The contracting parties must be competent to contract. Every person is competent to contract who is of the age of majority, has sound mind, and is not disqualified from contracting by any law. A minor, person of unsound mind and person disqualified by law are incompetent to contract. (Sec.11).
Minor
Minor is a person who has not attained 18 years of age. According to Majority Act, 1875; where a guardian of minor’s person or property is appointed or court of wards take charge of minor’s property, a minor will attain the age of majority after 21 years.
Nature of Minor’s Agreements
The law regarding minor’s agreements is explained as under:
Void agreement
An agreement with minor is void. A minor is not liable to perform any act which he has promised because he does not possess the capacity to judge what is good or bad for him. He cannot be compelled to pay back the money received by him under the agreement. An agreement with a minor does not create legal rights and duties.
Examples
a. A, a minor sold his shop to B. the amount was paid to A but the sale deed could not be registered as A was minor. On a suit by B, it was held that as A was minor, so agreement was void ab-initio and the amount was not recoverable. (Shiam Lal vs. Ram Piary).
b. D, a minor mortgaged his house in favour of M to secure a loan of Rs. 20,000. D received Rs. 8,000. M filled a suit for recovery of money and sale of mortgaged property in case of default. Held that the agreement with minor was void so M cannot recover the money or sell the minor’s mortgaged property. (mohori Bibi vs. Dharmo Das Gosh).
2. Minor and Ratification
Ratification means act of confirming or approving. An agreement made by minor cannot be confirmed by him or attaining the age of majority because an agreement which is void from beginning cannot be made valid by subsequent confirmation.
Example
M, a minor borrowed some money and wrote a pro-note for it. On attaining majority M wrote a second pronote to settle the first note. It was held that the second pronote was void for want of consideration. (Suraj Narain vs Sukhu Ahir).
3. Minor and Estoppel
The rule of estoppel does not apply to a minor. It means that minor is not estopped from pleading his infancy in order to avoid a contract, even if he has entered into an agreement by falsely representing that he was of full age. In other words where minor represents fraudulently that he is of full age and induces another to enter into a contract with him, he is not bound by the contract.
Example
M, a minor fraudulently shows that he is of full age and contracts with N to sell his house. M refuses to perform the contract on the ground that he is a minor. N cannot sue M. (Sadiq Ali khan vs. Jai Kishore).
4. Minor and Repayment
A minor cannot be compelled to repay the money received by him under an agreement. If anything is recoverable from minor, out of the proceeds of the contract made by fraudulently showing that he was of full age, the court may compel the minor to return the amount to the other party when the minor himself brings a suit against the other party. But, if the property or money has been lost by minor, then he cannot be made responsible to restore.
Examples
a. M, a minor got Rs. 17,500 as advance and promised to sell the land. Later, M refused to perform the contract. The court ordered the minor to refund the amount. (Khan Gull vs. Labha Singh).
b. A minor sold a house for Rs. 50,000 showing that he is an adult. Later, he sued to cancel the sale on the ground of minority. The court ordered the minor to return the money received by him. (Jager Nath Singh vs. Lalta Prasad).
5. Minor and Necessaries
A person who supplies necessaries to a minor or anyone whom the minor is bound to support, can recover reasonable value of such goods from the property of a minor. If a minor owns no property, the supplier cannot recover the price of necessaries.
The necessary article depends upon the status and circumstances of the minor, if the minor already possesses a necessary at the time when necessary is supplied to him, the supplier cannot recover value of that necessary. (Sec.68).
Examples
a. A supplied necessary of life to B, a minor. A can recover value from B’s property.
b. A supplies necessary to the wife and children of B, a minor. A can recover expenses from B’s property.
c. A supplied a coat with diamond buttons to minor. A cannot recover the price of coat.
d. A minor purchased 11 coats. At that time he had sufficient clothes. It was held that the coats were not necessaries of life and minor was not liable to pay for them. (Nash vs. Inman).
6. Agreement on behalf of Minor
A contract made on behalf of minor by his guardian is binding on the minor. It can be enforced against the minor provided the contract is within the authority of the guardian and for benefit of the minor.
Example
A contract of sale of immovable property by the guardian of minor, for the minor’s benefit, may be enforced by either party to the contract. (Gujoba Tulsiram vs. Nilkanth).
7. Minor as Beneficiary
A minor is capable of accepting benefit. Any contract is valid which is for the benefit of a minor and under which the minor is not required to bear any obligation. The minority of one party to contract does not affect the other party’s liability.
Examples
a. A, a minor advanced some amount to B. B mortgaged his property in favour of A. A can enforce the mortgage if B does not repay the money. (Raghva Chariar vs. Srinivasa).
b. A, a minor delivered some goods under an agreement to P. P refused to make payment. The court held that minor could recover the price. (Abdul Gafar vs. Piare Lal).
8. Minor as Agent
A minor can be an agent. If a minor works as an agent, he can make his principal responsible to third parties for his acts. But he cannot be held personally liable for negligence or breach of duty.
Example
A appoints M, a minor as his agent to sell his house. M makes an agreement with B to sell A’s house. The agreement is valid.
9. Minor as Partner
A minor cannot become a partner of a firm. He can be admitted only in the benefits of the firm through his guardian with the consent of all the partners. Minor can only inspect the account of a firm but not the books. He cannot participate in the management of the firm. The minor’s liability is limited to his investment in the business.
Example
A, B, and C are partners in a firm. To make M, a minor as a partner, they make a contract with X, who is the guardian of M. M can be admitted to the benefits of firm.
10. Surety for Minor
When an adult stands surety for a minor in a contract of guarantee, the adult is liable under the contract but the minor is not answerable. The adult is responsible because there is direct contract between adult and the third party.
Example
M, a minor makes a contract with X. S stands surety for M. the contract is valid.
11. Minor as Member of Company
A minor cannot directly buy shares of a company because he is not competent to contract. If parents of a minor are shareholders in a company, the company can transfer shares in favour f a minor upon the death of parents.
Example
A holds shares in a company. He dies and leaves M, a minor as his legal representative. The company is bound to transfer the shares to M.
12. Minor and Insolvency
A minor cannot be declared insolvent. He is not personally liable even for necessaries supplied to him, only his property is liable. If he has no property payment cannot be recovered. (Sec. 68).
Example
M, a minor buys medicines from X. M has no property. M cannot be held liable for payment. He cannot be declared insolvent.
13. Contract by Minor and Adult
Where a minor and an adult jointly enter into a contract with another parson, the minor is not liable but the adult is liable.
Examples
a. M, a minor and A jointly make an agreement with X to purchase a car. The agreement is valid.
b. A minor and adult jointly agreed to pay some amount and executed a bond. The court held that adult was liable but not the minor. (Jamna Bai vs. Vasanta Rao).
14. Liability of Minor’s Parents
The parents of a minor are not liable for agreement made by a minor even if the agreement is for the purchase of necessaries. The parents are liable if the minor acts as an agent of the parents.
Example
F sends his son M, a minor to buy goods from S. M buys goods from S. F is liable for payment.
15. Minor and Negotiable Instruments
A minor can make, draw, endorse and deliver bill of exchange, promissory note and cheque to bind other parties except himself. He himself is not liable but all other parties to the instrument are liable in their respective capacities.
Examples
a. M, a minor draws a bill of exchange on A. A accepts the bill. M endorses it to C. the bill is valid.
b. X draws a bill on Y, a minor. Y accepts the bill. The bill is valid.