COMPETENCE OF PARTIES TO CONTRACT- MINORS- PART II

The first part of competence of parties dealt with certain factors regarding a contract with a minor. This part would elaborate more upon the effect of a contract with a minor.

DOCTRINE OF RESTITUTION

The doctrine of restitution is an equitable doctrine that provides, he who seeks equity must do equity. This doctrine lays down if a minor obtains property or goods by misleading the other party about his age and committing fraud, he can be coerced by the court to restore it as long as it can be traced to the hands of the minor. If the minor has sold the goods or converted them i.e. he does not retain the possession of the goods or property, then he cannot be forced to restore the benefit received by him as it will result in enforcing a void contract.

This doctrine was explained in the case of Leslie Ltd. v. Sheill. A minor succeeded in misrepresenting his age and getting a loan of £ 400 from some moneylenders. The moneylenders attempted to recover the loan but their action failed as an agreement with a minor is void and cannot be enforced. The moneylenders presented various arguments that were ultimately rejected by the court. Finally, they relied upon the doctrine of restitution claiming that the minor should be compelled to restore the benefit gained by him. Lord Sumner of the Privy Council rejected this argument and held that this doctrine falls short in enforcing a contractual obligation against the minor even if it was entered through fraud.

“Restitution stopped where repayment began”

Further Lord Sumner said that,

“There is no question of tracing the amount, no possibility of restoring the very thing got by the fraud, nothing but compulsion through a personal judgment to repay an equivalent sum out of his present and future resources. I think this would be nothing but enforcing a void contract.”

Thus, this doctrine is applicable only in cases where the minor has obtained property or goods and not where he/she has received cash as consideration as it is generally not traceable in the hands of a minor.

Position of the Doctrine in India-

The doctrine of restitution lies in section 41 of the Specific Relief Act, 1877 (Section 33 of 1963 Act). The first landmark case in India associated with the doctrine in the case of Mohori Bibee v. Dharmodas Ghosh. This case was discussed in detail in the previous article. The defendants in the case relied upon section 41 of the Specific Relief Act, 1877 (Section 33 of 1963 Act). Section 41 stated that while 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 party as justice may require. Their Lordships held that,

“This section no doubt gave a discretion to the court; but the court of first instance and subsequently the Appellate Court, in the exercise of such discretion, came to the conclusion that under circumstances of this case justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy, and their Lordships see no reason for interfering with the discretion so exercised”.

This case thus laid down the principle that the doctrine of restitution would be applicable only in cases where the minor has fraudulently misrepresented his age. If the other party is aware of the age of the minor like in the case of Mohori Bibee then this doctrine will not be applicable.

Another landmark case, Khan Gul v. Lakha Singh, decided by the Lahore High Court. In this case, the defendant entered into a contract to trade a plot of land to the plaintiff by deceitfully misrepresenting his age. He obtained a consideration of Rs 17,500 but then he denied to hand over the land. The plaintiff initiated action, praying for possession of land or recovery of consideration. The question that arose was,

"Can a minor who has entered into a contract by false representation refuse to perform the contract and at the same time retain the benefit he may have received therefrom?"

His Lordship enlarged the view of restitution of cash as well, contrary to the decision of the Privy Council in the case of Lesli ltd. and ordered the refund of consideration and opined that,

“The doctrine of restitution is not confined to cases covered by sections 39 and 41 of the Specific Relief Act,1877 i.e. where minor is plaintiff (sections 31 and 33 of 1963 Act). The doctrine rests upon the salutary principle that a minor cannot be allowed by a court of equity to take advantage of his own fraud. The scope of this doctrine should be extended in India as all minor’s agreements are void whereas there is no such general rule in England.”

This opinion was however not followed by other High Courts in further cases like Ajudhia Prasad v. Chandan Lal and Gokeda Latcharao v. Viswariadham Bhimayya. It was held by these courts that the decision of the Privy Council in Leslie Ltd. is the prime authority in such cases. Taking any other view would be contrary to the great preponderance of the authority in England simultaneously ignoring the distinction between the position of a minor as a plaintiff (restitution allowed) and as a defendant (restitution not allowed). Allowing to claim restoration in cases where the consideration is non-traceable means enforcing the contract and there is no rule of equity that allows a court to enforce a void contract of a minor against him.  

This controversy was finally settled by enactment of section 33 of the new Specific Relief Act,1963. Section 33 is divided into two sub-sections:

Sub-section (1) grant courts the discretion to compel a minor-plaintiff to restore the benefits acquired by him which justice may require. For example, where a minor sells a property to a person by misrepresenting his age then he is liable under this section to restore any benefit that has been received by him to the purchasers. But the court will not compel any restitution by a minor-plaintiff in the following two cases,

·       where the other party was not deceived and was aware of the infancy like in the case of Mohori Bibee, or  

·       where the other party produces nothing before the court for concluding that justice requires that the money paid to the minor be returned.

Sub-section (1) does not alter the earlier law.

Sub-section (2), however, amends the doctrine to the extent that if a minor is brought as a defendant before the court and he claims that the contract is void due to him/her being a minor then he/she can be compelled to account for such benefit as has been received by him/her or his/ her estate.

 

BENEFICIAL CONTRACTS

The proposition that minors cannot form agreements means that the courts cannot enforce any contractual obligations binding the minor. Thus, a minor can enforce a contract entered into by him or his guardian which is beneficiary to the minor and under which he does not have any contractual obligation. There are certain contracts that are prima facie considered beneficial to a minor by the courts.

a.     Marriage- Contracts of marriage are considered prima facie for his or her benefit. For example, the guardian of a minor entered into a contract of betrothal on behalf of the minor. If the contract is breached then he can sue for breach of contract on behalf of the minor. (Khimji Kuveriji Shah v. Lalji Karamsi Raghavji)

 

b.     Contracts of apprenticeship- Contracts of apprenticeship are contracts of service which are for the benefit of the minors entered into by their guardian and are binding upon the minors according to the Indian Apprentices Act, 1850.

 

c.    Trade contracts- Trade contracts are not considered prima facie as beneficial to the minors. For example, a minor is doing a business of clothes and he enters into a contract with a retailer wherein the minor has to supply the retailer 100 pieces of shirts. The minor sends 50 shirts which are rejected by the retailer as of poor quality and fail to provide the rest 50 shirts. The retailer cannot sue for the breach of contract as this contract is not a beneficial contract and only such contracts can be enforced by the parties. (Cowern v. Nield)

 

RATIFICATION

A minor cannot ratify a contract entered into by him/her while he was a minor after attaining majority. The rationale behind such a rule is that ratification relates to the previous contract which was void and a void contract cannot be made valid subsequently.

Let’s discuss certain situations where a minor attains majority:

1.     Old contract + old consideration = not binding

2.  Old contract + old consideration + fresh consideration = binding (Kundan Bibi v. Shree Narayan, Narain Singh v. Chiranjilal)

3.   Two contracts- old and fresh - fresh contract + old consideration = not binding (Nazir Ahmad v. Jiwan Das)

4.     Fresh contract + fresh consideration = binding

*old contract- entered by the person while being a minor

*old consideration- given instead of an old contract while being a minor

*fresh contract- entered by the person after attaining majority

*fresh consideration- given after attaining the majority in place of old/ fresh contract

A landmark case in this regard is Anant Rai v. Bhagwan Rai where a minor paid the debt after attaining majority incurred by him while he was a minor. It was held by the Allahabad High Court that he cannot recover the amount afterward.

The next article will deal with the aspects of a contract with a person of unsound mind. Stay tuned!

BY

LAWVASTUTAH

 

 

REFERENCES-

1.     Indian Contract Act, 1872.

2.     Specific Relief Act,1877.

3.     Specific Relief Act,1963.

4.     Pollock & Mulla, The Indian Contract and Specific Relief Acts, 16th edition.

5.     Avtar Singh, Contract and Specific Relief, 12th edition.

6.     Leslie Ltd. v. Sheill, (1914) 3 KB 607 (CA), 618.

7.     Mohori Bibee v. Dhurmodas Ghose, (1903) 30 IA 114: ILR (1903) 30 Cal 539 (PC).

8.     Khan Gul v. Lakha Singh, ILR (1928) 9 Lah 701: AIR 1928 Lah 609.

9.     Ajudhia Prasad v. Chandan Lal, AIR 1937 All 610, 617 (FB).

10.  Gokeda Latcharao v. Viswariadham Bhimayya, AIR 1956 AP 182.

11.  Khimji Kuveriji Shah v. Lalji Karamsi Raghavji, AIR 1941 Bom 129.

12.  Cowern v. Nield, (1912) 2 KB 419.

13.  Kundan Bibi v. Shree Narayan, (1906) 11 CWN 135.

14.  Narain Singh v. Chiranjilal, AIR 1924 All 730: ILR (1924)46 All 568.

15.  Nazir Ahmad v. Jiwan Das, AIR 1938 Lah 159.

16.  Anant Rai v. Bhagwan Rai, AIR 1940 All 12.