#validcontract

This article on "Legal validity of Minor's agreement in India" was written by Shudhi Malhotra, an intern at Legal Upanishad.

Introduction

This article discusses the Legal Validity of the Minor's Agreement in India and its provisions and case laws related to it. The Indian Contract Act, 1972, Section 10, states that not all agreements qualify as contracts. Only agreements signed by parties who have the legal capacity to do so are considered contracts. Furthermore, Section 11 of the Indian Contract Act defines "capable" as including the following three criteria: - The individual must be of legal age, or at least 18 years old. - When the contract is made, he should be competent to enter into it. - Any law that he is subject to shouldn't prevent him from signing contracts. Before engaging in a contract, it might be argued that majority approval is necessary.

Who is a minor?

A minor is an individual who does not have the same legal rights as an adult because they are under the legal age of majority as defined by the regulation of the jurisdiction in which they live. Generally speaking, a minor is someone who has acquired all of the rights and obligations of an adult but has not yet achieved the age of majority. Minor cannot be held accountable or responsible for their conduct. The typical majority age is 18 years old. However, as the permitted drinking age in the United States is generally 21, even if a person is at least 18 years old, they may still be referred to as juvenile in alcohol legislation. A minor is a person who has not attained the age of 18 according to Section 3 of the Indian Majority Act of 1875. If a custodian of a minor's individual or belongings is assigned, the minor becomes 21 years old.

What is Minor's agreement?

Any person who is of legal age under the decree to which they are subject, who is of sound mind, and who is not prohibited from contracting by any ordinance to which they are subject is capable of agreeing, according to Section 11 of the Indian Contract Act of 1872. Therefore, a minor cannot engage in a contract. AGE OF MAJORITY: Section 3 of the Indian Contract Act of 1875 means that any individual residing in India reaches adulthood when they turn 18 years old. Exceptions: 21 years in the following lawsuits: - In cases where a guardian of a minor's individual or belongings has been assigned by the Guardian and Wards Act of 1890. - When property belonging to a juvenile has been transferred under the control of the bench of remarks.

The effects of minor's agreement

The results of this momentous decision can be stated by there is no contractual or tort liability: A minor is incapable of giving permission, and any agreement they make is invalid and cannot be implemented because of this. Rule of Estoppel: It is a lawful principle of proof that forbids a party from causing an allegation that is inconsistent with what he has already said. The tribunal ruled that the estoppel theory does not lay in cases when the individual involved already understands the existence; in this instance, the defendant's attorney was familiar that the complainant was a minor. This regulation does not thus lay on. Restitution of benefit: Section 64 of the Indian Contract Act means that when a party who has the opportunity to nullify an agreement does so, the further party is not required to fulfill their obligations under the contract. This is true for voidable contracts, but a minor's contract is void, thus he cannot be required to pay the finances back to the lender.

The exception in the generally applicable rule

For protecting minors. His agreement is unlawful since it shielded a child. But there are also some exceptions. Upon completion of the minor's duty: A minor may be both the promisee and the promisor in a contract, but not both. If the juvenile is in the role of the promisee and has upheld his end of the bargain but the other party hasn't, he or she may be able to enforce the contract. An agreement made by the minor's guardian for his advantage: A minor may then file a lawsuit against the other party if it breaks its assurance. In the lawsuit of Great American Insurance v. Madan Lal, the custodian of the minor's property signed an insurance contract on behalf of her son. The insurance refused to pay out when the belongings were sabotaged and the minor requested reimbursement, claiming that an agreement with the minor is invalid. Delinquent, however, the bench ruled that this agreement was valid, and he is now required to make restitution. The Contract of apprenticeship: A contract of apprenticeship entered into by a custodian on behalf of a child under 18 years is enforceable under the Indian Apprentices Act of 1850.

Legal validity of Minor's agreement in India

Necessity supplied to a minor

If someone unable to engage in a contract is given the requirements of life by another person, even a child, the person who assisted is entitled to compensation from the incompetent person's property. However, the youngster cannot be forced to pay back the other person if he has no property of his own.

Case Law

Mohribibi vs. Dharmodas Ghosh (1903) Facts The complainant, Dharmodas Ghosh, loaned a juvenile Rs. 20,000 while he was still a minor by pledging his belongings to the defendant, a moneylender. The defendant's attorney was then aware of the plaintiff's age. Later, the plaintiff consented to pay Rs 8000 but vetoed the balance. He sued the defendant, claiming that because he was a minor at the time the contract was formed and as such, he is not obligated by the agreement, on behalf of his next friend and current legal guardian, the plaintiff's mother. Decision According to section 11 of the Indian Contract Act of 1872, minors are not permitted to engage in contracts, the privy council ruled in its ruling. Section 11 of the Indian Contract Act of 1872 provides that every individual who is of the age required by the ruling to which they are subject is competent to contract. Any agreement with a minor is therefore Void ab initio. A valid contract is stated to satisfy all of the conditions outlined in section 11. The court further ruled that the agreement with the minor is void. A minor cannot enter into a contract, hence the mortgage was void. The minor is not obligated to keep any promises he made in connection with the contract, thus he cannot be forced to reimburse the finances that were granted to him. Additionally, the minor is not covered by estoppel legislation.

Can a minor be a partner?

The formation of a contract results in the formation of a partnership, and both parties to the contract must be of legal age. The minor may, however, be accepted to the advantage of the coalition for the period being with the proper approval of all the members, as an exemption under Section 30 of the Partnership Act. But he won't be held responsible for any of his actions.

Conclusion

A minor is not allowed to come into a contract under the Indian contract Act, of 1872 and such a contract would be null and void from the beginning. Minor cannot rely on the ratification of the agreement he reached during his minority when he becomes a member of the majority. A contract that was void in the past cannot be made lawful later on because ratification refers to a time when the individual was still a minor. After reaching the age of the majority, a new contract may be made with new considerations if necessary. Furthermore, a minor's agreement cannot be demanded to be performed specifically since doing so would mean carrying out a full agreement. A youngster will only be held accountable for claims for necessities, though.

References

This article on 'Contract of Pledge under the Indian Contract Act: All you need to know' was written by Rishabh Tyagi, an intern at Legal Upanishad.

Introduction

This article deals with the concept of the pledge as defined under the Indian Contract Act, of 1872 (hereinafter, “Act”). Pledge can be said to be a sub-species of bailment, which involves the delivery of goods in exchange for securing a loan or fulfillment of an obligation. The Act states several nuances important for the contract of pledges like the rights of the Pawnor, and Pawnee, and mentions situations where such rights can be exercised. Sections 172 to 179 of the Act deal with the concept of the pledge.

Ingredients of a pledge

- Delivery of Goods An important element of a contract of a pledge is the delivery of possession of goods by the Pawnor to the Pawnee. Delivery can be either actual or constructive as stated under Section 149 of the Act. In Revenue Authority vs Sudarsanam Picture, the producer took a loan from a financial distributor in exchange for the final print of the film to be delivered when ready. This contract was held to be not a pledge as there was no actual delivery of possession. In certain cases, the good pledged is allowed to remain in the custody of the pledger. In Bank of Chittoor vs Narasimbulu, certain pieces of equipment were allowed to remain with the Pawnor. They were essential for the running of Pawnor’s cinema. It was held to be a case of constructive delivery of possession and the contract came under the domain of pledge. - In pursuance of an agreement The delivery of goods in a pledge by a Pawnor to Pawnee shall be for the fulfillment of a contract. Although the advancement of loans and delivery of goods need not be synchronous. A pledge may be affected by the delivery of possession after an advance is made.

Rights of Pawnee

- Right to Retain Section 173 of the Act empowers a pawnee to retain goods bailed by the pawnor in case of default on interests of the debt and this right is also extended to expenses incurred by him in keeping and preserving the goods pledged. However, Section 174 puts this right in check by stating that a pawnee cannot keep the goods for a contract that was never executed between the Parties. The possession of goods shall remain with the pawnee only for the promise they were pledged. After the payment of debts or the performance of obligations on part of the pawnor, the goods shall be duly returned by the pawnee. Act under Sections 160 and 161 provide the remedy to the pawnor in relation to the return of bailed goods and puts the liability on the pawnee in case the return is not possible due to negligence on his part resulting in deterioration, loss, or damage to the bailed goods. - Extraordinary Expenses Sometimes it so happens that certain goods require preservation costs which fall upon the pawnee. For example, if a person delivers his aeroplane as a pledged good, its preservation would be expensive until the pawnor fulfills part of his obligations. So, Section 175 empowers the pawnee to receive remuneration for such maintenance or preservation of the pledged goods. - Default on the part of the pawnor When there is a default or breach on part of the pawnor in terms of payment, the Act via Section 176 empowers the pawnee via two pathways. Firstly, the pawnee may file a suit against the pawnor for default and keep the goods as collateral security. The right to sue is a personal act and a lot depends upon the terms of the loan contract. But, the pawnee can until the suit or debt is settled, retain the goods. Secondly, the pawnee is entitled to sell the good, provided reasonable notice is given to the pawnor. This requirement of giving a reasonable notice is statutory and it cannot be dispensed with by putting a contrary clause in the contract. These two rights of suing and selling goods are not related to each other and are disjunctive.

Right to Redeem

The provision under Section 177 gives the pawnor a right to redeem the goods pledged. Even if the pawnor fails to pay on time, the provision enables him to redeem the goods before the sale or another deadline provided that additional expenses must be paid by him that occurred due to default on his part. In case the goods are sold by the pawnee, two situations arise. In the first scenario, if the goods are sold at a loss, the pawnor would still be liable to pay the deficit amount. In the second case, if the sale is made for a profit, the excess amount shall be paid by the pawnee to the pawnor. What can be inferred from this provision is that the pawnor has an absolute right to redeem once the debt or the amount due is cleared. On satisfaction of a debt or arrangement between the pawnor and pawnee, the pawn extinguishes and the pawnee is obliged to return the pledged goods.

Contract of Pledge under the Indian Contract Act, 1872

Possession under Voidable Contract

Section 178A deals with a case where the possession of goods obtained by the pawnor is subject to a contract voidable under provisions of Section 19 or 19A. If such a contract hasn’t been rescinded at the time of pledge, the Act provides that the title of pawnor over such goods holds good.

Conclusion

There are different types of contracts that are mentioned in the Act, the pledge being a niche among them. It is a special type of contract which differs even from its nearest relative i.e., bailment. Two important factors determine whether a given arrangement is a pledge or not. There shall be a delivery of goods (either constructive or actual) and such a delivery shall be in line with a contract made for that specific arrangement agreed upon by both the pawnor and pawnee. The provisions in relation to the rights of the pawnor and pawnee seem to resemble those given in the Transfer of Property Act, of 1882 for the rights in a mortgage agreement (although both are different domains). On an overall view of the pledge-related provisions, the Act does seem to create a balance between the rights of the pawnor and pawnee.

References