Contract Business law: Validity of Contracts by Minors

A contract is an agreement by two or more parties that is enforceable by law. All contracts are agreements but all agreements are not contracts. A contract should have few essential elements to be considered as valid. In case any of the requirements are not fulfilled, the contract is considered to be void. One such essential requirement is that both the parties entering the contract should have attained the age of majority. As per the Indian Majority Act, 1875, a person who has not completed the age of 18 years on the date of contract is considered as a minor. There are two exceptions where a person may be considered major only on completion of the age of 21 years.

The two special cases are:

• Where the court has appointed a guardian to the individual or property.
• Where the property of the minor is under the guardianship of the Court of Wards. Typically in India, this refers to the court that assumes overall superintendence of the ward or the minor.

Contract Business law: Is a Minor’s Contract Void or Not?

In a landmark case of Mohori Bibi vs. Dharmodas Ghose, the council held that a minor’s contract is null and void from the beginning. Neither of the parties acquires any rights nor can they be held liable in cases where the contract is formulated with a minor. The main reason for the contract with a minor to be considered invalid is that a minor is not capable of taking a rational decision. Also, it is accepted by law that a minor cannot judge his own interests.

Other pertinent points relating to the position of a minor in a contract are:

Minor can be Promisee: Although a contract is considered void if it is entered with a minor, a minor can gain benefit under a contract and be a promisee. The benefits specified for the minor can be derived only by the minor.

Ratification of Contract: A void contract that a minor entered cannot be ratified even after he reaches the age of majority. This means it cannot be validated by law when the minor reaches the age of majority.

Partnership: A minor cannot be included in a partnership. However, he can enjoy the benefits of the partnership with the approval of other partners. It is advisable to avoid including a minor in a partnership.

Minor’s Parents: The parents of a minor cannot be held liable for any agreement that the minor enters into. However, they can be held liable in case the minor is acting as their agent.

Insolvency: A minor can be never considered as insolvent.