Blog Details

A Contract or an Agreement with Minor

Author - Associate Kantika Mukherjee

Whether A Contract or an Agreement with a Minor is valid as per Indian Contract Act, 1872?

Contracts

An agreement made between two or more individual’s creating responsibilities that are enforceable or otherwise recognizable at law. A contract is an agreement applicable by law. The Contracts or agreements amid various individuals are formed and validated by the Indian Contract Act.

 As per the Indian Contract Act, 1872, the term “Contract” means under its section 2 (h) as an agreement enforceable by law.

The essential elements of a valid Contract are:

Offer and Acceptance

Intention to create a legal relationship

Lawful Consideration

Competent parties

Free consent

Lawful Object

Contract Not expressly declared void

One of the main essentials of a valid contract is the competence of the parties to form a contract. Section 11 of the Indian Contract Act, 1872, states that the capacity to contract for an individual to be reliant on three aspects:

attaining the age of majority

being of sound mind and

not disqualified from entering into a contract by any law that the person is subjected to

A contract with minor or an agreement is void ab initio, explain.

A Contract or an agreement with a minor  is void as per Indian contract act, A Minor and contract law does not mix really well, so generally contracts by minors as minor contracts are avoided and contract with minor or minor agreement is void ab initio (legally void from the start). In this article, we will find about a Minor’s capacity to contract and how contract with minor or an agreement with a minor is void ab initio explaining its consequences.

Who is a minor in contract law?

A minor in contract law is the one who has not gained the age of majority or a person under 18 years old.

Who is a minor in business Law? {Minor Agreement}

Answer to the question, 'who is a minor in business law?’ can be found in the Indian Majority Act, 1875, which specifies the age of majority in India as 18 years. Even a day short of the specified age of entering in a contract disqualifies the individual from being a party to it. Any individual, domiciled in India, who has not attained the age of 18 years, is referred to as a minor.

A minor can be an individual who has not attained the age of 18 years and the attaining majority for every contract is an essential condition precedent. The question ‘who is a minor in business law?’is very important because agreements with minors as per indian contract act, a minor's agreement stands void, which means that it has no stand whatsoever in the eyes of the law. So a contract with a minor or an agreement with a minor stands null and void since either party can not impose it. And even after the person attains majority, the same agreement cannot be ratified by him. The difference here is that a minors contract is void/null; So a contract however, it is not illegal as there is no statutory provision on this. The answer to ‘who is a minor in business law?’ is clear from the above discussion.

Eligibility Criteria for minor to become partner {Minor in business law}

A person must be of Indian origin.

An individual should not reach the age of majority.

He or she should be of sound mind while signing a contract.

Any legislation should not exclude him or her from entering into a contract.

He or she must meet the conditions for being a partner.

Essentials of minor to become a partner {Minor in business law}

Consent of all partners- A minor can become a partner with the consent of all of the firm's current partners.

There must be a particular business- There must be an established business with a partner vacancy. A minor cannot create a business on his or her own.

Rights of Minor as a partner {Minor in business law}

Right to be a partner

Right to share the profits

Right to access to books of account

Not liable for any loss

When the minor attains the age of majority then he/she has the right to decide to be a partner or not.

Liability of Minor {Minor in business law}

If the minor decides to withdraw the partnership then he/she has to give a notice.

Insolvency of the minor’s share- When the minor's portion becomes insolvent, the minor is not accountable for any damage.

Liable to third party

Liabilities will be same as of a regular partner

A Contract or An Agreement with minor is void explain

Why Contact/Agreement with Minor is void ab initio Explain.

Since any contract with minors, that is any individual less than 18 years of age cannot contract, a minor agreement is void ab-initio (from the beginning).

We get it a contract or agreement with minor will be void-ab-initio which means void from the beginning. But why it’s void-ab-initio when you enters into an agreement with minor void explain because Minor is an incompetent party as per contract law they don’t have that intent of mind to understand the circumstances or a contract or agreement.

Case law: Radhey Shyam Gupta vs. UP State Agro Industrial Corporation ( this case law may answer to the question, “Contract/Agreement with minor is void explain”)

A Minor in contract law could be a beneficiary of a contract {Minor Agreement}

Though a minor is not qualified towards entering a contract, he could be the beneficiary of one. Section 30 of the Indian Partnership Act, 1932, also states that while a minor cannot become a partner in the partnership firm, the benefits of the firm could be extended towards him. So a contract with minors or agreement can it be taken forward for his/her own benefit .

However a minor is not competent to form a contract, nothing in the Contract Act stops him from making the other party bound to the minor. Therefore, a promissory note executed adequately in favour of a minor is not void and could be sued upon by him. A minor is not allowed to become a partner in a partnership firm. But an underage person might with the consent of all partners, be admitted to the benefits of a partnership.

A Minor must get the benefit of being a Minor

Even if a minor incorrectly represents himself as a major as well as takes a loan or enters into a contract, he could plead to the minor. The rule of estoppel does not apply to a minor. He could plead his minority in his defence.

Where a minor falsely came into a minor agreement and mortgaged and sold a property, as the minor agreement is void ab initio, the Court considers that at the instance of a minor as the lender, and the purchaser, both should be compensated on cancellation of such an agreement.

Ratification on attaining majority is not permitted as minor agreement is void-ab-initio

As an agreement with minor is void, he could not validate it through ratification on attaining majority. For example, a minor borrows cash and executes a promissory note. On attaining majority, he furnishes a new promissory record in substitution of the one implemented as a minor. The second promissory note is also void without consideration. But an individual who supplies necessaries of life to a minor, or to one whom the minor is lawfully bound to support according to his situation in life, is permitted to be reimbursed from the property of the minor, not based on any contract, but on responsibility resembling a contract. However, a minor’s property is legally responsible for necessities, and no personal liability is incurred through him.

Contract by Guardian {Minor Agreement}

Under some circumstances, a guardian of a minor could enter into a valid contract on behalf of the minor. Such an agreement, which the guardian enters into for the advantage of the minor, could also be enforced by the minor and is considered a valid contract/agreement.

However, guardians must not bind a minor by a contract for buying immovable property. However, a contract entered into through a certified guardian of a minor, appointed by the Court, with authorization from the Court for the sale of a minor’s property could be enforced.

Insolvency

A minor in business law could not be declared insolvent as he cannot avail debts. Also, if any dues are pending from properties of a minor, then he is not legally responsible for the same.

Joint contract by a Minor and an Adult {Minor Agreement}

For a joint contract between an adult and minor, executed by the guardian on behalf of a minor, the contract’s legal responsibility falls on the adult. If there is involvement of the guardians/parents of the minor then it will be a valid contract/agreement.

Liability for necessaries {Agreements with Minors as per Indian Contract Act is void}

As per section 68, any person shall be entitled to reimbursement out of the minor contract for necessaries supplied towards him or his family. Necessities also consist of goods and services. So, a minor’s agreement amounting to payment for necessaries can be enforced.  If a minor had acquired payment falsely by concealment of age, then he might be compelled to restore the payment. However, he cannot be obliged for an identical amount, if any, as it would sum to enforcing a void contract.

Exceptions to the General rule of Minor Agreement

When the minor has performed his obligation- A minor may be a promisee rather than a promisor in a contract. So, if the minor has fulfilled his portion of the promise but the other party (promisor) has not, the minor, as a promisee, can enforce the contract.

Contracted by the minor’s guardian for his benefit- Minor can sue the other party for not performing the contract.

Contract of Apprenticeship- Under the Indian Apprentices Act, 1850, a contract of apprentice entered by the guardian on minor’s behalf is binding on the minor.

The legal consequences of a contract with a minor {Minor in contract law}

Thus it could be said that as per law, an agreement formed and entered into by a minor is void. Agreements with minors as per Indian contract act  and also as per the Indian Contract Act states that only an individual who is a major that is who has attained the age of 18 years is competent to contract. The primary reason for holding a minor’s agreement void is that where an agreement, through which a minor includes a promise on his part or his promise, is an essential part of the agreement, it stands void since a minor is not qualified to make a promise imposing a legal obligation.

Any minor’s agreement cannot call for a specific performance by a minor as any contract/agreements with minors as per Indian contract act minor is void-ab initio.

Minor in contract law are as observed above are not at all parallel to each other. Minors are not burdened by law to comply with obligations