Contracts I
Capcaity
Capacity of Parties
• Incapacity to contract may arise out of
• (i) mental deficiency and
• (ii) status.
• Infants or minors, lunatics, idiots, and drunken persons
fall under (i) and
• foreign ambassadors or sovereigns, etc., alien enemies,
professionals, corporations, and married women fall
under (ii)
• In other words, for the enforcement of a valid
contract, parties must be a major in age, of sound
mind, and not disqualified by any other law in force.
• Definition:
• Section 11 in The Indian Contract Act, 1872
Who are competent to contract?
“ 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. “
• From Sec. 11
• a person is incapable of entering into contracts
under the following circumstances:
• 1) If he has not attained the age of majority
according to the law to which he is subject.
• 2) If he is, not of sound mind, i.e., if he is a lunatic
or an idiot, or suffering from a similar disability
and
• 3) If he is disqualified from contracting by any law
to which he is subject.
MINORS
• MINORS:
• According to sec 3 the Indian Majority Act, 1875 Age of majority of
persons domiciled in India.—
• (1) Every person domiciled in India shall attain the age of majority on his
completing the age of eighteen years and not before.
• (2) In computing the age of any person, the day on which he was born is to
be included as a whole day and he shall be deemed to have attained
majority at the beginning of the eighteenth anniversary of that day.
• In case of a minor whose person or property or both a guardian is
appointed by a court, or of whose property the superintendence is
assumed by a court of wards, before the minor has attained the age of
eighteen years , the Act provides that the age of majority shall be deemed
to have attained on the minor completing the age of twenty one years
Minors in Indian Law
• The privy Council’s categorical declalration in Mohiri Bibi Vs.
Dharamadas Ghose (1903) 30 Cal.539, makes it absolutely clear
that a minor’s contract under the Indian law is absolutely void, and
therefore there is no possibility or question of ratification by the
minor or coming of age.
•
• IN Mohiri Bibi’s case the minor had executed a mortgage for
the sum of Rs.20,000 out of which the lender had paid the minor
only about Rs.8,000.
• The minor then filed a suit for setting aside the mortgage.
• It was contended that as the contract was voidable, and the minor
was now repudiating it, the amount of Rs.8,000 actually paid to the
minor must be refunded under Sec.65 of the Indian Contract Act.
• Decision
• The privy Council pointed out that as the minor’s contract was absolutely void, no
question of refunding money could arise in these circumstances.
• In Sadik Ali Khan V Jai Kishore (1928) PC held that a contract entered into by a
minor is a complete nullity by the statutory provison contained in the contracts
Act. There can not be any estoppels against the statute.
• The present position of the law in India regarding minor’s capacity to contract may
be started thus:
•
• A minor’s contract is altogether void in law, and a minor therefore cannot bind
himself by a contract.
• All those contracts to which a person, incompetent to contract, is a party are void,
as against him, but he can derive benefit under them.
• A minor can always plead infancy and is not stopped to do so even where he had
procured a loan or entered into some other contract by falsely representing that
he was of full age, when in reality he was a minor. (Gadigappa Vs. Balangowda)
A minor can be a promisee:
• An agreement under which a minor has received a
benefit can be enforeced as against the other party.
• In Raghavachariah Vs. Srinivas, it was pointed out by
the court that a minor in whose favour a mortgage has
been executed can get a decree for the enforcement of
the mortgage.
• Under the English Law agreements for the infant’s
education, service or apprenticeship, and agreements
enabling the care of his living are binding, unless they
are detrimental to his interests.
A minor can always plead minority
• A minor can always plead minority and is
not stopped in doing so, even when he has
procured a loan or entered into some other
contract by falsely representing that he was of
full age, when in reality he is a minor.
Minor’s liability for necessaries
• The minor’s property is liable for the payment of a
reasonable price for necessaries supplied to the minor
or to anyone whom the minor is bound to support.
• A trader who supplies necessaries can always recover
u/s 68 of the Indian Contract Act, which provides for
liability in respect of necessaries supplied to a person
incapable of entering into a contract.
• For necessaries supplied to a minor, it is only his
property that is liable, not the minor himself,
personally. But an infant is personally liable for
necessaries supplied in the English Law.
• Inman, an infant undergraduate in Cambridge brought
11 fancy waistcoats from Nash. He was at the time
adequately provided with clothing. In Nash Vs.Inman,
it was held by the court that the waistcoats were not
necessary, and the price could not be recovered.
• Fletcher Moulton J.observed as follows: ‘The basis of
the action is hardly contract. Its real foundation is an
obligation which the law imposes on the infant to make
a fair payment in respect of needs satisfied’.
•
Legal Decisions Constituting
Necessities:
• The following have been held as necessities in
India.
• Costs incurred in successfully defending a suit on
behalf of a minor in which his property was in
jeopardy. (Ryder Vs. Wombell)
• Money advanced to a Hindu minor to meet his
marriage expenses. (Kidar Nath Vs.Ajudhia)
• A loan to a minor to save his property from sale
in execution of a decree. (Sham Charan Mal
Vs.Chowdhry lebya Singh)
• In an English case Chaplin v.Leslie Frewin
Ltd(1966) the contract by C aged 19 to write
his auto biography was binding on the minor.
It was similar to service contract and to his
benefits.
• In Roberts v Grey(1913) a contract by a minor
billiards player to tour and play billiards
matches with a well known expert was held to
be valid.
• The case of necessities supplied to a minor is covered
by Sec.68 of the Contract Act which reads as follows:
‘If a person is incapable of entering into a contract, or
any one whom he is legally bound to support, is
supplied by another person with necessities suited to
his condition of life, the person who has furnished
such supplies is entitled to be reimbursed from the
property of such incapable person.
•
• What goods and services are ‘necessities’ for minors
are determined by their status and social position.
• Necessities include the following:
•
• Goods physical goods are necessary not only for
bare existence but also for reasonable comforts
and luxuries to which the minor concerned is
habituated.
• Services rendered : A minor requires certain
services for e.g., a nurse for an infant, a teacher,
marriage expenses of a minor, etc.
• A minor may get loans for his necessities, if he so
requires.
Minor as an agent:
• Minor as an agent:
• A minor can draw, make, endorse, and deliver
negotiable instruments so as to bind all
parties except himself. Sec 26 of Negotiable
Instruments Act 1881
• A minor cannot be adjudicated as an
insolvent.
• If an adult stands surety for a minor, the adult
is liable on the agreement.
Ratification:
• Ratification relates back to the date of
making a contract.
• Since a minor’s agreement is void, there can
be no question of ratifying it.
• A minor on attaining majority cannot ratify an
agreement entered into, while he was a minor.
(Mahendra Vs. Kailash
Restitution
• Where a minor has obtained a loan by
misrepresenting the age an he had already spent
the amount restitution would not be possible.
• In Laslie v Sheill(1914) it was held
• “RESTITUITION STOPPED WHERE REPAYMENT
BEGAN” if restitution is granted it might be
indirectly enforcing performance of contract. It
has also been held that minor have no previlage
to cheat men.
• In mohri bibi case it was contended that the
amount already advanced to the minor by the
mortgagor must be returned as per sec 41 of
specific relief Act.
Sec 41 of specific relief Act,1877 provides that
“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.”
• Sec 38 of specific relief Act 1877
• On adjudging the rescission of a contract, the Court may
require the party to whom such relief is granted to make
any compensation to the other which justice may require.
• The PC held that in the circumstances of the case justice did
not require that the money advanced with full knowledge
of infance be returned.
• Thus, where a mortgage of the property of a minor is set
aside it might order compensation to the lender if the loan
was obtained by the minor fraudulently representing that
he was of full age.
•
• In Khan v Lakha Singh The Lahore HC held
that the power to give the relief under sec 41
is more extensive in India than in England.
• ShadilalC.J. money compensation in a case
where the minor misrepresented the age was
ordered.
• In India, it is statutory power which expressed
in the widest terms. The word Restitution is
avoided and the word Compensation is used
• The minor is called the fond child of equity.
• “ THE LAW PROTECTS THEIR PERSONS:
PRESERVES THEIR TIGHTS AND ESTATES,
EXCUSES THE LACHES, AND ASSISTS THEM IN
PLEADINGS: THE JUDGES ARE THEIR
COUNSELLERS , THE JURY ARE THEIR
SERVANTS AND LAW IS THE GUARDIAN.”
Minor as a partner
• A minor cannot enter into a contract of
partnership. But, he can be admitted into the
benefits of a partnership with the consent of
all the partners.
Minor as a member of a company:
• A minor cannot apply for and be a member of a
company.
• If a minor has, by mistake, been registered as a
member, the company can rescind the transaction and
remove the name from the register.
• The minor can also repudiate the transaction and get
his name removed, from the register.
• In Fazalbhoy Vs. The Credit Bank of India, it was held
that where a minor was made a member and, after
attaining majority received and accepted dividend, he
will be stopped from denying that he is a member.
Minor’s parents liability
• A contract with a minor does not give the
creditor any rights against the minor’s
parents, whether the contract is for
necessities or not.
• A parent may be liable only when the infant
is contracting as an agent for the parent
Minor can’t be adjudged as insolvent:
• A person is adjudged as an insolvent who
has lost his capacity to redeem his debts.
• As a minor is not capable of contracting any
debts, he cannot be adjudged as an insolvent.
Minor as a shareholder:
• As per the provisions of the Companies
Act, a minor may be a shareholder of a
company provided he has paid full amount in
respect of shares subscribed.
Marriage contract:
• Any agreement made by a minor during his
minority for marriage shall be void.
• Similarly, any such agreement made during his
minority for marriage after attaining majority,
shall also be void.
Liability of the Minor for Torts and
Cirmes:
• A minor is always liable for crimes and torts (civil wrong) he
has committed.
• However, it is not left open to the shopkeeper to convert liability
under civil law to be a liability under torts.
•
• In Burnard Vs. Haggis (1863) 32 L.J.C.P.189, a minor hired a horse
for riding and caused strain to the horse as a consequence of which
action was taken on torts against the minor. The court held a
contractual liability which cannot be converted into a tortuous
liability. Hence, a minor cannot be held liable under torts.
• However, in Jennings Vs. Rundall (1779) 8 E.R.332, a minor hired a
horse for his own use, but lent the horse to a friend of his who
misused the horse and caused injuries to it. In this case, the minor
was held liable under torts as he has no business to lend a horse to
his friend when it was hired for his own use
