The Indian Contract Act, 1872 is important legislation in the field of commercial law in India. It is basically responsible for regulating contractual relationships and obligations. A common legal complexity often arises when an agreement with minor parties takes place. This is problematic because the Act does not permit such agreements outrightly.
Section 11 of the Contract Act, 1872 explains the requirements of competency for entering into contracts. Individuals or entities can create contracts only if they meet these requirements. The very first such requirement is that of majority age.
The general rule of contracts is that every person, whether natural or artificial, can enter into contractual obligations.
Section 11, however, lays down certain exceptions. For example, minors, persons of unsound mind and those whom the law specifically disqualifies are the exceptions.
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The rationale behind Section 11 is that all parties to a contract must be competent to understand their obligations. Since a mature mind is important for this purpose, the law prohibits agreement with minor parties.
This is because minors would find it difficult to comprehend and fulfil their obligations. Hence, the law itself prohibits them from creating contracts.
Agreement with Minor parties
Section 11 states that only persons who have attained majority according to the law are competent to contract. Therefore, there must be a law that defines the age of majority.
In India, the Indian Majority Act, 1875 declares the age of majority of all persons to be 18 years. If a minor has a guardian or Court of Ward looking after him, his age of majority becomes 21 years. Hence, any contract with a party below the age of 18 years is invalid as per the Act.
A very important case that had explained this issue is Mohiri Bibi v. Dharmodas Ghose. In this case, a minor had borrowed some money from a money-lender by mortgaging his house.
The money-lender moved to take possession of the minor’s house when he defaulted payment. The court, however, said since an agreement with minor parties is void, the money-lender could not enforce this contract.
For example, a minor cannot transfer property as per the Transfer of Property Act. He can, however, receive property from other persons under a legal contract.
Rules relating to Agreement with Minor Parties
Although, as a general rule, a contract with minors is void, we must keep in mind the following rules as well:
1) A contract with a minor is void and, hence, no obligations can ever arise on him thereunder.
2) The minor party cannot ratify the contract upon attaining majority unless a law specifically allows this.
3) No court can allow specific performance of a contract with minors because it is void altogether.
4) The Partnership Act also prohibits minors from becoming partners in a firm. They can, however, receive the benefits of partnership and ratify the same upon attaining majority.
5) The rule of estoppel under evidence law does not apply to minors under contractual obligations. In other words, even if a minor forms a contract claiming majority age, legal obligations cannot arise against him.
6) Parents or guardians of minors can name them in contracts only if it benefits them. But even in this case, the minor cannot be personally liable.
Solved Examples on Agreement with Minor
Question: Find the missing word(s) in the following statements.
(a) Section __________ of the Contract Act states grounds of competency for entering into contracts.
(b) The majority age for an agreement with minor parties is __________.
(c) The __________ Act allows minors to receive property but prohibits them from transferring it.
(d) The rule of __________ under evidence law does not apply to minors in contracts.
Answers: (a) Section 11 (b) 18 years (c) Transfer of Property (d) estoppel