E – Material

RULES RELATING TO MINOR’S CONTRACTS

According to Indian Contract Act 1872 for a void contract Parties must have
capacity to enter in to the contract. Which mean the persons must be a Major
with Sound Mind and Not Disqualified by any other Law to which he is subject.

Who are the persons not competent to enter into the contract

1. Minor

2. Sound Mind

3. Persons Disqualified by Law

Who is a Minor:
A person who is not a major is a minor . According to Indian Majority Act 1875
A person who is not completed 18 years of age is known as Minor. But there is
an exception to this Act. In the following cases the Minority continues till the
completion of 21 years of act.

1. Where a Guardian of a minor person or property has been appointed

under the Guardian and wards Act, 1890

2. Where the superintendence of a minor’s property is assumed by a Court

of Wards.

According Indian Majority Amendment Act 2000 the age of majority is 18

years of age in all the cases.

RULES RELATING TO MINOR’S AGREEMENTS :

1. An Agreement with or by a minor is void Ab Initio

2. No Ratification

3. Minor can be promisee or beneficiary

4. No estoppel against Minor

5. No Specific Performance Except in certain cases

6. Liability for torts

7. No Insolvency

8. Partnership

9. Minor can be an Agent

10. Minor cannot bind parent or guardian

11. Joint Contract by Minor and Adult

12. Surety for a minor

13. Minor as Shareholder

14. Liability for necessaries

1. An Agreement with or by Minor is void Ab Initio: According to

Indian Contract Act 1872 Minors are not Competent to enter in to the Contract.
Contracts with Minors are void Ab Initio. Ab Initio means void from the
beginning or from the initial stage. Because Minor will be innocents and will
not have the capability to understand the terms and conditions of the contracts
and cannot form Rational judgements and most of the time Minors will be
exploited by the people. So to protect Minors the Law declared Minor contract
void Ab initio. Let us see a Leading :

Mohiri Bibi Vs Dharam Das Ghose: In this case a Minor borrowed Rs.
20000/- from a money lender and as a security he executed a mortgage

of his property in money lender’s favor. After a few months later he became
major and filed a suit that the mortgage he executed while he was minor is void
and it should be cancelled. It was held that Contracts with minors are void Ab
Initio and are not enforceable. Hence the minor is not liable to pay the loan
amount to the money lender and the money lender is not entitled to get the loan
amount back and he should the property which is under the mortgage.

2. No Ratification: Minor Agreements are Void Ab Initio and can not be

Ratify even after the attainment of majority. Because there is no existence for
minor Agreements and something which is not in existence can not be Ratify
and a person who is not capable to authorize an can Agreement cannot validate
it by Ratifying. Let us see a Leading Case :

ARUMUGAN SHETTY VS DURAISINGA TEVAR (1914): In this case a

Minor borrowed loan from a money lender and executed a simple bond. He
became major after few months and executed a fresh bond for the loan amount
and interest. And did not paid the amount and the money lender filed a suit . It
was held that since Minor Agreements are Void ab inition so they are not
maintainable. The minor need not pay back the money to the money lender and
the money lender is not entitled to get the money back.

3. Minor can be a promisee or beneficiary: According to Indian Contract

Act 1872 Contracts with or by minors are void ab initio. If a minor is
beneficiary in any contract that is valid which means there is not restriction on
being a minor as a beneficiary. Minor can buy immovable proper and he can sue
for the possession. A promissory can also be executed in favor of a minor. Let
us see an example:

THE GENERAL AMERICAN INSURANCE COMPANY LTD VS.

MADAN LAL SONU LAL (1935): A minor insured his goods with an
insurance company . The Goods were damaged due to some reason and he filed
a suit for the compensation. The Insurance Company denied to pay the
compensation stating that the person on who’s behalf the goods are insured is a
minor and the contract is void. The court rejected the plea of the Insurance
Company and order to pay the compensation amount. And the minor is entitled
to receive the claim for the damage.

4. No estoppel against minor. Estoppel means stopping. Stopping from

denying from the responsibility or Liability. In a contract both the parties will
have their part of responsibilities to perform. If any party is denying from his
part of responsibility the Law of estoppel will not allow him to do so. Where
as there is not estoppel against minor . Minor can always pleads his minority.
But it does not mean that the minor is allowed to retain the benefit of his own
fraud. Minors got protection from the exploitation but minor can not cheat
others.

5. No Specific performance Except in certain cases: As we have

discussed earlier every party in a contract will have their part of responsibility
to perform . if any party is not performing his part of responsibility and the
other party can go to the court and make him perform his part of duty as per the
contract is known as Specific performance. But in case of minors specific
performance is not required except if the Guardian is entered in to a contract on
behalf of minor for his benefit then the Specific Performance is required by the
minor.

6. Liability for Torts: Torts means civil wrong: A minor will held
responsible for the Tort unless it is proved that it is breach of contract. For Ex.
A Minor borrowed a horse for riding and he lend the horse to one of his friends
. That friend jumped on the horse and killed the horse and he could not return
back the horse to his friend and the minor intern is not in a position to return
the horse to the owner. In this case the will held responsible for the death of the
horse and he can not plead his minority .

7. No Insolvency: Insolvent is a person who is not capable to pay his debts.

Since minors are not competent to enter in to the contract they will not have
any liability of debts and they cannot be declared as Insolvent.

8. Partnership: Minor is not competent to enter in to the Contract he is not

Competent to be a partner in a partnership firm . But if all the partners agrees
then he can become a Partner in a partnership firm but he will be liable for the
debts of the company. He will be a beneficiary.

9. Minor can be an agent: A minor can act as an agent. But he will not be
liable for his acts. Principal will be liable for the acts of minor. A minor can
draw , deliver or endorse cheques on behalf of the principal.

10. Minor can not bind his Parent or Guardian: A minor is not capable
of binding his Parents or Guardian for his Acts. But if the minor is acting as the
agent of parent or Guardian then they are liable.

6. Joint Contract by minor and Adult: Minors can enter in to the contract
jointly by adults. And minor will not held responsible for his Acts Adult will be
liable.

7. Surety for a Minor: In a contract of Guarantee an adult can stand surety

for a minor but the minor will not be liable for the payment to the third party ,
the adult will be liable for the payment.
8. Minor as a share holder: A minor being incompetent to enter in to the
contract he can not become the share holder of the company. If by mistake he
becomes the member of the company through his lawful Guardian he can buy
and sell shares and can be the member of the company.

9. Liabilities for necessaries: In case of necessaries supplied to minor by

any person he will be liable for the payment for such supply of necessaries.
Necessaries means the facilities which helps to lead a decent life. For Ex.
Travelling expenses, Educational expenses, Training expenses and Medical
expenses etc. Let see the Leading Case:

NASH Vs INMAN: In this case Inman is a minor student of Trinity college

Cambridge, London. He bought 11 waist coats from Nash and did not pay the
amount. The minor bought 11 waist Coats when he was having sufficient
clothing. So they are not his necessaries but luxuries. And it was compulsory to
wear a waist coat for the college. Hence it was held that Nash is not entitled to
get the amount for the waist coats and Inman need not pay the amount.

HAPPY LEARNING