Mohori Bibee v. Dharmodas Ghose

By Shraddha Agrawal, Chanakya National Law University

Editor’s Note: In this submission, the author has discussed in detail the Mohori Bibee case wherein, for the first time in 1903, the Privy Council  declared that the minor’s contract is void and not merely voidable. The Privy Council reached this conclusion on the basis of various Sections of the Indian Contract Act which have also been elaborated in this paper to define the nature of a minor’s agreement.

INTRODUCTION

The law relating to contracts in India is contained in Indian Contract Act, 1872. The Act was passed by British India and is based on the principles of English Common Law. It is applicable to all the states of India except the state of Jammu and Kashmir. It determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties on the contracting parties. Hence this legislation, Indian Contract Act of 1872, being of skeletal nature, deals with the enforcement of these rights and duties on the parties in India.

It was enacted mainly with a view to ensure reasonable fulfillment of expectation created by the promises of the parties and also enforcement of obligations prescribed by an agreement between the parties. The of British India formed in 1861 under the stewardship of chairman Sir John Romilly, with initial members as Sir Edward RyanR. Lowe, J.M. Macleod, Sir W. Erle (succeeded by Sir. W.M. James) and Justice Wills (succeeded by J. Henderson), had presented the report on contract law for India as Draft Contract Law (1866). The Draft Law was enacted as The Act 9 of 1872 on 25 April 1872 and the Indian Contract Act, 1872 came into force with effect from 1 September 1872.

Before the enactment of the Indian Contract Act, 1872, there was no codified law governing contracts in India. In the Presidency Towns of MadrasBombay and Calcutta law relating to contract was dealt with the Charter granted in 1726 by King George I to the East India Company. Thereafter in 1781, in the Presidency Towns, Act of Settlement passed by the British Government came into force. Act of Settlement required the Supreme Court of India that questions of inheritance and succession and all matters of contract and dealing between party and party should be determined in case of Hindu as per Hindu law and in case of Muslim as per Muslim law and when parties to a suit belonged to different persuasions, then the law of the defendant was to apply. In outside Presidency Towns matters with regard to contract was mainly dealt with through English Contract Laws; the principle of justice, equity and good conscience was followed.

The Act as enacted originally had 266 Sections, it had wide scope and included.

  • General Principles of Law of Contract- Sections 01 to 75
  • Contract relating to Sale of Goods- Sections 76 to 123
  • Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238
  • Contracts relating to Partnership- Sections 239 to 266

Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and Partnership. The developments of modern business world found the provisions contained in the Indian Contract Act inadequate to deal with the new regulations or give effect to the new principles. Subsequently the provisions relating to the Sale of Goods and Partnership contained in the Indian Contract Act were repealed respectively in the year 1930 and 1932 and new enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership act 1932 were re-enacted.

At present the Indian Contract Act may be divided into two parts

  • Part 1:deals with the General Principles of Law of Contract Sections 1 to 75
  • Part 2:deals with Special kinds of Contracts such as

(1)Contract of Indemnity and Guarantee

(2)Contract of Bailment and Pledge

 (3)Contract of Agency

Definition of Proposal (Offer):

According to Section 2(A) of the Indian Contracts Act, 1872, when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

Hence, proposal is synonymous to offer. So, we can say that the above definition of proposal is also valid for offer.

Definition of Promise:

According to Section 2(B) of the Indian Contract Act, 1872, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Offer is an open invitation by the promisor for the acceptance of the terms and conditions of the undertaking, which when accepted by the promisee becomes binding on both parties and the proposal becomes a promise. Hence the difference between an offer (proposal) and a promise lies in acceptance of the offer (proposal).

Definition of Offer:

In American Law, an element required in the creation of an enforceable contract. An offer is a proposal to enter into an agreement and must express the intent of the person making the offer to form a contract, must contain the essential terms — including the price and subject matter of the contract — and must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding contract.

 Definition of Contracts:

In the Indian Contract Act, 1872, under Section 2 (H) it is said that an agreement enforceable by law is said to be a contract.

American Law defines contract in the following manner -A contract is a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty.

How an Offer Becomes a Contract:

An offer when accepted gives rise to an agreement. It is at this stage that the agreement is reduced into writing and a formal document is executed on which parties affix their signature or thumb impression so as to be bound by the terms and conditions of the agreement as set out in the document. Such an agreement has to be lawful and we know from the definition of contract of the Indian Contract Act, 1872 that an agreement enforceable by law is a contract. This is how an offer becomes a contract.

In contracts, a promise is essential to a binding legal agreement and is given in exchange for consideration, which is the inducement to enter into a promise. A promise is illusory when the promisor does not bind herself to do anything and, therefore, furnishes no consideration for a valid contract.

For an offer to be accepted there must be an offer and that has to be accepted to make an agreement. Though this might seem self explanatory, but one has to differentiate it from the legal phrase ‘amounts to a valid offer’. The various modes of making an offer are orally, in a written form or by conduct. Irrespective of the mode in which the offer is made, it is the intention or willingness of the offeree which is of paramount importance and that is clearly a subjective issue.

It is important to differentiate at this point between an offer and an “invitation to offer”. Carlill v Carbolic Smoke Ball Co[i] is an important case which brings out the difference between offer and “invitation to treat.” Parties may enter into preliminary negotiations before entering into a contract. The issues they discuss will not necessarily be a part of the contract and are considered to be ‘invitations to offer’. A classic example of this is the display of products at Supermarkets and on shelves, e.g. Pharmaceutical Society of Great Britain v Boots[ii]. The advertised price results in an ‘invitation to an offer’ only. The offer does not become a contract until the merchandise is taken to the counter and the price checked. At this point the customer can accept the merchandise and pay the price, thereby completing the transaction and forming the contract. Also, the legality of acceptance of acceptance is equally as important as the offer and this acceptance to the terms of this offer must be an ‘unqualified expression’ of acceptance of the offer. Acknowledgement of an offer would neither amount to credence acknowledgement nor would a ‘statement of intent’. On the footing laid forward by the offer there must be a clear unequivocal communicating of acceptance of the offer.

The offer and acceptance are the prominent conditions of the contract, but perhaps even more prominent is the requirement of ‘consideration’. Consideration means transaction of money for goods or services rendered or the exchange of an item of ‘value’ to the parties. It perhaps can be regarded as extremely contentious of the requirements for a legal and valid agreement and also the most complex.

In English Law, a promise will never materialize into an enforceable contract without some form of consideration. But it is not enough that the parties make this exchange of worth, the consideration must be of ‘adequate value’ and not ‘inadequate’ consideration.

There are various rules governing the law of consideration:

  1. It must not be a past consideration.
  2. It might be a sufficient consideration but it does not have to be sufficient.
  3. The consideration must come from the side of the promisee.
  4. A valid consideration will not amount to an existing public duty.
  5. A valid consideration will not amount to an existing contractual duty.
  6. For a promise to forego the balance, part payment of a debt is not valid consideration.

CASE BRIEF

The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favour of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs. 20,000.  The actual amount of loan given was less than 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 is a minor.

The plaintiff brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, mortgage was void and inoperative and the same should be cancelled.  By the time of Appeal to the Privy Council the defendant,  Brahmo Dutt died and the Appeal was prosecuted by his executors.

The Defendant, amongst other points, contended that the plaintiff had fraudulently misrepresented his age and therefore no relief should be given to him, and that, if mortgage is cancelled as requested by the plaintiff, the plaintiff should be asked to repay the sum of Rs. 10,500 advanced to him.

JUDGEMENT

On July 20, 1895, the respondent, Dharmodas Ghose, executed a mortgage in favour of Brahmo Dutt, a money-lender carrying on business at Calcutta and elsewhere, to secure the repayment of Rs. 20,000 at 12 per cent, interest on some houses belonging to the respondent. The amount actually advanced is in dispute. At that time the respondent was an infant; and he did not attain twenty-one until the month of September following. Throughout the transaction Brahmo Dutt was absent from Calcutta, and the whole business was carried through for him by his attorney, Kedar Nath Mitter, the money being found by Dedraj, the local manager of Brahmo Dutt. While considering the proposed advance, Kedar Nath received information that the respondent was still a minor; and on July 15, 1895, the following letter was written and sent to him by Bhupendra Nath Bose, an attorney:

Dear Sir, I am instructed by S.M. Jogendranundinee Dasi, the mother and guardian appointed by the High Court under its letters patent of the person and property of Babu Dharmodas Ghose, that a mortgage of the properties of the said Babu Dharmodas Ghose is being prepared from your office. I am instructed to give you notice, which I hereby do, that the said Babu Dharmodas Ghose is still an infant under the age of twenty-one, and any one lending money to him will do so at his own risk and peril.

Kedar Nath positively denied the receipt of any such letter; but the Court of first instance and the Appellate Court both held that he did personally receive it on July 15; and the evidence is conclusive upon the point.

On the day on which the mortgage was executed, Kedar Nath got the infant to sign a long declaration, which he had prepared for him, containing a statement that he came of age on June 17; and that Babu Dedraj and Brahmo Dutt, relying on his assurance that he had attained his majority, had agreed to advance to him Rs. 20,000. There is conflicting evidence as to the time when and circumstances under which that declaration was obtained; but it is unnecessary to go into this, as both Courts below have held that Kedar Nath did not act upon, and was not misled by, that statement, and was fully aware at the time the mortgage was executed of the minority of the respondent. It may be added here that Kedar Nath was the attorney and agent of Brahmo Dutt, and says in his evidence that he got the declaration for the greater security of his “client.” The infant had not any separate legal adviser.

On September 10, 1895, the infant, by his mother and guardian as next friend, commenced this action against Brahmo Dutt, stating that he was under age when he executed the mortgage, and praying for a declaration that it was void and inoperative, and should be delivered up to be cancelled.

The defendant, Brahmo Dutt, put in a defence that the plaintiff was of full age when he executed the mortgage that neither he nor Kedar Nath had any notice that the plaintiff was then an infant, that, even if he was a minor, the declaration as to his age was fraudulently made to deceive the defendant, and disentitled the plaintiff to any relief; and that in any case the Court should not grant the plaintiff any relief without making him repay the moneys advanced.

By a further statement the defendant alleged that the plaintiff had subsequently ratified the mortgage; but this case wholly failed, and is not the subject of appeal.

Jenkins J., who presided in the Court of first instance, found the facts as above stated, and granted the relief asked. And the Appellate Court dismissed the appeal from him. Subsequently to the institution of the present appeal Brahmo Dutt died, and this appeal has been prosecuted by his executors.

The first of the appellants’ reasons in support of the present appeal is that the Courts below were wrong in holding that the knowledge of Kedar Nath must be imputed to the defendant. In their Lordships’ opinion they were obviously right. The defendant was absent from Calcutta, and personally did not take any part in the transaction. It was entirely in charge of Kedar Nath, whose full authority to act as he did is not disputed. He stood in the place of the defendant for the purposes of this mortgage; and his acts and knowledge were the acts and knowledge of his principal. It was contended that Dedraj, the defendant’s gomastha, was the real representative in Calcutta of the defendant, and that he had no knowledge of the plaintiff’s minority. But there is nothing in this. He no doubt made the advance out of the defendant’s funds. But he says in his evidence that “Kedar Babu was acting on behalf of my master from the beginning in this matter “; and a little further on he adds that before the registration of the mortgage he did not communicate with his master on the subject of the minority. But he did know that there was a question raised as to the plaintiff’s age; and he says, “I left all matters regarding the minority in the hands of Kedar Babu.”

The appellants’ counsel contended that the plaintiff is estopped by Section 115 of the Indian Evidence Act (I. of 1872) from setting up that he was an infant when he executed the mortgage. The section is as follows: “Estoppel. When one person has by his declaration act or omission intentionally caused or permitted another person to believe a thing to be true, and to act upon such belief, neither he nor his representative shall be allowed in any suit or proceeding between himself and such person or his representative to deny the truth of that thing.”

The Courts below seem to have decided that this section does not apply to infants; but their Lordships do not think it necessary to deal with that question now. They consider it clear that the section does not apply to a case like the present, where the statement relied upon is made to a person who knows the real facts and is not misled by the untrue statement. There can be no estoppel where the truth of the matter is known to both parties, and their Lordships hold, in accordance with English authorities, that a false representation, made to a person who knows it to be false, is not such a fraud as to take away the privilege of infancy: Nelson v. Stocker. 1 De G. & J. 458. The same principle is recognised in the explanation to Section 19 of the Indian Contract Act, in which it is said that a fraud or misrepresentation which did not cause the consent to a contract of the party on whom such fraud was practised, or to whom such misrepresentation was made, does not render a contract voidable.

The point most pressed, however, on behalf of the appellants was that the Courts ought not to have decreed in the respondent’s favour without ordering him to repay to the appellants the sum of Rs. 10,500, said to have been paid to him as part of the consideration for the mortgage. And in support of this contention Section 64 of the Contract Act (IX. of 1872) was relied on:

Section 64. When a person at whose option a contract is voidable rescinds it, the other party thereto need not perform any promise therein contained of which he is promisor. The party rescinding a voidable contract shall, if he have received any benefit thereunder from another party to such contract, restore such benefit, so far as may be, to the person from whom it was received.

Both Courts below held that they were bound by authority to treat the contracts of infants as voidable only, and not void; but that this section only refers to contracts made by persons competent to contract, and therefore not to infants.

The general current of decision in India certainly is that ever since the passing of the Indian Contract Act (IX. of 1872) the contracts of infants are voidable only. This conclusion, however, has not been arrived at without vigorous protests by various judges from time to time; nor indeed without decisions to the contrary effect. Under these circumstances, their Lordships consider themselves at liberty to act on their own view of the law as declared by the Contract Act, and they have thought it right to have the case reargued before them upon this point. They do not consider it necessary to examine in detail the numerous decisions above referred to, as in their opinion the whole question turns upon what is the true construction of the Contract Act itself. It is necessary, therefore, to consider carefully the terms of that Act; but before doing so it may be convenient to refer to the Transfer of Property Act (IV. of 1882), Section 7 of which provides that every person competent to contract and entitled to transferable property….is competent to transfer such property…in the circumstances, to the extent, and in the manner allowed and prescribed by any law for the time being in force. That is the Act under which the present mortgage was made, and it is merely dealing with persons competent to contract; and Section 4 of that Act provides that the chapters and sections of that Act which relate to contracts are to be taken as part of the Indian Contract Act, 1872. The present case, therefore, falls within the provisions of the latter Act.

Then, to turn to the Contract Act, Section 2 provides: (e) Every promise and every set of promises, forming the consideration for each other, is an agreement, (g) An agreement not enforceable by law is said to be void, (h) An agreement enforceable by law is a contract, (i) An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.

Section 10 provides: “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

Then Section 11 is most important, as defining who are meant by “persons competent to contract”; it is as follows: “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.” Looking at these sections, their Lordships are satisfied that the Act makes it essential that all contracting parties should be “competent to contract,” and expressly provides that a person who by reason of infancy is incompetent to contract cannot make a contract within the meaning of the Act. This is clearly borne out by later sections in the Act. Section 68 provides that, “If a person incapable of entering into a contract, or any one 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.” It is beyond question that an infant falls within the class of persons here referred to as incapable of entering into a contract; and it is clear from the Act that he is not to be liable even for necessaries, and that no demand in respect thereof is enforceable against him by law, though a statutory claim is created against his property. Under Sections 183 and 184 no person under the age of majority can employ or be an agent. Again, under Sections 247 and 248, although a person under majority may be admitted to the benefits of a partnership, he cannot be made personally liable for any of its obligations; although he may on attaining majority accept those obligations if he thinks fit to do so. The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant. Their Lordships are, therefore, of opinion that in the present case there is not any such voidable contract as is dealt with in Section 64.

A new point was raised here by the appellants’ counsel, founded on Section 65 of the Contract Act, a section not referred to in the Courts below, or in the cases of the appellants or respondent. It is sufficient to say that this section, like Section 64, starts from the basis of there being an agreement or contract between competent parties, and has no application to a case in which there never was, and never could have been, any contract.

It was further argued that the preamble of the Act showed that the Act was only intended to define and amend certain parts of the law relating to contracts, and that contracts by infants were left outside the Act. If this were so, it does not appear how it would help the appellants. But in their Lordships’ opinion the Act, so far as it goes, is exhaustive and imperative, and does provide in clear language that an infant is not a person competent to bind himself by a contract of this description.

Another enactment relied upon as a reason why the mortgage money should be returned is Section 41. of the Specific Relief Act (I. of 1877), which is as follows: “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 justice may require.” Section 38 provides in similar terms for a case of rescission of a contract. These sections, no doubt, do give a discretion to the Court; but the Court of first instance, and subsequently the Appellate Court, in the exercise of such discretion, came to the conclusion that under the circumstances of this case justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy, and their Lordships see no reason for interfering with the discretion so exercised.

It was also contended that one who seeks equity must do equity. But this is the last point over again, and does not require further notice except by referring to a recent decision of the Court of Appeal in Thurstan v. Nottingham Permanent Benefit Building Society [1902] 1 Ch. 1, since affirmed by the House of Lords. [1903] A.C. 6 In that case a female infant obtained from the society of which she was a member part of the purchase-money of some property she purchased; and the society also agreed to make her advances to complete certain buildings thereon. They made the advances, and took from her a mortgage for the amount. On attaining twenty-one she brought the action to have the mortgage declared void under the Infants Relief Act. The Court held that, as regards the purchase-money paid to the vendor, the society was entitled to stand in his place and had a lien upon the property, but that the mortgage must be declared void, and that the society was not entitled to any repayment of the advances. Dealing with this part of their claim Romer L.J. says [1902] 1 Ch. at p. 13: “The short answer is that a Court of Equity cannot say that it is equitable to compel a person to pay any moneys in respect of a transaction which as against that person the Legislature has declared to be void.” So here.

Their Lordships observe that the construction which they have put upon the Contract Act seems to be in accordance with the old Hindu Law as declared in the laws of Menu, ch. viii. 163; and Colebrooke’s Dig. liii. 2, vol. ii. p. 181; although there are no doubt decisions of some weight that before the Indian Contract Act an infant’s contract was voidable only in accordance with English law as it then stood.

The appeal, therefore, holly fails; and their Lordships will humbly advise His Majesty that it should be dismissed. The appellants must pay the costs of the appeal.[iii]

PRESENT SITUATION OF THE LAWS RELATING TO A MINOR’S CONTRACT AND RELATED CASES

Section 10 of the Contract Act requires that the parties must be competent to contract. Competence to contract is defined in Section 11:

Section 11: Who are competent to contract- Every person is competent to contract who is of the age of majority according to 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.

Thus, the section declares the following persons to be incompetent to contract-

  • Minors,
  • Persons of sound mind, and
  • Persons disqualified by law to which they are subject.[iv]

MINOR

Age of majority

The age of majority is generally eighteen, except when a guardian of a minor’s person or property has been appointed by the court, in which case it is twenty-one.[v] The age of majority of a person is to be determined “according to the law to which he is subject”.[vi]

In England the age of majority formerly was 21 years. But now under the Family Law Reform Act, 1969, “a minor is a person under the age of eighteen years”. Formerly a minor was referred to as an “infant”, but this Act has changed the term “minor”.

Nature of minor’s agreement

Section 10 requires that the parties to a contract must be competent and Section 11 declares that a minor is not competent. But neither section makes it clear whether, if a minor enters into an agreement, it would be voidable at his option or altogether void. These provisions had, therefore, quite naturally given rise to controversy about the nature of a minor’s agreement.[vii] The controversy was only resolved in 1903 by Judicial Committee of the Privy Council in their well-known pronouncement in Mohiri Bibee v. Dharmodas Ghose.[viii]

Ever since this decision it has not been doubted that a minor’s agreement is absolutely void. In England also the Infant’s Relief Act of 1874 declares the following categories of a minor’s agreement to be “absolutely void”.

  1. Contract for repayment of money lent or to be lent, or
  2. Contract for goods supplied or to be supplied(other than necessary), and
  3. Contract for accounts stated.[ix]

Any other rule would have made the law asymmetrical leaving it to the whim of a child to pick and choose between agreements made by him which he will and which he will not enforce. A child may show poor judgment in making a particular contract, and it is a protection against his own ignorance and immaturity- not merely fraudulent manipulation by others- that the law affords. The general presumption that every man is the best judge of his own interests is suspended in the case of children.[x]

The ruling of the Privy Council in the Mohiri Bibee case has been generally followed by the courts in India and applied both to the advantage and disadvantage of minors. Another decision of the Privy Council in line is Mir Sarwarjan v. Fakhruddin Mahomed Chowdhuery[xi]. “A contract to purchase certain immovable property had been made by a guardian on behalf of a minor, and the minor sued the other party for a decree of specific performance to recover possession. His action was rejected.”

The court said that it was not within the competence either of the manager of the minor’s estate or of the guardian of the minor, to bind the minor or the minor’s estate by a contract for the purchase of immovable property; that as the minor was not bound by the contract, there is no mutuality; and that consequently the minor could not obtain specific performance of the contract.

In its subsequent pronouncement in Sirkakulam Subramanyam v. Kurra Subba Rao[xii]the Privy Council overruled earlier decisions and entertained no doubt that it was within the powers of the mother of a minor as guardian to enter into a contract of sale for purpose of discharging his father’s debts. Following this decision the Orissa High Court held that endowment of property for religious purposes by guardians on behalf of minors, being within their competence, was specifically enforceable.[xiii] The other High Courts have also expressed the view that the doctrine of mutuality should not have been imported into the matter where the contract was within the competence of the guardian and that there is no scope for this doctrine under Section 20 of the Specific Relief Act,1963.[xiv] If the contract is within the competence of the guardian and it is for the benefit of the minor it is especially enforceable.[xv]

In today’s society it does not seem to be possible, much less desirable, for law to adhere to the categorical declaration that a minor’s agreement is “absolutely void”. Minors are appearing in public life today more frequently than ever before. A minor has to travel, to get his dress tailored, or cleaned, to visit cinema halls and deposit his cycle at a stand. He has to deal with educational institutions and purchase so many things for the facility of life and education. If, in any one of these cases, the other party to contract could brush against contractual liability would be too dear to minors. The Privy Council had, therefore, to modify its earlier decisions. This trend is evidenced by the decision of their Lordships in Srikakulam Subramanyam v. Kurra Subba Rao.[xvi] In order to pay off the debts of his father, which were promissory notes owing to the appellants and a mortgage to another, a minor son and his mother sold a piece of land to the appellants in satisfaction of the notes, requiring that the appellants pay off the mortgage debt. The appellants, accordingly, paid off the mortgagee and took possession. Afterwards the minor brought an action to recover back the land. It was found as a fact that the transaction was for the benefit of the minor and the guardian had the capacity to contract on his behalf. LORD MORTON said that section 11 and the Mohiri Bibee case leave no doubt that a minor cannot contract that if the guardian and the mother had for the benefit of the minor and within the power of the guardian was held to be binding upon him.

EFFECTS OF MINOR’S AGREEMENT

A minor’s agreement being void, ordinarily it should be wholly devoid of all effects. If there is no contract, there should, indeed, be no contractual obligation on either side. Consequently, all the effects of a minor’s agreement must be worked out independently of any contract.

  1. No Estoppel against minor

Suppose that the minor by misrepresenting his age induces another to contract with him, will there be any estoppel against him, or, in other words, will he be precluded from disclosing his true age in a litigation resulting from the contract? Even this question had at one time created a controversy. But it is now settled by preponderance of authority that there is no such estoppel against a statute. The policy of the law of contract is to protect persons below age from contractual liability and naturally the doctrine of estoppel cannot be used to defeat that policy. Thus, in a case before Bombay High Court,[xvii]BEAUMONT CJ reviewed the earlier authorities and concluded by saying: “ the court is of opinion that where an infant represents fraudulently or otherwise that he is of age and thereby induces another to enter into a contract with him then in an action founded on the contract the infant is not estopped from setting up infancy”.

  1. No liability in Contract or in Tort arising out of Contract

A minor’s agreement is, of course, in principle devoid of all legal effects. “A minor is in law incapable of giving consent, and, there being consent, there would be no change in the character” or status of the parties.[xviii] In England it was laid down as early as 1665 in Johnson v. Pye[xix] that “ an infant who obtains a loan of money by falsely representing his age cannot be made to repay the amount of loan in the form of damages for deceit”. The court pointed out that infant of England would be ruined. Hence a minor cannot be held responsible for anything which would be an indirect way of enforcing his agreement. “You cannot convert a contract into tort to enable you to sue an infant.”[xx] This example, refused to hold a minor liable in tort for money lent on a bond.[xxi] The court said: “ if the tort is directly connected with the contract and is the means of effecting it and is parcel of the same transaction, the minor is not liable in tort.

But where the tort is independent of the contract, the mere fact that a contract is also involved, will not absolve the infant from liability. Thus, where an infant borrowed a mare for riding only, he was held liable when he lent her to one of his friends who jumped and killed her.[xxii] Similarly, in another case, an infant was held liable for the tort of detenue for his failure to return certain instruments which he had hired and then passed on to a friend.[xxiii]

ATKIN J’s judgment in Fwcetta v. Smethurst[xxiv] explains the independent of the contract. “The principle of law applicable to this case is that which is referred to in Leslie (R) Ltd v. Sheill[xxv]where Kennedy LJ in his judgment cites with approval the following passage from POLLOCK ON CONTRACTS:[xxvi] ‘He (i.e. the infant) cannot be sued for a wrong when the cause of action in substance is ex contractu, or is so directly connected with the contract … But if an infant’s wrongful act, though concerned with the subject-matter of a contract, and such that but for the contract there would have been no opportunity of committing it, is nevertheless independent of the contract in the sense of not being an act of the kind contemplated by it, then the infant is infant’. In the present case the car was hired for the purpose of going to Cairn Ryan and back, but was in fact driven further. In my opinion nothing that was done upon that further journey made the defendant an independent tortfesor; and, if any damage was done to the car on that journey, the defendant would only be liable if he were liable under the contract made… In Burnard v. Haggis[xxvii] the defendant who was a Cambridge undergraduate and an infant, hired a horse for the purpose of going for a ride, expressly stating that he did not want a horse for jumping. The defendant let the horse to a friend, who was jumping, with a result that it fell and was injured. The defendant was liable on the ground that the act resulting in injury to the horse was one which was quite outside the contract, and could not be said to be an abuse of the contract. In Jennings v. Rundall,[xxviii] on the other hand, where the defendant, an infant, had hired a horse to be ridden for a short journey and took it on a much longer journey, with the result that it was injured, the court held the defendant not liable upon the ground that the action was founded in court and that the plaintiff could not turn what was in substance a claim in contract to one in tort.”

  1. Doctrine of Restitution

If an infant obtains property or goods by misrepresenting his age, he can be compelled to restore it, but only so long as the same is traceable in his possession. This is known as the equitable doctrine of restitution is not applied where the infant has obtained cash instead of goods. The well-known authority is Leslie Ltd v Sheill.[xxix]

An infant succeeded in deceiving some money-lenders by telling them a lie about his age, and so got them to lend him £ 400 on the faith of his being an adult.

Their attempt to recover the amount of principal and interest as damages for fraud failed for the reasons explained above. They then claimed the return of principal moneys under a quasi-contract as “money has and received to plaintiff’s use.” To this Lord SUMNER replied: “Further, under the statute[xxx] the principal, which at common law relieved an infant from liability for a tort directly connected with a voidable contract, namely, that it was impossible to directly connected with a voidable contract, namely, that it was impossible to enforce in a roundabout way an unenforceable contract, equally forbids the courts to allow, under the name of an implied contract or in the form of an action quasi ex contractu, a proceeding to enforce part of a contract, which the statute declared to be fully void.[xxxi]

Finally, the money-lenders relied upon the doctrine of restitution, contending that the infant should be compelled in equity to restore the money. Rejecting this contention, Lord Sumner said:

“ I think that the whole current of decisions down to 1913… went to show that, when an infant obtained an advantage by falsely stating himself to be of full age , equity required him to restore his ill-gotten gains, or to release the party deceived from obligations or acts in law induced by fraud, but scrupulously stopped short of enforcing against him a contractual obligation, entered into while he was an infant , even by means of a fraud… Restitution stopped where repayment began.

… the money was paid over in order to be used as the defendant’s own and he has so used it and , I suppose, spent it. There is no question of tracing it, no possibility of restoring the very thing got by the fraud, nothing but compulsion through a personal judgment to repay an equivalent sum out of his present and future resources…. I think this would be nothing but enforcing a void contract.”[xxxii]

Minor Seeking Relief, Compellable to Restore

However, where an infant invokes the aid of the court for the cancellation of his contract, the court may grant the relief subject to the condition that he shall restore all benefits obtained by him under the contract, or make suitable compensation to the other party.

This aspect of the doctrine of restitution found expression in Section 41 of the original Specific Relief Act of 1877.The section authorized the courts to order any compensation that justice required to be paid by the party at whose instance a contract was cancelled. The first well-known case decided under the section is that of Mohiri Bibee v. Dharmodas Ghose[xxxiii].

The relief of cancelled has to be granted in the above case as the plaintiff was entitled to it under section 39 of the Specific Relief Act, 1877.

  1. Beneficial contracts

The law declared by the Privy Council in the Mohiri Bibee case that a minor’s agreement is “absolutely void” has been generally followed, but it has been growlingly “confined to cases where a minor is charged with obligations and the other contracting party seeks to enforce those obligations against the minor.” It was observed by ABDUR RAHIM J of the Madras High Court that “what is meant by the proposition that an infant is incompetent to contract or that his contract is void is that the law will not enforce any contractual obligation of an infant.” Accordingly, a minor is allowed to enforce a contract which is of some benefit to him and under which he is required to bear no obligation.

Contracts of Marriage

A contract for the marriage of a minor is also prima facie for his or her benefit. “It is customary amongst most of the communities in India for parents to arrange marriages between their marriages between their minor children and the law has to adapt itself to the habits and customs of the people.” It has, therefore, become well established, almost without any controversy, “that while the contract of marriage could be enforced against the other contracting party at the instance of the minor it cannot be enforced against the minor”.[xxxiv]

Marriage of Muslim minor girl

Parties were governed by Shariat law. The medical report showed that the girl had not attained the age of majority. She had, therefore, no right to enter into the contract of marriage on her own free will. She could have been given in marriage only by her father or guardian. The Kazi who performed the ceremony of marriage was in know of things. The marriage was not valid. She could not have been forced to live with her husband against the mandate of Quran Sharif. The father was entitled to her custody.[xxxv]

Contracts of Apprenticeship

Contracts of apprenticeship are another species of contracts which are for the benefit of minors. The Indian Apprentices Act, 1850 provides for contracts in the nature of contracts of service which are binding on minors. The Act was passed, as the preamble of the Act shows: “For better enabling children and specially orphans and poor children brought up by public, charity, to learn trades, crafts and employments, by which, when they come to full age, they may gain a livelihood.”[xxxvi]

The Act requires the contract to be made by a guardian on behalf of the minor [S. 9].

  1. Ratification

A person cannot on attaining majority ratify an agreement made by him during his minority.[xxxvii] Ratification relates back to the date of the making of the contract and, therefore, a contract which was then void cannot be made valid by subsequent ratification. It would be a contradiction in terms to say that a void contract can be ratified. If it is necessary, a fresh contract should be made on attaining majority. And a new contract will also require a fresh consideration. “The consideration which passed under the earlier contract cannot be implied into the contract into which the minor enters on attaining majority.[xxxviii]

CONCLUSION

In the due course of the project the researcher has dealt with the case of Mohiri Bibee and the judgment given by the Privy Council. The following is the summary of the laws of contract with a minor:

1. Agreement with or by a minor is void:

An agreement with or by a minor is void and inoperative ab initio [Mohiri Bibee vs. Dharmodas Ghose]. These agreements are considered to be nullity and non-existent in the eyes of law. These cannot be enforced against a minor.

2. Minor can be a promisee or a beneficiary:

In competency of a minor to enter into contract means incompetency to bind himself by a contract. There is nothing which debars him from becoming a beneficiary, e.g., a payee [SharafatAli vs. Noor Mohd.], an endorsee or a promisee in a contract.

Such contracts can be enforced at his option, but not at the option of the other party. Thus, the law does not regard him as incompetent for accepting a benefit.

3. Minor’s agreement cannot be ratified by him:

An agreement by a minor cannot be ratified by him on attaining the age of majority. They term ‘ratification’ may be defined as the act of confirming or approving. The doctrine of no ratification’ implies that an agreement made by a minor (during the period of minority), cannot be confirmed by him on attaining majority.

This is so because minor’s agreement is voidable initio (i.e., void from the very beginning) and, therefore, cannot be made valid by ratification. However, if the minor wants to carry out the agreement, a fresh agreement should be made on attaining majority, it may be noted that a new agreement will also require fresh consideration.

The consideration which was given under the earlier agreement (during minority) cannot be taken as consideration for the new agreement (during majority) also as in the case of Nazir Ahmed v. Jiwandas.

4. No estoppel against minor:

The term ‘estoppel’ may be defined as prevention of a claim or assertion by law. In other words, when someone makes another person to believe that a particular thing or fact is true, then later on he cannot be allowed to deny the truth of that thing.

It will be interesting to know that there is no such estoppel against the minor. In other words, when a minor fraudulently enters into a contract, representing that he is a major, but in reality he is not, then later on he can plead his minority as a defence and cannot be stopped (i.e. prevented) from doing so.

5. No specific performance of the agreements:

There can be no specific performance of the agreements, entered into by minors as they are void ab initio. A contract entered into on his behalf by his parent /guardian or the manager of his estate, can be specifically enforced by or against minor provided that the contract is:-

(a) Within the scope of the authority of the parent /guardian or manager, and

(b) For the benefit of the minor.

6. No compensation by minors:

If a minor has received any benefit under a void agreement, he cannot be asked to compensate or pay for it. Sec 65, which provides for restitution in case of agreements found to be void, does not apply to a minor.

7. Minor’s property liable for necessaries:

Sometimes, a person supplies necessaries to a minor. In such cases, the supplier of necessaries can claim reimbursement from the property of minor.

8. Minor as a partner:

The partnership of partners results from their agreement. A minor, being incompetent to enter into a 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 [Sec 30(1) of the Indian Partnership Act, 1932].

9. The Minor as an agent:

An agent is merely a connecting link, between his principal and third person. Therefore, a minor can be appointed as an agent. But he will not be personally liable for his acts as an agent [Sec. 184].

It may, however, be noted that the principal will be liable to the third persons for the acts of the minor agent which he does in the ordinary course of dealings.

10. Minor as an insolvent:

A minor cannot be declared as an insolvent. This is so because all agreements with a minor are absolutely void. Moreover, the minor is not personally liable for any debt incurred during the period of his minority.

11. The minor can execute a negotiable instrument:

According to Sec 13(1) of the Negotiable Instruments Act, 1881, the term ‘negotiable instrument’ means and includes a promissory note, a bill of exchange and a cheque. The minor is competent to draw, negotiate or endorse the negotiable instruments.

It may, however, be noted that the minor will not incur any personal liability under such instruments. But, the negotiable instruments executed in favour of the minor can be enforced by him.

12.  The liability of minor’s parents or guardians:

As a matter of fact, the minor’s contracts do not impose any liability on his parents or guardians even if the contracts are for ‘necessaries’. The parents or guardians of the minor may pay money borrowed by him just out of moral obligations.

But there is no legal obligation to make such payments. It may, however, be noted that the parents or guardians can be held liable when the minor child is acting as an agent of his parents or guardians.

Edited by Kanchi Kaushik

[i] [1893] 1 QB 256

[ii] [1953] 1 QB 401

[iii] (1903)L.R. 30 I.A. 114

[iv]  Ashok Kumar J. Pandya v. Suyog Coop Housing Society Ltd, AIR 2003NOC 118(Guj.) : 2002 AIHC 3401, a housing society agreed to sell land before it became a legal person by registration. Not enforceable.

[v] The Indian Majority Act, 1875. S.3.

[vi] The section defines inherent competence to be a party to a contract, and not competence for being an agent or representative, etc.

[vii] There is no provision as to the effect of competency.

[viii] (1903) 30  IA 114

[ix] Apart from these categories, the contract of an infant may be either valid or voidable at his option.

[x] Anthony T. Kronman, Paternalism and the Law of Contract, (1988) 92 Yale LJ 763,786.

[xi] (1911-12)39 IA 1.

[xii] (1947-48) 75 IA 115.

[xiii] Durga Thakurani Bije Nijigarh v Chintamoni Swain, AIR 1982 Ori 158.

[xiv] AIR 1971 SC 15

[xv] AIR 1956 Bom. 566.

[xvi] (1947-48) 75 IA 115.

[xvii] AIR 1931 Bom 561.

[xviii] Padma Vithoba Chakkayya v. Mohd Multan, AIR 1963 SC 70.

[xix] (1665) 1 Sid 258: 82 ER 1091.

[xx] Jennings v. Rundall, (1799) 101 ER 1419.

[xxi]Harimohan v.Dulu Miya, ILR (1934) 61 Cal 1075.

[xxii] Burnard v. Haggis, (1863) 4 CBNS 45: 8 LT 328.

[xxiii] Ballet v. Mingay, 1943 KB 281.

[xxiv] (1914) 84 LJKB 473.

[xxv] (1914) 3 KB 607, 618

[xxvi] (8th Edn), p. 78.

[xxvii] ( 1863) 4 CBNS 45.

[xxviii] (1799) 8 TR 335

[xxix] (1914) 3 KB 607,618.

[xxx] His Lordship was considering the effect of the Infant’s Relief Act, 1874.

[xxxi] Leslie Ltd v. Sheill, (1914) 3KB 607, 613.

[xxxii] Ibid, 618.

[xxxiii] (1903) 30 IA 114.

[xxxiv] KANIA J(1941) 211, 221.

[xxxv] Kumari Shahnoor Md Tahseen v State of U.P., AIR 2007 NOC 437(All).

[xxxvi]  Judgement of DESAI J in Raj Rani v. Prem Adib, AIR 1949 Bom 215, 218-219.

[xxxvii] Nazir Ahmad v. Jiwan Das, AIR 1938 Lah 159.

[xxxviii] Ibid.

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