Minor’s Capacity to Contract.

In the world of commercial transactions and legal agreements, contracts form the backbone of business operations. But what happens when one of the parties involved is a minor — someone under the legal age of majority? This brings us to a fundamental principle of contract law: a minor’s capacity to contract.

Minor’s Capacity to Contract

Who is a Minor?

Under Indian law, specifically the Indian Majority Act, 1875, a person is considered a minor if they have not completed 18 years of age. In some cases—like if the minor is under a guardian appointed by the court—the age of majority extends to 21 years. Similar age-based definitions exist in other jurisdictions as well, though the age limit may vary slightly.

What the Indian Contract Act Says

According to Section 11 of the Indian Contract Act, 1872, a person is competent to contract if they:

• Are of the age of majority,

• Are of sound mind, and

• Are not disqualified from contracting by any law.

This makes it clear that minors are not competent to enter into a contract.

The Landmark Case: Mohori Bibee v. Dharmodas Ghose (1903)

This iconic case set the precedent for how contracts involving minors are viewed under Indian law. In this case, a minor executed a mortgage in favor of a moneylender. Later, the minor sought to cancel the contract on the ground of his minority at the time of execution.

The Privy Council held that the contract was void ab initio (invalid from the outset), as a minor lacks the legal capacity to contract. This case continues to be a cornerstone of Indian contract law.

Effects of a Minor’s Contract

1. Void Ab Initio Any contract with a minor is not just voidable—it is void from the beginning. This means it has no legal effect and cannot be enforced by either party.

2. No Estoppel Against a Minor Even if a minor falsely represents themselves as a major, they are not estopped (i.e., legally prevented) from later claiming minority as a defense.

3. No Ratification Upon Majority A contract entered into during minority cannot be ratified (confirmed) after attaining the age of majority. The individual would need to execute a fresh contract.

4. Restitution in Some Cases If a minor has unjustly received benefits under a void contract, courts may order restitution under Section 33 of the Specific Relief Act, 1963, but only to the extent that the benefit still exists in the hands of the minor.

   
   

Exceptions: When Minors Can Enter Contracts

Despite the general rule, there are certain exceptions where contracts involving minors may be enforceable:

• Contracts for Necessaries: Under Section 68 of the Indian Contract Act, a minor is liable to pay for "necessaries" supplied to them, such as food, shelter, education, and medical care. However, the liability is not personal—it is against the minor’s estate, if any.

• Beneficial Contracts: Courts may enforce contracts that are clearly for the benefit of the minor, such as a scholarship agreement or a trust created for a minor's benefit.

• Minor as a Beneficiary: A minor can receive benefits under a contract, even if they cannot be bound by it.

  
  

Commercial Implications

From a commercial standpoint, businesses must exercise extreme caution when dealing with individuals who may be minors. KYC (Know Your Customer) processes must be thorough, and age verification should be standard practice—especially in industries like e-commerce, fintech, and real estate.

Conclusion

In contract law, minors are protected by the legal system from being exploited or bound by obligations they may not fully understand. While this protects young individuals, it also places a duty on businesses and professionals to ensure that contracts are entered into only with parties legally capable of doing so. Ignoring this fundamental principle can lead to unenforceable agreements and significant financial and legal consequences.

FAQ

Can a minor enter into a valid contract?

No, a minor cannot enter into a valid contract under Indian law. Any agreement with a minor is void from the beginning and legally unenforceable.

What happens if a minor lies about their age in a contract?

If a minor lies about their age, the contract is still void and unenforceable. The minor cannot be held liable, as estoppel does not apply to minors under Indian law.