Agreement with Minor

One important piece of legislation that controls Indian business law is the Indian Contract Act of 1872. It is essential to the regulation of contractual responsibilities and relationships. Nonetheless, there is a specific area of complication that comes up when working with agreements involving small parties. Such agreements without constraints or limitations are prohibited by the Act.

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This Story also Contains

1. Meaning of Minor under Indian Contract Act, 1872
2. Rules Regarding Minor’s Agreement
3. Significant Landmark Case
4. Minor's Responsibility under the Negotiable Instruments Act
5. Conclusion

This presents a problem because contracts with children are not expressly allowed under the legal framework. Therefore, to ensure compliance with the Indian Contract Act, it becomes crucial to grasp the particular guidelines and requirements that regulate transactions involving minors.

Meaning of Minor under Indian Contract Act, 1872

• In India, anyone who is younger than eighteen is legally regarded as a minor. A 17-year-old and 364-day-old would still be considered a juvenile.

• The Indian Majority Act of 1875 establishes the age of majority or the point at which a person becomes an adult.

• Minors are considered legally incapable of engaging in any kind of contract, as per the Indian Contract Act 1872.

• Contracts involving minors are thus regarded as null, invalid and unenforceable.

• The law limits a minor's contractual ability until the age of majority, acknowledging the necessity to safeguard minors' interests and welfare.

• Based on Indian law, a minor's agreement is void, meaning that neither party may enforce it, making it null and void and having no legal significance.

• Furthermore, he will not be able to ratify the same deal even after achieving a majority.

• The distinction here is that although a minor's contract is worthless or null, it is not unlawful because there is no statutory provision regarding this.

Rules Regarding Minor’s Agreement

The rules for minors' agreements are as follows:

1. A Minor's Agreement Is Null and Void: A minor is not permitted to enter into a contract, according to Section 10 of the Indian Contract Act. In the same vein, Section 11 makes it clear that a minor is incapable of signing a contract. Indian courts disagreed over whether a contract with a minor was invalid or voidable before 1903. The case of Mohri Bibi v. Dharmo Das Ghose (1903) provided a final resolution to this issue.

2. Lack of Ratification: A contract with a minor is null and invalid: A minor is unable to ratify an agreement that is null and invalid, even after reaching a majority. An act approved by an incompetent person cannot be given legality by the Act of Ratification. On the other hand, if a juvenile, upon becoming an adult, makes a new pledge backed by a new thought, that new promise shall stand.

3. Minor as a Recipient or Promisee: A minor has the legal authority to enforce a contract in which they are a promisee or beneficiary. A kid may be a beneficiary without any limitations, much as a payee or promisee in a contract. Consequently, once a kid tenders the purchase money, they are allowed to seek possession recovery and can buy immovable property. Likewise, a promissory note written for the benefit of a minor may be enforced.

4. Nothing to Estoppel a Minor: A minor cannot be held accountable for a contract they engage in if they deceive the other party about their age. A minor may use their minority as a defence to avoid entering into a contract, as estoppel does not apply to them.

5. Specific Performance, With Exceptions: A contract made by a minor is null and invalid and cannot be subject to specific performance. An agreement for the acquisition of real estate cannot be binding on a minor under the guardian's authority. As a result, the child cannot demand particular fulfilment of a deal that the guardian was not legally authorised to make.

6. Not bankrupt: Since a minor cannot incur debt, they cannot be declared insolvent. The minor is not held personally responsible for any obligations or debts; instead, they would be paid from their belongings.

7. Partnership: A minor is not permitted to be a partner in a partnership business due to their incapacity to engage in contracts. However, a minor may be permitted to benefit from a partnership under Section 30 of the Indian Contract Act.

8. Minor as an Agent: An agent can be a minor. They won't be accountable to their principal for their actions, though. Negotiable documents may be drawn, delivered, and endorsed by minors without exposing them to personal risk.

9. Unable to bind parent or guardian, Minor: Even for necessities, a child cannot bind their parent or guardian without explicit or implicit authorisation. Parents are only accountable when their child is representing them.

10. Guarantee for a Minor: Since there is a direct contract between the surety and the third party in a contract of guarantee where an adult acts as a guarantor for a child, the adult is accountable to the third party.

11. Joint Agreement between a minor and an adult: When an adult and a juvenile enter into a joint contract, the adult will be responsible for the terms of the agreement and the youngster won't. It was decided that the vendor may enforce the contract against the adult purchaser but not the juvenile in the Sain Das v. Ram Chand case, which included a joint purchase with one of the purchasers being a minor.

12. Minor as a Shareholder: A minor cannot become a shareholder in a firm since they are not allowed to engage in contracts. The business reserves the right to cancel the transaction and delete the minor's name from the register if they unintentionally become members. On the other hand, a minor may transfer or transmit fully paid shares to become a shareholder through their legal guardian.

Significant Landmark Case

Mohiri Bibi v. Dharmodas Ghosh

The case dates back to 1903 when the Privy Council determined that a contract entered into by a minor is void ab initio, meaning that it is void from the start.

Fact about the Case: The plaintiff, Dharmodas Ghosh, mortgaged his belongings to the defendant, a moneylender, while still a child. The plaintiff's age was known to the defendant's counsel at the time. Later, the plaintiff only paid Rs 8,000 and refused to give the remaining sum of money. At that point, the plaintiff's mother served as his next best friend and legal guardian. He filed a lawsuit against the defendant, claiming that because he was underage when the contract was made, it was null and invalid and that he was not obligated by it.

Judgement of the Case: The court decided that an agreement is not a contract unless both parties meet the requirements of Section 11 of the Act.

Srikakulam Subramaniam v. Subba Rao

Fact about the Case: The minor sold a plot of property to the holders of the promissory note to satisfy the obligation and pay off the mortgage debt owed by his mother, father, and minor. After paying off the debt, he was granted ownership of the land. However, the minor later requested ownership of the land, claiming that the contract was null and void due to his minor status.

Judgement of the Case: However, the court determined that this agreement was legitimate since it was made by his mother, who was acting as his guardian, and it was for the minor's benefit.

Kundan Bibee v. Sree Narayan

After reaching the majority, S took out a bond to pay K the full amount he owed him after, as a minor, he had received certain items from K in connection with his company which was owed to him. S argued that K was not obligated to pay since he was allegedly underage in an attempt to recoup the stated sum. However, because there was an additional factor, S was forced to pay the whole sum.

Implications of a Minor's Agreement

The consequences can be understood in light of this historic ruling:

• The doctrine of Estoppel: It is a legal principle of evidence that forbids a person from making an allegation that is inconsistent with what he has already said. The defendant's counsel in this case knew that the plaintiff was a juvenile, and the court decided that the notion of estoppel does not apply in situations when someone is aware of the facts beforehand. Therefore, this rule is not relevant.

• Benefit Restitution: Under Section 64 of the Indian Contract Act, if one party rescinds a contract that is voidable at their discretion, the other party is not required to fulfil their end of the bargain. This applies to voidable contracts; however, since a minor's contract is null and void, the moneylender cannot demand that he return the money.

• No obligation resulting from a contract or tort: Since a minor cannot provide consent, any agreement they make is void and cannot be enforced.

Minor's Responsibility under the Negotiable Instruments Act

• A minor may draw, endorse, and negotiate under Section 26 of the Act, and he may bind everyone but himself.

• A promissory note, cheque or bill of exchange may be made, drawn, accepted, delivered and negotiated by any person who is competent to enter into contracts under the laws to which he is subject.

Conclusion

When it comes to a minor's agreement, there are a few key guidelines. Finally, the regulations governing a minor's agreement are as follows: it is null and invalid, there are limited liability exceptions for necessities, it cannot bind third parties, and there are particular considerations for partnerships, suretyship, and torts.