Page 37 - DCOM103_COMMERCIAL_LAW

Commercial Law

Notes The position of minors contract may be summed up as follows:

1. A contract with a minor is void, and a minor, therefore cannot bind himself by a contract.
A minor is not competent to contract. In Mohiri Bibi v. Dharmodas Ghosh the facts were as
follows:

Dharmodas Ghosh, a minor, entered into a contract for borrowing a sum of ` 20,000 out
of which the lender paid the minor a sum of ` 8000. The minor executed a mortgage of
his property in favour of the lender. Subsequently, the minor sued for setting aside the
mortgage, the court ordered for setting aside the mortgaged. The mortgagee, prayed for
refund of ` 8000 by the minor. Held, further that as a minor’s contract is void, any money
advanced to a minor cannot he recovered.

2. A minor can be a promisee or a beneficiary: During his minority, a minor cannot bind

himself by a contract, but he may enforce a contract for his benefit. Thus, a minor is
incapable of making a mortgage, or a promissory note, but he is not incapable of becoming
a mortgagee or a payee he can derive benefit under the contract.

3. A minor’s agreement cannot he ratified by the minor on his attaining majority as the

agreement is void ab initio.
4. If a minor has received any benefit under a void contract, he cannot be asked to refund the

same (see Mohisi Bibi’s case given above).
5. 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.
6. A minor cannot be a partner in a partnership firm. However, a minor may, with the consent

of all the partners for the time being, he admitted to the benefits of partnership (Section 36
of the Indian Partnership Act, 1932).
7. A minor’s estate is liable to a person who supplies necessaries of life to a minor, or to one
whom the minor is legally bound to support, according to his station in life. This liability
of the minor is not on the basis of any contract, but on the basis of an obligation resembling
a contract. However, there is no personal liability of a minor for the necessaries of life as
supplied.
8. A minor’s parents/guardians are not liable to a minor’s creditor for the breach of contract
by the minor, whether the contract is for necessaries or otherwise. However, the parents
are liable where the minor is acting as their agent.

3.1.3 Mental Incompetence Prohibits a Valid Contract

A person who is not of sound mind may not enter into a contract; he must be of sound mind so
as to be competent to contract. A test of soundness of mind has been laid down by law. A person
is said to be of unsound mind for the purpose of making a contract if at the time he makes it he
is incapable of understanding it and of forming a rational judgement as to its effect upon his
interests. A person who is usually of unsound mind but occasionally of sound mind may make a
contract when he is of sound mind (S.12).

Example: (i) A patient is in a lunatic asylum. He is, at intervals, of sound mind. He may
contract during those intervals.
(ii) A sane person, who is delirious from fever or who is so drunk that he cannot understand the
terms of a contract or form a rational judgement as to its effect on his interests, cannot contract
whilst such delirium or drunkenness lasts.

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