National Law Institute University

Bhopal

2014-15

SECOND TRIMESTER

Law of Contract-I

Project and Case Analysis on

Contract with Minor

Submitted to: Submitted by:

Prof. Padma Singh Vivek Jain
2014 B.A.LL.B.71

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 ACKNOWLEDGEMENT

Firstly, I would like to thank my Prof. Mrs. PADMA SINGH for giving
me such a golden opportunity to show my skills through this project.
The project is a result of an extensive research study, hard work and
labour, that is put into to make it worth reading.

I wish to acknowledge that in completing this project I had full

support of my friends as well as my teacher. This project would not
have been completed without the help of my university’s library and
through the university’s internet.

Thanking you

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 TABLE OF CONTENTS

1. INTRODUCTION.................................................................................................. 4

2. LAWS REGARDING MINOR’S CONTRACT................................................5

3. DISTINCTION BETWEEN INDIAN AND ENGLISH LAW AS TO

MINOR’S CONTRACT...........................................................................11

4. CASE STUDIES.....................................................................................................12

5. BIBLIOGRAPHY..................................................................................................18

6.

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 CONTRACT

 Section 2 (h) of the Indian Contract Act, 1872 defines a contract as:
‘An agreement enforceable by law is a contract.’

 Contract is a combination of agreement and enforceability.

Creation of obligation on the part of  the parties to an agreement
to perform their liabilities gives the cause of enforceability of an
agreement. The nature of agreement is then changed into a contract.

MINOR

 According to Section 3 of the Indian Majority Act, 1875, a minor is

one who has not completed his 18thyear of age. So a person
becomes a major after the completion of 18 years of life. To this rule
there are two exceptions:

1. W h e n a g u a r d i a n o f t h e m i n o r ’ s p e r s o n o r p r o p e r t y
i s a p p o i n t e d b y a court of law;

2. W h e n a m i n o r ’ s p r o p e r t y i s t a k e n o v e r b y t h e
c o u r t o f w a r d s f o r management.

In either of these two cases minority continues up to the completion of the

21st year. In India Section 11 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. But the later trend of law for determining the age of majority
is:

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(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.

LAWS REGARDING MINOR’S CONTRACT

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 c o n t r a c t . S o a m i n o r i s n e i t h e r l i a b l e t o p e r f o r m
w h a t h e h a s 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 m i n o r i s i n c a p a b l e o f j u d g i n g w h a t i s g o o d
f o r h i m . A m i n o r , 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

refund any benefit which he has received under a void
contract:

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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
t h a t a v o i d contract cannot be validated by any
s u b s e q u e n t a c t i o n a n d a minor’s contract is void ab initio.

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, t h e p e r s o n w h o h a s f u r n i s h e d s u c h
s u p p l i e s i s e n t i t l e d t o b e 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 m i n o r i s b o u n d t o s u p p o r t .
W h a t i s a n e c e s s a r y a r t i c l e i s t o b e determined from the status
and the social position of the minor.

5. The Rule of Estoppel does not apply to a minor:

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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 o t h e r p a r t y i n c a s e s w h e r e a n i n f a n t
o b t a i n s a l o a n b y f a l s e l y 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-

(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:

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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 receives hare 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 f i r m , a l t h o u g h h e m a y a f t e r a t t a i n i n g
m a j o r i t y a c c e p t t h o s e obligations if he thinks fit to do so.

8. Minor as an Agent:

A minor can be appointed as an agent (Sec1 8 4 ) . H e c a n

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 an 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).

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.

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 11. Surety for a minor:

A c o n t r a c t b y s m i n o r i s v o i d , b u t 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

c o n t r a c t c a n n o t b e a s h a r e h o l d e r o f t h e company.
Therefore a company can refuse to register, transfer or
transmission of shares in favour 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 t o r t , i . e . a c i v i l w r o n g u n l e s s t h e
t o r t i s i n r e a l i t y a b r e a c h o f   contract.’

15. Minor’s marriage:

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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

u n d e r t h e Indian law and the mere fact it is for his benefit
would not entitle the minor to sue under the contact.

(ii) A minor may bind himself by a contract of apprenticeship if it

before his benefit but he cannot be used for failing to serve as
such.

(iii) Contract with minor does not create

l e g a l c o n t r a c t u a l 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.

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 DISTINCTION BETWEEN INDIAN AND ENGLISH LAW AS TO
MINOR’S CONTRACT

The English Law is the principal source of Indian Law. But the
Indian Law differs from the English Law on the subject of minor’s
contracts on the following points:

1. In India the minor’s contract is altogether void but in England

it is sometimes void and sometimes voidable. In England the loan of
money to a minor is void.

2. I n I n d i a , a m i n o r c a n r a t i f y a f r e s h c o n s i d e r a t i o n o f
a c o n t r a c t entered into during minority where as in England he
cannot do so.

3. In India a minor on attaining majority can neither sue nor be sued on

contracts entered into by him during minority but in England he can
sue on the contract for damages.

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 4. In India a minor’s property is liable for the necessaries and
not his personal self acquired property but in England the minor is
personallyliable.5 . I n I n d i a t h e r e c a n b e n o s p e c i f i c
p e r f o r m a n c e b y o r a g a i n s t t h e minor unless it is a contract
entered into by a guardian on behalf of the minor sand the minor’s
benefit. In England there can be no specific performance for
want of mutuality in the contract.

CASE STUDIES

CASE I: Ramchandra v. Manikchand And Anr. on 9/2/1968

( This appeal is by the defendant. The trial Court has passed a decree
for specific performance.)

The suit was filed by the plaintiffs (respondents 1 and 2), when
they were minors, through their guardian, Smt. Phulibai, their
mother. Smt. Phulibai had entered into an agreement dated 30-9-
1961 on behalf of t h e m i n o r s f o r p u r c h a s i n g h o u s e
p r o p e r t y f r o m t h e d e f e n d a n t (appellant) for a
c o n s i d e r a t i o n o f R s . 1 1 , 0 0 0 . R s . 1 , 0 0 0 was paid towards
earnest and the rest of the amount was to be paid at the time of the
registration of the sale-deed.

 The relevant term of the agreement was:

The purchaser shall construct a partition wall at his own cost and in the
presence and help of the vendor.
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The plaintiffs' case was that the defendant did not obtain
permission from the Municipal Corporation and hence the
construction could not be completed. The suit for specific performance
was filed. The defence w a s t h a t t h e b r e a c h w a s c o m m i t t e d b y
the plaintiffs t h e m s e l v e s a n d t h a t t h e y w e r e n o t
entitled to the specific performance. The
d e f e n d a n t , c l a i m e d t h a t h e w a s e n t i t l e d t o t h e expenses
incurred by them; and as the plaintiffs' guardian was not prepared to pay
the amount, the sale-deed was not executed. Thus, the breach was
committed by the plaintiffs.  T h e t r i a l C o u r t f o u n d t h a t t h e
r e s p o n s i b i l i t y o f c o n s t r u c t i n g t h e partition wall was that of
the purchaser, even if the defendant spent any amount, he did it at his
own risk; and that, the plaintiffs were always willing to purchase the
property and hence decreed their suit for specific performance.

The plaintiffs were not guilty of committing any breach of the

contract and that the defendant was not willing to execute the sale-
deed as per the agreement.

Solution: The trial court is right as the responsibility of constructing the

wall was of plaintiff (purchaser) and if seller spends the money he
did it at his o w n c o s t / r i s k a n d c a n n o t c l a i m t h e a m o u n t
f r o m t h e p u r c h a s e r . Plaintiff has full rights to claim the
property of which she has paid the earnest money and defendant
(appellant) has to execute the sale deed a s p e r t h e a g r e e m e n t
d a t e d 3 0 / 0 9 / 1 9 6 1 . T h e a p p e a l s h o u l d b e dismissed.

CASE II: Subrahmanyam's case. (AIR 1948 PC 95)

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A had executed promissory notes in the sum of Rs. 16,000 in favour of B.
He had also mortgaged certain property to a third party in the sum
of Rs. 1,200. A died on 4-10-1935. His widow
e n t e r e d i n t o a n agreement dated 29-11-1935 on behalf of her
minor son to transfer the mortgaged property to B for a consideration of
Rs. 17,000. Out of this amount, B was to utilize Rupees 1,200 in redeeming
the mortgage and rest of the amount towards satisfaction of his own debt
under the promissory notes. A suit was filed on behalf of the minor for
possession of the property on the ground that the agreement entered
into by his mother was not binding on him. The defence was that B was
protected under Section 53A of the Transfer of Property Act. The trial Court
held that as A and his son, the minor, were members of a joint Hindu
family, the minor was bound to satisfy the debt. His guardian could have,
therefore, validly transferred the property, as the transfer would have
been for the benefit of the minor. Even though no sale-
d e e d w a s executed in favour of B, he was entitled to protection
under Section53A of the Transfer of Property Act. This decision was
reversed by the first appellate Court and was confirmed by the High
Court.  T h e g u a r d i a n o f t h e H i n d u m i n o r w a s , c a l l e d u p o n
to decide as to whether the expression 'the transferor'
w o u l d i n c l u d e a m i n o r o n whose behalf the agreement had been
entered into by the guardian.

If the transfer would have been affected, the transfer would have been
of the minor's property, and not of his mother, and hence there was
no reason why the minor should not be treated as a transferor. The High
Court was of the view that the observations of the guardians are not
applicable to all contracts entered into on behalf of the minor. We have
already pointed out that the guardian of a Hindu minor could validly
transfer his property if it was for legal necessity or benefit of the estate of
the minor; but he had no authority to purchase any property.

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Solution: 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 o r i s f o r l e g a l n e c e s s i t y . H e r e t h e a g r e e m e n t
e n t e r e d i n t o b y t h e mother of minors is not binding on the
minor as the agreement is not for their benefit. Minor are not bound to
satisfy the debt taken by their guardian. The transfer of the said property to
B is not for the benefit of the estate of the minor, thus null & void

CASE III: Suresh Chandra Pradhan vs Ganesh Chandra De And Ors.

on2/9/1949

Defendants 1 & 2 are minors & the suit-contract is one entered into on
their behalf by their mother as guardian. The contract was for
selling t h e p r o p e r t y f o r a s u m o f R s . 7 5 o u t o f w h i c h R s .
3 5 w a s p a i d a s advance & the balance was to be paid later.
Defendant 3 who is the sister's husband of defendants l & 2 has
purchased the suit property on3-2-1943 subsequent to the agreement
in favour of the plaintiffs. The genuineness of the consideration alleged
to have been paid there under were denied by the defendants & contested
in the courts below. It has been found by the trial Court that the agreement
was true & that a sum of Rs. 35 was paid as an advance under it. It
was also found that t h e a g r e e m e n t w a s e x e c u t e d i n o r d e r t o
r a i s e m o n e y t o r e p a y a decretal debt for Rs. 60 against the
minors in respect of which there w a s a n e x e c u t i o n p e n d i n g a t
t h e t i m e . I t w a s f u r t h e r f o u n d t h a t defendant 3 was fully aware

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of the agreement & took the sale deed in h i s f a v o u r w i t h n o t i c e o f
t h e s a m e . T h e a r g u m e n t t h a t h a s b e e n advanced on behalf of
the defendants is that no specific performance can be decreed
against the minors on the basis of a contract entered into on their
behalf by their guardian even though it may be for legal necessity or
for the benefit of the minor. This contention has been accepted by both the
Courts below & the suit has been accordingly dismissed. I t h a s b e e n
taken as settled law that a mere executory contract
entered into by a guardian on behalf of a minor imposing a personal
obligation on the minor's estate is not valid & binding & it makes
no difference that it is for necessity or benefit.

Solution: 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. Here the
contract entered into on their behalf by their guardian is for legal necessity
but no specific performance can be decreed against the minors because
M i n o r ’ s l i a b i l i t y i s o n l y f o r t h e n e c e s s a r i e s supplied to him.

CASE IV: Lakhwinder Singh vs Miss Paramjit Kaur AIR 2004

Facts:

1. Plaintiff-respondent is owner in joint possession with defendant-

respondent, in respect of some land, inherited from her father’s property.

2. Plaintiff executed power of attorney dated 29.8.1991 in favour of her

mother in respect of her share in land.

3. The sale deed dated 9.9.1991 was executed by her mother in favour of
the defendant-appellant on the basis of power of attorney dated 29.8.1991.

4. Plaintiff was minor at the time when the sale deed was executed in
favour of defendant.
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Plaintiff’s Contention

1. The sale deed dated 9.9.1991 executed in favour of the defendant-

appellant on the basis of power of attorney dated 29.8.1991 is not binding
on the plaintiff-respondent because she was minor at the time of execution
of the power of attorney dated 29.8.1991 and therefore it was void.

2. It has been claimed the sale deed and mutation effected on that basis in
favour of defendant-appellant have no binding effect on her rights because
Rattan Kaur was fully aware that plaintiff-respondent was minor at that
time.

Defendant’s Contention

1. Plaintiff-respondent was estopped from filing the suit by her act and
conduct as he held out to the defendant-appellant that she was major and
fully competent to execute the power of attorney in favour of her mother.

2. On the basis of the representation made and believing her representation

regarding her age as correct power of attorney was got executed on
29.8.1991 and on that basis sale deed was executed by Rattan Kaur in
favour of defendant-appellant on 9.9.1991.

Concrete Decision

Defendant’s contention(2) was rebutted by court ruling that even if minor

falsely state that he is allowed to plead minority as defense to avoid liability
under agreement because the main aim of the court is to protect the
interest of the minor.

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On the vital issue as to whether the plaintiff-respondent was qualified to
execute the power of attorney on 29.8.1991 and therefore the sale deed
was valid, Court recorded findings of facts that the date of birth of the
plaintiff-respondent is 26.2.1975 once it has been established as a fact then
under Section 2, 10 and 11 of the Indian Contract Act, 1872, plaintiff-
respondent would not be a person competent in law to contract and to
execute any power of attorney in favour of her mother Rattan Kaur
authorising her to alienate her share in the property. Therefore, it was held
that the sale deed dated 9.9.1991 is void ab-initio and cannot confer any
right on the defendant-appellant.

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 BIBLIOGRAPHY

1. The Indian contract Act, 1872

2. Contract and Specific Relief by Avtar Singh

3. www.manupatrafast.com

4. www.indiankanoon.org

5. www.wikipedia.com/minor’scontractinIndia

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