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Introduction:
For a valid contract, the parties to a contract must have capacity i.e. competence to enter into a contract. Every person is presumed to have capacity to contract but there are certain persons whose age, condition or status renders them incapable of binding themselves by a contract.
Section 11 of the Contract Act deals with the competency of parties and provides that “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.”
It follows that the following persons are incompetent to contract:
i) Minor
ii) Person of unsound mind and
iii) Person disqualified by any law to which they are subject.
MINOR
According to the Indian majority Act 1875 a minor is one who has not completed his or her 18th year of age. A person attains majority on completing his 18th year in India.
Rules regarding Minor’s Agreement
1. Agreement void ab intio: Section 10 of the contract act requires that parties to a contract must be competent. Section 11 says that minor is not competent. The Privy Council made it perfectly clear that a minor is not competent to contract a contract by minor is void.
For example: The leading case is MOHORI BIBI V.S DHARMO DAS GHOSE (1903)
‘A’ a minor borrowed Rs 20,000 from ‘B’ and as a security for the same executed a mortgage in his favour. He became a major a few months later and filed a suit for the declaration that the mortgage executed by him during his minority was void and should be cancelled. It was held that a mortgage by a minor was void and ‘B’ was not entitled to repayment of money.
2. No ratification: An agreement with minor is completely void a minor cannot ratify the agreement even on attaining majority because a void agreement cannot be ratified. But after majority if he makes new promise for fresh consideration, then this new promise will be binding.
For example: A minor borrowed money executing a simple bond for it, and after attaining majority executed a second bond in respect of the original loan and interest. It was held that suit upon the second bond was not maintainable. (ARUNUGAN V.S DURAISINGA (1914)
3. Can be a promise or beneficiary: If a contract is beneficial to minor it can be enforced by him. There is no restriction on a minor from being a beneficiary.
For example: ‘X’ a minor insured his goods with an insurance company. The goods were damaged. ‘X’ filed a suit for claim. The insurance company took the plea that the person on whose behalf the goods were insured was a minor. The court rejected the plea and allowed the minor to recover the insurance money. (THE GENERAL AMERICAN INSURANCE COMPANY LTD. V.S MADAN LAL SONU LAL (1935))
4. No estoppels: Where a minor by misrepresenting his age has induced other party to enter into a contract with him. He cannot be made liable on the contract. No doubt minor had got protection but he has no liberty to cheat others.
5. No specific performance except in certain cases: A guardian of a minor cannot bind the minor by an agreement for the purchase of immovable property; So, the minor cannot ask for the specific performance of the contract which the guardian had no power to enter into. But a contact entered into by the guardian or manager on minor’s behalf can be specifically enforced.
For example: A bond was executed by widow acting as guardian of her minor son for the payment of her deceased husband’s debts, the minor’s estate can be held liable for the payment as per the bond. (LALCHAND V.S NARHAR)
6. Liability for torts: A tort is a civil wrong. A minor is liable in tort unless the tort in reality is a breach of contract.
For example: A minor borrowed a horse for riding only he was held liable when he lent the horse to one of his friends who jumped and killed the horse.
7. No insolvency: A minor cannot be declared insolvent as he is incapable of contracting debts and dues are payable from the personal properties of minor and he is not personally liable.
8. Partnership: A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Indian Partnership Act, he can be admitted to the benefits of partnership.
9. Minor can be an agent: A minor can act as an agent. But he will not be liable to his principal for his acts. A minor can draw, deliver and endorse negotiable instruments without himself being liable.
10. Minor cannot bind parent or guardian: In the absence of authority, express or implied, an infant is not capable of binding his parent or guardian even for necessaries. The parent will be held liable only when the child is acting as an agent for parents.
11. Joint contract by minor and adult: In such a case, the adult will be liable on the contact and not the minor.
For example: In SAIN DAS V.S RAM CHAND, case where there was a joint purchase by two purchaser, one of them was a minor, it was held that the vendor could enforce the contract against the major purchaser and not the minor.
12. Surety for a minor: In a contract of guarantee when an adult stands surety for a minor then he (adult) is liable to third party as there is direct contract between the surety and the third party.
13. Minor as a shareholder: A minor, being incompetent to contract cannot be a shareholder of the company. But, a minor may, acting through his lawful guardian become a shareholder by transfer or transmission of full paid shares to him.
14. Liability for necessaries: A claim for necessaries supplied to a minor is enforceable by law. But a minor is not liable for any price that he may promise and never for more than the value of the necessaries. There is no personal liability of the minor, but only his property is liable.
For example: Inman a minor undergraduate in Cambridge bought eleven fancy waistcoats from Nash. He was at the time adequately provided with clothing. Held the waistcoats were not necessary and the price could not be recovered.
For a valid contract, the parties to a contract must have capacity i.e. competence to enter into a contract. Every person is presumed to have capacity to contract but there are certain persons whose age, condition or status renders them incapable of binding themselves by a contract.
Section 11 of the Contract Act deals with the competency of parties and provides that “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.”
It follows that the following persons are incompetent to contract:
i) Minor
ii) Person of unsound mind and
iii) Person disqualified by any law to which they are subject.
MINOR
According to the Indian majority Act 1875 a minor is one who has not completed his or her 18th year of age. A person attains majority on completing his 18th year in India.
Rules regarding Minor’s Agreement
1. Agreement void ab intio: Section 10 of the contract act requires that parties to a contract must be competent. Section 11 says that minor is not competent. The Privy Council made it perfectly clear that a minor is not competent to contract a contract by minor is void.
For example: The leading case is MOHORI BIBI V.S DHARMO DAS GHOSE (1903)
‘A’ a minor borrowed Rs 20,000 from ‘B’ and as a security for the same executed a mortgage in his favour. He became a major a few months later and filed a suit for the declaration that the mortgage executed by him during his minority was void and should be cancelled. It was held that a mortgage by a minor was void and ‘B’ was not entitled to repayment of money.
2. No ratification: An agreement with minor is completely void a minor cannot ratify the agreement even on attaining majority because a void agreement cannot be ratified. But after majority if he makes new promise for fresh consideration, then this new promise will be binding.
For example: A minor borrowed money executing a simple bond for it, and after attaining majority executed a second bond in respect of the original loan and interest. It was held that suit upon the second bond was not maintainable. (ARUNUGAN V.S DURAISINGA (1914)
3. Can be a promise or beneficiary: If a contract is beneficial to minor it can be enforced by him. There is no restriction on a minor from being a beneficiary.
For example: ‘X’ a minor insured his goods with an insurance company. The goods were damaged. ‘X’ filed a suit for claim. The insurance company took the plea that the person on whose behalf the goods were insured was a minor. The court rejected the plea and allowed the minor to recover the insurance money. (THE GENERAL AMERICAN INSURANCE COMPANY LTD. V.S MADAN LAL SONU LAL (1935))
4. No estoppels: Where a minor by misrepresenting his age has induced other party to enter into a contract with him. He cannot be made liable on the contract. No doubt minor had got protection but he has no liberty to cheat others.
5. No specific performance except in certain cases: A guardian of a minor cannot bind the minor by an agreement for the purchase of immovable property; So, the minor cannot ask for the specific performance of the contract which the guardian had no power to enter into. But a contact entered into by the guardian or manager on minor’s behalf can be specifically enforced.
For example: A bond was executed by widow acting as guardian of her minor son for the payment of her deceased husband’s debts, the minor’s estate can be held liable for the payment as per the bond. (LALCHAND V.S NARHAR)
6. Liability for torts: A tort is a civil wrong. A minor is liable in tort unless the tort in reality is a breach of contract.
For example: A minor borrowed a horse for riding only he was held liable when he lent the horse to one of his friends who jumped and killed the horse.
7. No insolvency: A minor cannot be declared insolvent as he is incapable of contracting debts and dues are payable from the personal properties of minor and he is not personally liable.
8. Partnership: A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the Indian Partnership Act, he can be admitted to the benefits of partnership.
9. Minor can be an agent: A minor can act as an agent. But he will not be liable to his principal for his acts. A minor can draw, deliver and endorse negotiable instruments without himself being liable.
10. Minor cannot bind parent or guardian: In the absence of authority, express or implied, an infant is not capable of binding his parent or guardian even for necessaries. The parent will be held liable only when the child is acting as an agent for parents.
11. Joint contract by minor and adult: In such a case, the adult will be liable on the contact and not the minor.
For example: In SAIN DAS V.S RAM CHAND, case where there was a joint purchase by two purchaser, one of them was a minor, it was held that the vendor could enforce the contract against the major purchaser and not the minor.
12. Surety for a minor: In a contract of guarantee when an adult stands surety for a minor then he (adult) is liable to third party as there is direct contract between the surety and the third party.
13. Minor as a shareholder: A minor, being incompetent to contract cannot be a shareholder of the company. But, a minor may, acting through his lawful guardian become a shareholder by transfer or transmission of full paid shares to him.
14. Liability for necessaries: A claim for necessaries supplied to a minor is enforceable by law. But a minor is not liable for any price that he may promise and never for more than the value of the necessaries. There is no personal liability of the minor, but only his property is liable.
For example: Inman a minor undergraduate in Cambridge bought eleven fancy waistcoats from Nash. He was at the time adequately provided with clothing. Held the waistcoats were not necessary and the price could not be recovered.
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