished product by business, there are
contracts that define the relationships and the rights and obligations of the parties. As pervasive
as contracts are in our lives, the legal language of contracts is not very familiar to most of us. For
that reason this article is devoted primarily to the terminology or vocabulary that is needed to
work with contract law.

A contract is a binding agreement. By one definition a contract is "a promise or a set of promises
for the breach of which the law gives a remedy, or the performance of which the law in some
way recognizes as a duty; Contracts arise out of agreements; hence a contract may be defined as
an agreement creating an obligation. The substance of the definition of a contract is that by
mutual agreement or assent the parties create enforceable duties or obligations that are legally
binding. That is each party is obligated to do or to refrain from doing certain acts. The substance
of the definition of a contract is that by mutual agreement or assent the parties create enforceable
duties or obligations that are legally binding.

In some cases, the party with whom the contract has been made could be a minor(less than 18
years) on behalf of whom the guardian becomes the party to the agreement. This project is to
find out the nature and consequences if a minor comes in contract with a person by
misrepresentation of his age.

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RESEARCH METHODOLOGY & OBJECTIVE OF THE PROJECT
This research paper is descriptive and analytical approach. It is largely based on secondary and
electronic sources. Books and other reference are primarily helpful for the completion of this
project. Footnotes have been provided wherever needed, either to acknowledge the source.
The main objective of this project is to understand the status of a minor in a contract and its
nature and consequence if the minor misrepresents his age.

Chapter II
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WHO IS A MINOR

According to Section 3 of the Indian Majority Act, 1875, a minor is one who has not
completed his 18th year of age. So a person becomes a major after the completion of 18 years of
life. To this rule there are two exceptions:

(i)When a guardian of the minor’s person or property is appointed by a court of law;

(ii)When a minor’s property is taken over by the court of wards for management.1

In either of these two cases minority continues up to the completion of the 21st year.

In India Section 11 of the Indian Contract Act, 1872 expressly provides that the age of
majority of a person is to be determined according to the law to which he is subject. The Courts
of Law used to decide the competency of contract by the law of domicile and not by the law of
the place where the contract is entered into.2

But the later trend of law for determining the age of majority is a)In the case of contracts
relating to ordinary mercantile transactions, the age of majority is to be determined by the law of
the place where the contract is made;(b)In the case of contracts relating to land, the age of
majority is to be determined by the law of the place where the land is situated.

1
www.theindianlawyer.in/statutesnbareacts/acts/i27.html
2
www.advocatekhoj.com/.../bareacts/indiancontract/index.php?...Indian%20Contract%...

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Chapter III

Nature, Consequences and Laws if contract is made with a minor

1. A contract by a minor is absolutely void: A contract by a minor is absolutely void and

inoperative. Further where a minor is charged with obligations and the other contracting
party seeks to enforce those obligations against minor, the contract is deemed as void ab
initio. A minor’s contract being absolutely void, neither he nor the other party acquires
any rights or incurs any liability under the contract. So a minor is neither liable to
perform what he has promised to do under a contract, nor is he liable to repay money that
he has received under it. The principle behind this ruling is, a minor is incapable of
judging what is good for him. A minor, however, can derive benefits under the Act. That
means, a minor can be a beneficiary i.e. a payee, an endorsee or a promise under the Act.

2. A minor cannot be compelled to compensate for or refundany benefit which he has

received under a void contract: Section 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. It has also been
observed in many cases that the court may, on adjudging the cancellation of an
instrument at the instance of a minor, require the minor to make compensation to the
other party to the instrument

3. A minor cannot ratify an agreement on attaining majority: Ratification means

consenting to a past contract entered into during minority at a future date on attaining
majority. A minor’s contract being nullity and void ab initio has no existence in the eye
of law. Therefore, a minor on attaining majority cannot ratify a contract entered into
while he was a minor. The reason is that a void contract cannot be validated by any
subsequent action and a minor’s contract is void ab initio.

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4. Minor’s liability for necessaries supplied to him or to anyone whom the minor is
bound to support: The case of necessaries supplied to a minor is covered by Section 68
of the Contract Act which provides as follows-‘If a person incapable of entering into a
contract, or anyone 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 property of such incapable person.’ The
minor’s property is liable for the payment of a reasonable price and not the price for
necessaries supplied to the minor or to anyone whom the minor is bound to support. What
is a necessary article is to be determined from the status and the social position of the
minor.

5. The Rule of Estoppel does not apply to a minor: Section 115of the Indian Evidence
Act explains that-‘The principle of estoppel is a rule of evidence. When a man has, by
words spoken or written or by conduct, induced another to believe that a certain state of
things exists, he will not be allowed to deny the existence of that state of things.’ Lord
Halsbury has written that-‘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.’ In India it has
been held that the court can direct the minor to pay compensation to the other party in
cases where an infant obtains a loan by falsely representing his age he cannot be made to
pay the amount of the loan as damages for fraud, nor can be compelled in equity to repay
the money.

6. Specific Performance Order by Court will never be issued to a minor: As we are

aware that an agreement by as minor is absolutely void, the court will never direct
specific performance of such a contract by a minor. But a contract entered into, on behalf
of a minor, by his guardian or by the manager of his estate will be binding on the minor
and can be specifically enforced by or against the minor provide-

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 (i)The contract is within the authority of the guardian or manager;

(ii)It is for the benefit of the minor.

7. Minor as a Partner: Law says that -‘A minor being incompetent to enter into contract
cannot be a partner in a partnership firm; but under Section 30 of the Indian Partnership
Act 1932, 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 partner will have a right to receive share of the property or profits of the firm and
can have an access to and inspect the books of account of the firm. The minor cannot
participate in the management of the business and can bear losses of the firm only up to
the extent of the capital contribution in the firm. 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 as an Agent: A minor can be appointed as an agent (Sec184). He can draw, make,
indorse and deliver negotiable instruments so as to bind all parties except himself. In
other words, it can be said that a minor can bind the principal by his acts done in the
course of the agency, but he cannot be held personally liable for negligence or breach of
duty.

9. Minor and the insolvency: A minor cannot be adjudicated as insolvent as he is

incapable of entering into contracting debts. Even for the necessaries supplied to him, he
is not personally liable, only if his property is liable (Sec 68).

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10. .Contract by a minor and a major jointly: Where a minor and a major jointly enter into
a contract with another person the minor has no liability but the contract as a whole can
be enforced against the major.

11. Surety for a minor: A contract by s minor is void, but a contract by a guardian on his
behalf is valid. Where a guardian enters into a contract in respect of his property on
behalf of the minor, it is valid, provided it is for his benefit or for legal necessity.

12. Position of minor’s guardian: A contract entered into by the guardian of a minor on his
behalf stands on a different footing from a contract entered into by a minor himself. A
contract by a minor is void but a contract by a guardian on his behalf is valid provided the
obligations undertaken are within the powers of the guardian. A contract made by the
guardian is binding on the minor if it is for the benefit of the minor or is for legal
necessity.

13. Minor as shareholder: According to Contract Act, a minor being incompetent to

contract cannot be a shareholder of the company. Therefore a company can refuse to
register, transfer or transmission of shares in favor of a minor unless the shares are fully
paid. 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.

14. Minor’s Position and Liability in Tort: Tort is a civil wrong. So, minor’s position in
civil wrong is that- ‘A minor is liable for his tort, i.e. a civil wrong unless the tort is in
reality a breach of contract.’

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 15. Minor’s marriage: Minor’s contracted by their parents and guardians is valid. It is valid
on the ground of the custom of the community.

16. Relinquishment by a minor: A release by a minor of his rights in a property is

absolutely in fructuous in law.

17. Service contracts: (i) A contract for personal service by a minor is void under the Indian
law and the mere fact it is for his benefit would not entitled the minor to sue under the
contact.(ii) A minor may bind himself by a contract of apprenticeship if it be for his
benefit but he cannot be used for failing to serve as such.(iii)Contract with minor does not
create legal contractual relationship between the parties. Minor girls entering into a
contract of service a person can leave the service at any time without committing any
actionable wrong.

18. Minor’s Parents: The parents of a minor cannot be held liable for any contract that a
minor enters into. However, they can be held liable in case the minor is acting as their
agent.3

3
indusact.blogspot.com/2013/04/indian-contract-act-1872.html

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Chapter IV

Case Laws

1. Mohiri Bibi v. Dharmodas Ghosh

The case goes back to the year 1903 in which, for the first time, the Privy Council held that a
minor’s contract is void-ab-initio that it is void from the beginning.

Facts of the case – the plaintiff Dharmodas Ghosh, when he was a minor, mortgaged his property
to the defendant, a moneylender. At that time, defendant’s attorney had the knowledge about
plaintiff’s age. The plaintiff later paid only Rs 8000 but refused to pay rest of the money. The
plaintiff’s mother was his next friend (legal guardian) at that time, so he commenced an action
against the defendant saying that at the time of making of a contract, he was a minor, so the
contract being a void one, he is not bound by the same.

The court held that unless the parties have competence under Section 11 of the Act, no
agreement is a contract.

2. Leslie litd. Vs Sheill

FACTS: Defendant obtained loans from plaintiff by fraudulently misrepresenting that he

was of full age at the time of contract. Defendant sued him to recover the money.

HELD: 1) If an infant obtains property or goods by misrepresenting his age, he can be

compelled to restore it so long as the same is traceable in his possession. This is known
as equitable doctrine of restitution. However, in present case, since the money was
spent by the defendant, there was neither any possibility of tracing it nor any possibility
of restoring the thing got by fraud, for if the court will ask defendant to pay the
equivalent sum as that of loan received, it would amount to enforcing a void
contract. Restitution stops when repayment begins and equity does not enforce against
minor any contractual obligation.

2) Infant can’t be held liable for a wrong when the cause of action is ex contractu or is so
directly connected with the contract that it would be an indirect way of enforcing the
contract. But, if the wrongful act though connected with the subject matter of the
contract, yet independent of it in the sense of not being an act contemplated by it, then
infant can be liable.

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 In present case, since an action either on torts or on quasi contractual claim would be
tantamount to enforcing the contract by making defendant liable to pay the damages or
restitution, hence, no such action lies.4

3. Srikakulam Subramaniam v. SubbaRao–

To pay off, the promissory note and mortgage debt of his father, minor and his mother,
the minor sold a piece of land to the holders of the promissory note in satisfaction of the
debt. He paid off the mortgage and got possession of the land. But later the minor
claimed that because of his minority the contract was void, and he demanded the
possession of land. But the court held that this contract was for the benefit of the minor
and was entered into by his guardian; his mother and thus was a valid one.5

4. Kundan Bibee v. Sree Narayan:

S, while he was a minor received some goods from K in connection with his business
and was indebted to him, when he attained majority, he took some more money and
executed a bond for paying the total amount to K. In an action by K to recover the said
amount, it was contended by S that he was not liable to pay as they purported to be in his
minority. However, S was made liable to pay the whole amount since there was a new
consideration attached.6

5. In the case of Great American Insurance v. Madan Lal: The guardian on the behalf of
her son entered into an insurance contract in respect of fire for the minor’s property.
When the property was damaged and minor asked for the compensation, the insurer
denied it by saying that a contract with a minor is a void one. But later the court held that
this contract was enforceable, and he is liable to pay compensation.7

4
https://indiancaselaws.wordpress.com/tag/minor/
5
(1948) 50 BOMLR 646
6
(1906) 11 CAL W.N. 135
7
[1](1935) 37 BOMLR 461

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Chapter V

Conclusion

Therefore it can be concluded that with some exceptions, a contract made by a minor is voidable.
The minor, in other words, may avoid the legal liability under a contract. Upon reaching the age
of majority, a minor may affirm or ratify the contract and therefore make it contractually binding
on him. Any expression of the minor’s intention to avoid the contract will accomplish
avoidance. A minor can only avoid a contract during his minority status and only for a
reasonable time after he reaches the age of majority. After a reasonable period of time, the
contract is deemed to be ratified and cannot be avoided.

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References:

 www.theindianlawyer.in/statutesnbareacts/acts/i27.html
 www.advocatekhoj.com/.../bareacts/indiancontract/index.php?...Indian%20Contract
 indusact.blogspot.com/2013/04/indian-contract-act-1872.html
 https://indiancaselaws.wordpress.com/tag/ /minor

Case citation:

 (1948) 50 BOMLR 646

 (1906) 11 CAL W .N. 135
 (1935) 37 BOMLR 461

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