Capacity to Contract: Why Age Is Non-Negotiable?

Under Indian contract law, capacity refers to the legal permission for entering into a contract. Section 10 of the Indian Contract Act, 1872 lists the essentials of a valid contract and one of those essentials is competency of parties to contract. Here, section 11 lists three conditions which must be fulfilled for a person to be competent to contract.

As per section 11 competence requires majority, soundness of mind, and absence of disqualification. The Indian Majority Act, 1875 fixes the age of majority at 18 years, and 21 years where a guardian is appointed by court. Anyone below this threshold is legally incapable of contracting.

This incapacity is absolute. Courts do not inquire whether the minor understood the transaction or benefited from it. The law presumes vulnerability and stops there.

 Mohori Bibee v. Dhurmodas Ghose: The Law Frozen in Place

The Privy Council decision in Mohori Bibee v. Dhurmodas Ghose (1903) ILR 30 Cal 539 (PC) is a landmark judgment in this regard.

Issue

Whether an agreement entered into by a minor is voidable or void.

Held

A minor’s agreement is void ab initio means void from the very beginning.

This single holding shuts multiple doors:

• No enforceability

• No ratification on attaining majority

• No estoppel against the minor

• No contractual restitution

In this case, Dharmodas Ghose, mortgaged his property, the moneylender knew the borrower was a minor. The court refused restitution, making it clear that equity cannot override statutory incapacity.

 Why Estoppel and Contractual Restitution Fail?

Defendants often attempt three arguments and all were rejected in Mohori Bibee:

1. Estoppel (Section 115, Evidence Act)

 Rejected because estoppel cannot create capacity where law denies it. And in case of a minor’s agreement, law denies the capacity to contract, hence doctrine of estoppel cannot be used to stop the minor from backing off.

2. Sections 64 and 65, Contract Act

Inapplicable because these sections presuppose a valid agreement or one discovered to be void, not one void from inception.

3. Equitable Fairness

 Equity follows the law; it does not rewrite it. This rigid approach protects minors but it creates practical injustice when minors misuse protection.

The Problem Case: When the Minor Is Not Innocent

What happens when a minor lies about age, takes money, refuses performance, and pleads minority? Mohori Bibee offers no remedy. Indian courts had to evolve carefully.

That evolution begins with Khan Gul v. Lakha Singh (AIR 1928 Lah 609).

Khan Gul v. Lakha Singh: Equity Without Contract

Facts

A minor sold land, received full consideration, and denied possession.

Key Questions

1. Can estoppel apply against a minor?

2. Can a minor retain benefits obtained through misrepresentation?

Answer

• No estoppel. Contract law overrides general estoppel principles.

• Yes restitution. Minority in India is a fact, not a right.

Chief Justice Shadi Lal’s reasoning is crucial for practice:

• There is no real distinction between restoring goods and restoring money, except physical form.

The court did not enforce the contract. It merely ordered restoration of benefit to prevent unjust enrichment.

Judicial Conflict and the Need for Legislative Clarity

Not all courts agreed. In Ajudhia Prasad v. Chandan Lal (AIR 1937 ALL. 610), restitution against a minor defendant was denied, reviving uncertainty. This conflict created litigation chaos and confusion around cases where minors actual were at wrong and also retaining all the benefits.the Law Commission stepped in.

 Section 33, Specific Relief Act, 1963: The Settlement Clause

Section 33 resolves the conflict decisively. If a party seeks rescission or declaration that a contract is void, and any party has received a benefit,

Then that benefit must be restored, regardless of who is plaintiff or defendant.

This provision:

• Does not validate the contract,

• Does not impose contractual liability,

• Does prevent unjust enrichment.

It legislatively endorses Khan Gul.

Indian vs English Position: Why India Chose Expansion

The scope of restitution was expanded in India primarily because of the fundamental difference in how minority is viewed in India versus England.

In England, minority is considered a “right”. This means that if a minor takes money, it’s considered their right to retain it, and they cannot be compelled to return it, especially since money is not physically restorable.

However, in India, minority is considered a “fact”. This means that a contract entered into by a minor is inherently void. Chief Justice Shadi Lal, in the Khan Gul v. Lakha Singh case, argued that there’s no essential difference between a minor being asked to return goods and being asked to return money, other than the physical nature of the asset.

Since minority is a fact in India, the Doctrine of Restitution’s scope was broadened to ensure that if a minor obtains money by misrepresenting their age, they can be compelled to return it. This expansion was aimed at preventing minors from unjustly enriching themselves through fraud.

Beneficial Contracts: The Narrow Exception

Some contracts for the benefit of a minor are enforceable not against the minor but in their favour.

Examples:

• Education contracts

• Apprenticeship agreements

• Contracts supplying essential necessities

Section 68 of the Contract Act ensures that a person who supplies necessaries suited to the minor’s condition can recover the value not as contractual enforcement, but from the minor’s estate.

Agency and Partnership: Partial Recognition

A minor cannot enter a valid contract of partnership but Section 30 of the Partnership Act allows a minor to be admitted to the benefits of an existing partnership. They earn, receive profits, and enjoy protections but bear no personal liability.

For agency, a minor can act as an agent, but they cannot be bound by contractual obligations personally. In simple terms a minor may enable a contract, but cannot be the contracting party.

Litigation-Ready Takeaways

In trials and enforcement disputes, the burden almost always falls on the adult party. Courts examine:

• Age at the time of agreement,

• Nature of consideration,

• Whether necessity or exploitation existed,

• Whether restitution is equitable and possible.

If the contract was purely commercial such as sale, loan, purchase, mortgage, enforcement is unlikely.

If the contract was clearly for the minor’s welfare such as apprenticeships, medical services, accommodation, enforcement through restitution or equity is more likely.

Conclusion

Indian law draws a hard line on capacity. A minor’s agreement remains void ab initio, immune from enforcement. Yet the law has matured enough to ensure that protection does not become a weapon.

This framework is designed to ensure one side isn’t destroyed before adulthood while ensuring some degree of justice for the aggrieved party.

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