Are contracts with minors valid? | Legal Reasoning for CLAT PDF Download

A minor is not competent to contract

• A contract with or by a minor is void and a minor, therefore, cannot, bind himself by a contract.
• In English Law, a minor’s contract, subject to certain exceptions, is only voidable at the option of the minor.
• In 1903 the Privy Council in the leading case of .

Held : That in India minor’s contracts are absolutely void and not merely voidable.

The facts of the case were:

Example- 

• Dharmodas Ghose, a minor, entered into a contract for borrowing a sum of Rs. 20,000 out of which the lender paid the minor a sum of Rs. 8,000. The minor executed aside the mortgage. The Privy Council had to ascertain the validity of the mortgage.
• Under Section 7 of the Transfer of Property Act, every person competent to contract is competent to mortgage. The Privy Council decided that Sections 10 and 11 of the Indian Contract Act make the minor’s contract void. The mortgagee prayed for refund of Rs. 8,000 by the minor. The Privy Council further held that as a minor’s contract is void, any money advanced to a minor cannot be recovered.

A minor can be a promisee or a beneficiary

• During his minority, a minor cannot bind himself by a contract, but there is nothing in the Contract Act which prevents him from making the other party to the contract to be bound to the minor. Thus, a minor is incapable of making a mortgage, or a promissory note, but he is not incapable of becoming a mortgagee, a payee or endorsee. He can derive benefit under the contract.

A minor’s agreement cannot be ratified by the minor on his attaining majority

• A minor cannot ratify the agreement on attaining the age of majority as the original agreement is void ab-initio and, therefore, validity cannot be given to it later on.

Example-

• A, a minor makes a promissory note in favour of B. On attaining majority, he makes out a fresh promissory note in lieu of the old one. Neither the original, nor the fresh promissory note is valid.

If a minor has received any benefit under a void contract

• He cannot be asked to refund the same. We have mentioned the facts of Mohiri Bibi’s case. Under that case, the lender could not recover the money paid to the minor. Also the property mortgaged by the minor in favour of the lender could not be sold by the latter for the realization of his loan.

A minor is always allowed to plead minority

• And is not estopped 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. Thus, a minor who has deceived the other party to the agreement by representing himself as of full age is not prevented, from later asserting that he was a minor at the time he entered into agreement.

Example-

• S, a minor, borrowed £400 from L, a moneylender, by fraudulently misrepresenting that he was of full age. On default by S, L sued for return of £400, and damages for the tort of deceit.

Held: L could not recover £400, and his claim for damages also failed. The court did not grant the relief; otherwise, it would have been an indirect way of enforcing a void contract. Even on equitable grounds, the minor could not be asked to refund £400, as the money was not traceable and the minor had already spent the same.