Rules Regarding Minor’s Agreement

The Indian Contract Act 1872, is a significant legislation governing commercial law in India. It plays a crucial role in regulating contractual relationships and obligations. However, one particular area of complexity arises when dealing with agreements involving minor parties. The Act does not allow such agreements without limitations or restrictions. 

This poses a challenge as the legal framework does not explicitly permit contracts with minors. Therefore, it becomes important to understand the specific rules and provisions that govern agreements involving minors to ensure compliance with the Indian Contract Act.

Who is a Minor under Indian Contract Act, 1872?

In India, individuals below the age of 18 are considered minors under the law. Even a person who is 17 years and 364 days old would be regarded as a minor. The age of majority, defining when a person becomes an adult, is determined by the Indian Majority Act of 1875.

 According to the Indian Contract Act 1872, minors are deemed legally incompetent to enter into any form of contract. This means that contracts involving minors are considered void and unenforceable. The law recognises the need to protect the interests and well-being of minors by limiting their contractual capacity until they reach the age of majority.

Nature of Minor’s Agreement

An agreement entered into by a minor is considered void and has no legal effect. As a result, it lacks any enforceable contractual obligations on both parties. Since a contract with a minor is deemed invalid from the beginning, it is essentially non-existent in the eyes of the law. 

Therefore, neither party is legally bound by any contractual obligations or duties arising from such an agreement. The concept of a void minor’s agreement ensures that the legal framework recognises the minor’s limited capacity to enter into binding contracts, providing protection and safeguarding their rights and interests.

What are the Rules Regarding Minor’s Agreement?

The rules regarding minor’s agreement are:

An Agreement With or By Minor is Void

Section 10 of the Indian Contract Act states that a contract involving a minor is considered void. Similarly, Section 11 clarifies that a minor lacks the competence required for entering into a contract. Prior to 1903, Indian courts had differing opinions on whether a contract with a minor was void or voidable. However, the Mohri Bibi v. Dharmo Das Ghose (1903) case settled this matter definitively.

In this case, a minor borrowed Rs. 20,000 from B and provided a mortgage as security. After reaching adulthood a few months later, the minor filed a lawsuit seeking the cancellation and voidance of the mortgage executed during their minority. The court ruled that the mortgage by the minor was void, and B was not entitled to any repayment.

Absence of Ratification

An agreement with a minor is entirely void. Even upon attaining a majority, a minor cannot ratify the agreement because a void agreement cannot be ratified. The Act of ratification cannot confer validity on an act authorised by an incompetent person.

However, if a minor, upon reaching adulthood, makes a new promise supported by fresh consideration, that new promise will be binding.

Minor as a Promisee or Beneficiary

A minor can be a promisee or beneficiary in a contract and have the right to enforce such a contract. There are no restrictions on a minor being a beneficiary, such as being a payee or promisee in a contract. Therefore, a minor is capable of purchasing immovable property and can sue for the recovery of possession upon tendering the purchase money. Similarly, a minor in whose favour a promissory note has been executed can enforce it.

No Estoppel against a Minor

If a minor misrepresents their age and induces the other party to enter into a contract, the minor cannot be held liable for that contract. Estoppel does not apply to a minor, which means that they are not prevented from using their minority as a defence to avoid a contract.

Specific Performance Except in Certain Cases

Since a minor’s contract is absolutely void, there is no possibility of specific performance of such a contract. A guardian of a minor cannot bind the minor through an agreement for the purchase of immovable property. Therefore, the minor cannot seek specific performance of a contract that the guardian lacked the authority to enter into.

However, a contract entered into by a guardian or manager on behalf of a minor can be specifically enforced if:

(a) The contract falls within the authority of the guardian or manager.

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

(Lalchand v. Narhar 89 IC 896)

No Insolvency

A minor cannot be declared insolvent since they are incapable of incurring debts. Any dues or debts would be payable from the minor’s personal properties, and the minor is not personally liable for them.

Partnership

Due to their inability to enter into contracts, a minor cannot be a partner in a partnership firm. However, under Section 30 of the Indian Contract Act, a minor can be admitted to the benefits of a partnership.

Minor as an Agent

A minor can act as an agent. However, they will not be held liable to their principal for their acts. A minor can draw, deliver, and endorse negotiable instruments without assuming personal liability.

Minor’s Inability to Bind Parent or Guardian

Without express or implied authority, an infant is incapable of binding their parent or guardian, even for necessaries. Parents can only be held liable when the child is acting as their agent.

Joint Contract by Minor and Adult

In a joint contract involving a minor and an adult, the adult will be held liable for the contract, while the minor will not be held accountable. In the case of Sain Das vs. Ram Chand, where there was a joint purchase with one of the purchasers being a minor, it was determined that the vendor could enforce the contract against the adult purchaser but not the minor.

Surety for a Minor

In a contract of guarantee where an adult acts as a surety for a minor, the adult is liable to the third party as there is a direct contract between the surety and the third party.

Minor as Shareholder

Since a minor cannot enter into a contract, they cannot become a company shareholder. If a minor mistakenly becomes a member, the company has the right to rescind the transaction and remove the minor’s name from the register. However, a minor, acting through their lawful guardian, can become a shareholder by transferring or transmitting fully paid shares.

Liability for Necessaries

The provision for necessaries supplied to a minor or to a person whom the minor is legally bound to support is governed by Section 68 of the Indian Contract Act. A claim for necessaries supplied to a minor is enforceable by law. However, a minor is not personally liable for the price he may have promised and is only liable for the value of the necessaries. The minor’s property, not the minor personally, is liable.

To hold the minor’s estate liable for necessaries, two conditions must be met:

(a) The contract must be for goods reasonably necessary for the minor’s support according to their station in life.

(b) The minor must not already have a sufficient supply of these necessities.

Conclusion

There are several important rules regarding a minor’s agreement. In conclusion, the rules regarding a minor’s agreement include its void nature, exceptions for enforceability, limited liability for necessaries, inability to bind others, and specific considerations for torts, partnerships, and suretyship.