Capacity to Contract

By
Dr. Sridevi Krishna
Assistant Professor
Vidyavardhaka Law College
Mysore
Who are competent to
Contract?
 Section 11
• “Every person is competent to contract who is
of the age of majority according to the law to
which he is subject, and who is of sound mind,
and is not disqualified from contracting by any
law to which he is subject.”
 MINORITY
• According to Section 3 of the Indian Majority
Act, 1875, a minor is a person who has not
completed 18 years of age.
• Nature of Minor’s agreement
• A contract with a minor is void ab initio
• Ab initio means- from the beginning.
 Mohori Bibi V Dharamdas Ghose (1903)

• The plaintiff Dharamdas Ghose, a minor, mortgaged his

property in favour of the defendant Brahmo Dutt who was
a money lender to secure a loan of Rs 20,000. At the time
of the transaction the attorney, who acted on behalf of
the money –lender, had the knowledge that the plaintiff
was a minor. The minor brought an action against the
money- lender before trial court stating that he was a
minor when the mortgage was executed by him and thus
the mortgage was void and the same should be cancelled.
• By the time of appeal to privy council the defendant
Brahmo Dutt died and the appeal was taken up by his
executors Mohori bibi.
 Contentions in favor of Money-lender

• 1. the minor had fraudulently misrepresented

his age, the law of estoppel should be applied
against him. No relief should be given to
minor.
• 2. If the mortgage is cancelled as requested by
the minor, he should be asked to refund the
loan amount of Rs 20,000/- which he had
taken as under S 64 & 65 of Indian Contract
Act & section 41 of Specific Relief Act, 1877
 Privy council
• Held- the defendant’s contentions were rejected.
Minor’s agreement is void and he could not be
asked to repay the loan taken by him.
• Following reasons were observed-
• 1. the fact that he was a minor was known to the
defendant’s agent. Thus estoppel as under S 115
of Evidence act did not apply. The person knew
the real facts and was not mislead by the untrue
statement.
• 2. minor should be asked to refund the amount-
• Section 64 of Indian Contract Act-When a person at
whose option a contract is voidable rescinds it, the
other party thereto need not perform any promise
therein contained in which he is the promisor. The
party rescinding a voidable contract shall, if he had
received any benefit there under from another party
to such contract, restore such benefit, so far as may
be, to the person from whom it was received.
 Section 65
• When an agreement is discovered to be void,
or when a contract becomes void, any person
who has received any advantage under such
agreement or contract is bound to restore it,
or to make compensation for it to the person
from whom he received it. 
• This section is applicable as to contract
between competent parties
 3.Relief under Section 41
• On adjudging the cancellation of an instrument,
the court may require the party to whom such
relief is granted to make any compensation to
the other which the justice may require.
• This section gives discretion to court to grant
compensation. But under the circumstances of
this case the justice did not require the return
of the money by the minor as it was given with
full knowledge of his minority.
 Position under English Law
• The Infants Relief Act 1874 declares following
contracts as void-
• Contracts for repayment of money
• Contracts for supply of goods
• Contracts for accounts
 Can a minor’s agreement be ratified after attaining
majority?

• A minor’s agreement being void ab initio, is

incapable of being validated by a subsequent
ratification after minor has attained majority.
Thus no ratification is possible.
• A contract which is void cannot be revived and
cannot constitute a valid consideration for a
subsequent contract, and therefore a
transaction entered into by a minor during
minority cannot be ratified.
 Continued..
• If a person has received a part of the benefit during the minority and a
part after attaining majority, a promise by him to pay for the both if
made after attaining majority is a valid consideration and enforceable.
• Kundan Bibi V Sree Narayan
• Defendant while he was a minor received some goods from plaintiff in
connection with his business of piece goods and was indebted to
plaintiff to the extent of Rs 7,377/- on attaining majority he took a
further loan of Rs 89 and agreed to pay the total amount of Rs 7,465
under the bond to Plaintiff. In an action filed by plaintiff to recover the
amount defendant contended that he was not liable as the same was
ratified debts incurred during minority.
• Held- plaintiff was liable for the whole debt secured under the bond,
because there was a new consideration for the promise on which the
defendant sued.
 Whether estoppel applies against a minor?

• Law of estoppel does not apply against a minor.

• Vaikuntarama Pillai v. Authimoolam Chettiar , there is

a clear statutory provisions that a minor being
incompetent to contract is incapable of incurring any
liability for any debt, the law of estoppel cannot over
rule this provision to make him liable was observed by
Madras High Court. In the other words money was
obtained by a minor misrepresenting his age, that
amounted to a fraud and he might be made to refund
it, but, in the absence of fraud, refund could not be
ordered
 Continued..
• In Lakhwinder Singh v. Paramjit Kaur , the respondent a
daughter of Mr. Avtar Singh, who was deceased, inherited
a part of his land and otherproperty. While minor, she
executed Power of Attorney in favour of her mother Smt.
Rattan Kaur, who executed a sale deed of land belonging
to her daughter in favour of defendant/appellant.
• Finding that respondent was a minor at the time of
execution of Power of attorney of her mother obtained
specific permission from the District Court, sale of land
share by the mother was held void
 Doctrine of Restitution
• English Law- return of benefit secured by a fraudulent minor
• Leslie v. Sheill , in this case the defendant minor falsely
misrepresented himself to be a major and obtained two loans of
200 pounds from the plaintiff who were money lenders. The
plaintiff brought an action to recover 475 pounds being the
amount of loan and interest thereon.
• It was held by the Court of Appeal that the money could not be
recovered. If there were allowed that would amount to enforcing
the agreement to repay loan, which is void under Infants Relief
Act, 1874. if a minor is asked to pay money which cannot be
traced and which he no more possess, it would amount to
enforcing the agreement.
• As regards to the point of restoring back the property is
concerned, Lord Summer made observation- if the infant had
obtained property by fraud he can be compelled to restore it.
 Indian law

• Can a minor be asked to restore benefit wrongly

obtained by him?
• Can he be asked to pay compensation to the
other party?
• Compensation under S 64, 65 and 70 Indian
contract Act.
• Section 70- Where a person lawfully does anything for
another person, or delivers anything to him, not intending
to do so gratuitously, and such other person enjoys the
benefit thereof, the latter is bound to make compensation
to the former in respect of, or to restore, the thing so done
or delivered
• A, a tradesman, leaves goods at B’s house by mistake. B
treats the goods as his own. He is bound to pay A for
them. 
• Can a minor be asked to repay the benefit enjoyed by him
as given under S 70
 Continue..
• Section 70 cannot be invoked against a minor.
• 2. compensation under Specific Relief Act
section 41 & S 39
• Section 39- any person against whom a written
instrument is void or voidable , who has
reasonable apprehension that such instrument,
if left outstanding may cause him serious injury,
may sue to have it adjudged void or voidable
and the court may, in its discretion, so adjudge
it and order it to be delivered up and cancelled.
 Continue..

• On question of compensation there is a difference of

opinion between the high court.
• Lahore High Court
• Khan Gul V Lakha Singh the plaintiff who had
advanced a sum of Rs 17,500 to a minor brought an
action against him to recover the amount. the minor
was held liable to refund the same.
• Justice Shadi Lal made a liberal interpretation of the
section and applied equitable doctrine of English
law.
• Section 39 of SRA- a minor may sue for the cancellation of an
instrument pertaining to a void agreement and where he so
goes to the court as a plaintiff to claim the relief, the court
may ask the minor to pay compensation to the other side
under S 41. even if the minor is defendant he should be asked
to refund the amount. the other party deserve to be
compensated by a minor irrespective of the fact that the
minor is the plaintiff or the defendant.
• There was a departure from English doctrine of restitution
and the decision of Leslie V Sheill according to which there
can be only restoration of specific property wrongfully
obtained by a fradulent minor, if the same can be traced in his
hands and he cannot be asked to pay back money as the same
cannot be identified, otherwise it is enforcing an agreement
which is void.
 continued
• Asking a minor to return the ill gotten gain in
the form of money is not the enforcement of
contract, but it is only the restoration of the
pre-contract position. The relief is allowed not
because there is a contract between the
parties, but it is because there is no contract
but one of the parties has unjustly benefited
at the cost of the other.
 Allahabad High Court View

• Ajudhia Prasad V Chandan Lal it gave entirely opposite view

on Lahore High Court decision.
• 1. on minor’s responsibility to compensate under SRA, it was
held that a minor cannot be asked to give any relief to the
other party when the minor is a defendant in the case. A
minor can be asked to give relief when he himself is plaintiff
and wants some relief for himself. If the minor who is
defendant in a case, is asked to provide relief that is contrary
to the spirit and language of S41 of SRA and will also amount
to enforcing a contract which is void.
• 2. the rule under Leslie V Sheil was followed. A minor may be
asked to restore back the property if the same can be traced,
but he cannot be asked to pay money compensation because
that would amount to enforcing void contract against a minor.
 Considering Lahore High Court View
• The Law commission has expressed
recommendation and accepted the doctrine
of Unjust enrichment. (no one should be
benefited at the cost of the other)
• The obligation to restore an unjust benefit
should not depend upon the mere accident of
a person coming before the court as a plaintiff
or defendant.
 Continue..

• Section 33 was added to specific relief act, 1963

• 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 other party and to make
any compensation to him which the justice may require.
• (2) Where a defendant successfully resists any suit on the ground—(a)
that the instrument sought to be enforced against him in the suit is
voidable, the court may if the defendant has received any benefit under
the instrument from the other party, require him to restore, so far as
may be, such benefit to that party or to make compensation for it;
• (b)  that the agreement sought to be enforced against him in the suit is
void by reason of his not having been competent to contract under
section 11 of the Indian Contract Act, 1872 (9 of 1872), the court may, if
the defendant has received any benefit under the agreement from the
other party, require him to restore, so far as may be, such benefit to that
party, to the extent to which he or his estate has benefited thereby.
 Present position
• A minor may go to court as plaintiff or he may
be a defendant in a case. If under a contract
he has received any benefit then he has to
restore it.
• The parties are tried to be put into pre
contract position.
 CONTRACTS FOR NECESSARIES
• Necessaries, in a nutshell, are those without which an
individual cannot reasonably exist
• Necessaries must be things which the minor actually
needs; therefore it is not enough that they be of a kind
which a person of his condition may reasonably want for
ordinary use, they will not be necessary if he is already
sufficiently supplied with things of that kind, and it is
immaterial whether the other party knows this or not.
• However, this is a very flexible term and could include
many things depending upon the socio-cultural status of
the minor and the immediate circumstances faced by
him.
 Continued..

• Section 68 of the Indian Contract Act specially

exempts minor's contracts for necessaries
from the vice of nullity.
• It provides: If a person incapable of entering
into a contract, or any one of 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.
 Continue..
• The section does not create any personal
liability of the minor for supply of necessaries
but only his estate is liable.
• Further, the person supplying necessaries is
entitled only to reimbursement, that is, a
reasonable price and not contracted price.
 Beneficial Contract service & Apprenticeship
• Under English Law a minor is bound by the contract of apprenticeship or
services because such contracts are beneficial to him.
• A minor is bound by beneficial contract of service or apprenticeship or
any contract analogous thereto.
• Doyle V White City Stadium Ltd.
• The plaintiff a minor applied for licence as a boxer. A licence was duly
granted to him upon declaration made by him that he will be bound by
the rules of British Boxing Board and also be abide by the further
alterations to the existing rules as may be passed.
• In accordance with the rules he was disqualified in one of the contests
for hitting below the belt and the sum of 3000 pounds due to him was
withheld. He sued to recover the amount.
• Held- the contract with the board was closely connected with the
contract of service that the same was binding against him and so he
could not recover the amount.
 Continued..
• In the case of De Francesco v. Barnum apprentice
dancers had to sign a very restrictive contract under
which the girls were bound for seven years, were
required not to marry, and had no guarantee that
they would be provided with work during the
contract.
• Held- that considering the contract as a whole, its
terms and conditions were unreasonably prejudicial
to the interests of the infant apprentice and were
therefore not enforceable against her.
 In India

• Minor’s contract of service is void whereas apprenticeship is

valid.
• contract of service- Raj Rani V Prem Adib
• The father of Raj Rani who was a minor entered in to a
contract on her behalf with Prem Adib a film producer.
According to the contract Raj Rani was to act as a film
actress on the payment of a certain amount. Raj Rani was
not given any work. She sued the producer for breach of
contract
• Held- the plaintiff being a minor, the contract was void. It
was observed that contract entered by father on behalf of
the minor was void because the same was with out any
consideration. Consideration moving from a third party who
is a minor is no consideration.
 Minor liability in Partnership Indian
Partnership Act, 1932
• A minor, being incapable to make an agreement or
contract, cannot be a partner in the firm. However,
he may be admitted only to the benefits of the firm
with the consent of all other partners
• A person can become a partner only by an act of
consent: i) on the part of himself; ii) on the part of all
the other partners. A minor is incapable of giving
consent so he or she cannot become a partner but
with the consent of all others he or she can only be
admitted to the benefits of the partnership
Minor Liability in a Contract of Agency

• A minor can be appointed as an agent. But a

minor will not be personally liable for his/her
acts as an agent .
• It may, however, be noted that the principal
will be liable to the third persons for the acts
of the minor agent which he/she does in the
ordinary course of dealings
 Minor’s Liability in a Breach of Agreement
and a Tort
• One cannot make a minor liable for breach of a
contract by challenging the form of action to
one ex delicto (for tort or wrong)
• In Johnson v. Pye , a minor made a wrong
statement that he was of the age of majority
and obtained a loan of 300 pounds. It was held
that the minor cannot be forced to repay the
loan by bringing an action for deceit against
him.
• In the case of Jennings v. Rundall , a minor,
who hired a mare for riding, injured her by
over-riding. It was held that he could not be
made liable for the tort of negligence because
that would mean making him liable for the
breach of contract of bailment.
 Continued..
• An action under the law of tort implies an indirect
enforcement of the contract the action for the same is not
permitted, yet if the nature of the act is such that the tort
committed by the minor is totally independent of the breach
of obligation under the contract, the action for the same can
lie.
• In the case of Ballett v. Mingay there a minor hired a
microphone and an ampliphier. Instead of returning the same
to the owner the minor gave it on to his friend. It was held
that the minor’s act of giving it on was altogether outside the
purview of bailment and, therefore, the minor could be made
liable for detinue.( wrongful detention of goods)
• The above decided cases clearly shows that a minor is not
liable under contract but liable under tort.
 Position of person of unsound mind

• Section 12- a person is said to be of unsound

mind for the purpose of making a contract if at
the time when he makes it, he is incapable of
understanding it and of forming a rational
judgment as to its effect upon his interests.
• Soundness of mind is necessary only at the
time of making a contract.
• A person who is usually of unsound mind, but
occasionally of sound mind can he make a
contract ?
• A person who is usually of sound mind but
occasionally of unsound mind can he make a
contract?
• A person who is usually of unsound mind but
occasionally of sound mind may make a
contract when he is of sound mind.
• A person who is usually of sound mind but
occasionally of unsound mind cannot make a
contract when he is of unsound mind.
Indar Singh v Parameshwardhari Singh
• On the death of father, the defendant purported to sell some
properties to the plaintiff for a consideration of Rs 7000 and
executed a sale deed for the purpose. The properties sold
under the sale deed were worth of Rs 25000. mother of
defendant No 1 pleaded that her son was a congenital idiot
incapable of understanding transactions relating to transfer
of properties and that he is a man of unsound mind. Thus
the transaction by him is void.
• Held- he was incapable of understanding business and
forming a rational judgment as to its effect upon his interest
at the relevant time and thus sale deed executed by him in
favour of he plaintiff did not confer any title on them.
 Burden of proof
• The onus of proof in proving unsoundness of
mind of a person lies on the person who
alleges it.