Showing posts with label Indian Contract Act 1872. Show all posts
Showing posts with label Indian Contract Act 1872. Show all posts

INTRODUCTION

The Indian Contract Act of 1872, which is the most important piece of legislation controlling Indian contract law, established the law governing contracts in India. The Act is based on the ideas of English common law. A false claim, active concealment, vow without the purpose to carry it out, any other deceptive act, or any act ruled fraudulent are all listed in Section 17 as activities that constitute fraud. Any of the following conduct undertaken by a constricting party, his collusion, or his agent to deceive or persuade another party or his agent to agree is considered fraud. A decree is a plant that has been obtained through deception, and the operation has moved in a delinquent manner. The court possesses the necessary authority to give relief in such a case, and res judicata rules would not apply. Indeed, innocent misrepresentation may be grounds for a claim of fraud relief. A contract that is voidable under Section 19 is reached by deceit. Even yet, even silence is enough to establish that deception has occurred. If the court is willing to "verify" substantiation, it means the information has been disclosed. The defendant's wicked or felonious purpose can be proven based on the evidence and circumstances of the case. The punishment for fraud is non-compoundable because it includes both a fine and imprisonment. Online fraud has increased as technology has advanced, and committing fraud has recently become a serious crime in the eyes of the law. However, if the agreement was obtained or forced by compulsion, there was undue influence or fraud.

 

FRAUD

 

"Any of the following activities undertaken by a contracting party, his connivance, or his agent to trick or persuade another party, or his agent, to join into the agreement are considered fraud."

Someone who knows or believes a fact deliberately caches it. There was a promise made with no intention of keeping it. Any other behavior that is intended to deceive. Any act or omission that the law has expressly labeled fraudulent. Confidentiality on material likely to influence a person's desire to enter into a contract isn't fraud unless the conditions of the case are comparable enough that it's the person remaining silent's job to speak, or unless his silence is unique to speaking. To be regarded fraudulent, the contractual party, or any other individual with whom he colluded, or his agent, must have subjected him to similar conditioning to persuade him to enter the agreement. The parties have no obligation to communicate about data that could affect the other party's agreement to the contract, and merely remaining silent does not constitute fraud unless the circumstances of the case produce a duty to speak or silence similar to speech.

DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION

The crucial distinction between fraud and misrepresentation is that in the first case, the person making the suggestion doesn’t believe it's true, whereas in the alternate case, he believes it's true, even though in both cases, the pledge is misled by a misrepresentation of the verity. Rattan Lal Ahluwalia v. Jai Janider Parshad was the case. Under common law, fraud not only makes the contract voidable at the discretion of the person whose assent was attained by deception, but it also gives rise to a claim for damages for deception.

CONSTITUENTS OF FRAUD?

The Constituents of Fraud are as follows:

ACTIVE CONCEALMENT

When one party declines to disclose material contract information despite having a legal obligation to do so, this is known as active concealment. It necessitates more than ineffective concealing; it necessitates a deliberate act of concealment. It's vital to note that the previously described unresistant caching relates to silence. While bare silence does not constitute fraud, it may do so when the person should communicate or when silence is equal to speech, according to the provision.

PROMISE WITHOUT INTENTION OF EXECUTING IT

Pledging without intending to keep it's considered fraud. To fall under this section, it must be demonstrated that the pledge had no intention of carrying out the pledge at the time it was made, and any after conduct or representation isn't taken into account.

ESTABLISHING FACTS WITHOUT BEING CONVINCED OF THEIR ACCURACY

To prove that a claim was made with the knowledge of the person making it, it must be shown that the statements were untrue. The assertion must be false in both substance and fact. In Jewson & Sons Ltd v. Arcos Ltd, giving a deceptive print and urging someone to act on it constituted fraud, even if each verity was physically true.

RECKLESS AND AMBIGUOUS STATEMENTS

Whether the representation is made recklessly or intentionally, evidence of the absence of factual and honest belief is all that is required to establish the reality of fraud; inquisitiveness or recklessness on the part of the represented as to the verity or falsity of the representation only serves to illustrate the lack of similar belief. When a statement is ambiguous, the person to whom it is made must prove that he misinterpreted it. If the representative meant the statement to be understood that way, rather than if he truly feels it is accurate but the person relying on it does not, he will be accused of fraud.

WHEN IS SILENCE CONSIDERED AS A FRAUD?

The duty to communicate occurs when one party places their trust and confidence in the other and the other party accepts that trust. The duty to communicate may also apply in the context of a contract, where one party lacks the resources to investigate the truth and must rely on the information provided by the other. Silence can be used as a cover for words in some situations. A person is inversely liable for fraud if he or she maintains silent despite knowing that their silence is dishonest. Although a statement may be true at the time it is uttered, it may become incorrect when it is acted upon by the other person owing to a change in circumstances. Whenever a person shares a commodity, whether or not it is his job to speak, he must reveal all information. Contracts are voidable under Section 19 in the absence of free consent. In this scenario, silence or deception must fall under the definition of fraud as defined in Section 17.

CASES WHERE THERE IS NO FRAUD

Indeed if a false statement was made, the party professing fraud couldn't be supposed to have been duped if it had the data in front of it or could know them. The partition of property on the death of the father and mother wasn’t set away in Janakiamma v. Raveendra Menon because the complainant was apprehensive of the vittles of her father's Will and no new partition was ordered. In the vast maturity of cases, fraud can not be proven with positive and concrete substantiation.

REMEDIES AVAILABLE FOR FRAUD

Even if restitutio in integrum is not possible, as, in Indranath Banerjee v. Rooke, such a suit would provide a remedy. Due to the opposing party's distortion of facts, the plaintiff in Dambarudhar Behera v. the State of Orissa cancels the contract. The plaintiff demanded compensation for expenses incurred during the contract's drafting as well as lost wages until the deception was discovered. The Court awarded him damages, stating that the number of damages awarded for false misrepresentation shouldn't exceed the losses that would have passed if the data hadn't been misrepresented. In the event of a quiet fraud, the complainant has two options the complainant has the right to repudiate, terminate, the contract and seek payment for his losses or confirm the contract and train an action against the defendant for damages. The defendant's malignant or felonious intent can be proven depending on the data and circumstances of the case. The defendant can also face felonious proceedings, which might affect forfeitures or maybe a captivity judgment for the defendant.

PUNISHMENT FOR COMMITTING FRAUD

The punishment for fraud is non-compoundable because it includes both a fine and imprisonment. Online fraud has increased as technology has advanced, and perpetrating fraud has become a serious crime in the eyes of the law. If an existent is found guilty of fraud under Section 447, he can be sentenced to prison for a period ranging from six months to ten years. He will also face forfeitures ranging from the amount engaged in the fraud to three times the amount involved in the fraud. If the circumstances of the fraud are detrimental to the public interest, the perpetrator might be sentenced to a minimum of three years in jail.

CONCLUSION

As a result, being unaware of some material information that affects a person's decision to engage in a contract does not constitute fraud. Silence, on the other hand, may be considered fraud if it can be proved as speech or if the existing must inform the other party of the information. Silence can lead to fraud if one person declines to disclose relevant information, causing harm to the other. Frauds committed all around the world could be the outcome of a dire financial situation. The penalty for fraud is now low, and it should be increased to instill a moral heart in residents so that they are not deceived by the benefits of deception. The general public should be apprehensive of common swindles and should double-check whether the information handed by the party is accurate. Fraud elimination doesn't be overnight, and society as a total must pay the price.

This blog is authored by Dakshita Dhage, a Student of Maharashtra National Law University, Nagpur.

ENDNOTES

1.     THE INDIAN CONTRACT ACT, 1872 <https://legislative.gov.in › sites › default › files>

2.     Avtar Singh, Contract and Specific Relief, 12th Ed (2020)

3.     www.gtlaw.com

4.     www.mondaq.com

5.     https://indiankanoon.org/doc/353998/

6.     Rattan Lal Ahluwalia vs Jai Janinder Parshad on 27 October, 1975 AIR 1976 P H 200

7.     JEWSON & SONS, LTD. v. ARCOS, LTD. (1933) 47 Ll.L.Rep. 93

8.     Janaki Amma And Ors. vs Raveendra Menon And Ors. on 3 June, 1981 AIR 1981 Ker 205

9.     Indra Nath Banerji vs E.G. Rooke on 2 August, 1909 3 Ind Cas 316

10.  Dambarudhar Behera vs State Of Orissa And Ors. on 14 May, 1980 AIR 1980 Ori 188

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INTRODUCTION

In the twenty-first century, tremendous growth and development have taken in trade and commerce. With the development of trade and commerce, a combination of different principles is used to fix the rights and obligations of the parties involved. In India, the rights and obligations of the parties involved in such a contract related to commercial law are laid down in The Indian Contract Act, 1872. It also lays down the legal remedies available to the aggrieved parties entered into the contracts. Any party failing to honor its part of the agreement could be actioned upon due to a binding contract. Hence they give a legal framework for the formation and execution of a contract in India. There are two types of contracts- valid and invalid.

S. 10 of the ICA, 1872 provides for the constituents of a valid contract. An invalid contract may be of two sub-types, void and voidable. It hence becomes important to know the comparison between the two.

VOID CONTRACT

A void contract is not valid. Section 2 (g) of the act, 1872 says defines void.Thus, a void agreement is null from its beginning and no rights are conferred upon parties.As the parties are not bound by the terms of void contract, any of the parties cannot be sued due to the breach of contract and no remedy is available in such a case.

WHAT MAKES A CONTRACT VOID?

A void contract means that the contract has no power or effect, so no party is bound by it and no party can rely on it. Usually, this is because:

·         The purpose of the agreement is illegal or contrary to public policy (illegal consideration or topic)

·         The terms of the agreement are unlikely to be fulfilled or unclear to be understood

·         There was a lack of consideration

·         Fraud (i.e. false representation of facts)

Relevant legal provisions

1.      Mistake of Fact (Section 20) -

This provision states that if the contracting parties are under a mistake of fact (matter of fact) important to the agreement, it is void due to bilateral mistake.

2.      Mistake of law (Sections 23 & 24) -

If the consideration or object of the contract is illegal, then the agreement does not apply as it defeats the provisions of the law. This applies to contracts that the court may consider unethical or in conflict with public policy, such as fraudulent agreements, which may result in financial loss to a person. However, if the legal part of the contract is separated from the illegal part, then the legal part can be enforced in a court of law.

3.      Agreements without Consideration (Section 25) -

This section provides that the contract without consideration will be void unless it is a gift made out of natural affection; it is a debt.

4.      Agreement in restraint of-

·         Marriage (Section 26)

·         Trade (Section 27)

·         Legal proceedings (Section 28)

 

5.      Impossibility/Uncertainty of performance (Section 29, 30, 36)

These sections provide that the agreement, the terms of which are uncertain, based on uncertain events, or based on impossibility, does not apply except in certain circumstances such as that of horse racing.

CASE LAW[i]- Collins v Godefroy[1]

VOIDABLE CONTRACT

Voidable contracts are legal and enforceable in courts.  Section 2 (i) of the act gives light on voidable contracts. One or both parties may terminate the contract at any time under normal circumstances. Contract enforceability is void when one person is minor and not capable to enter into a contract. This is always the case when one does not have the mental capacity to enter into an agreement. Others are simply void if one of the parties did not enter with free will or consent, be deceived, or coerced. Incapacity does not provide for a voidable contract, and if the courts find this, such contract becomes null and void.

WHAT MAKES A CONTRACT VOIDABLE?

Voidable contract binds only one party; the other party may choose to reject or accept it. A contract becomes voidable under various circumstances, including:

• The party was forcing or threatening another party to sign the agreement

• One party had undue influence (one party controlled the will of the other)

• Mistakes in the contract affect whether one or both individuals can fulfill their obligations

• The party violates the terms of the agreement

Relevant legal provisions

1.      Lack of free consent (Sections 19 and 19-A)

2.      Preventing from performing the obligation (Section 53)

Reciprocal promise based contracts and situations where and one of the parties prevents the other from fulfilling its obligations under the contract makes it voidable.

3.      Non- performance by other parties within time period (Section 55)

4.      Consequences of cancellation (Section 64)

When a party rescinds a contract no obligations are required to be performed while the other party must be fulfilled with the benefits which according to the contract must be received.

CASE LAW[ii]-Bawlf Grain Co. v. Ross[2]

DIFFERENCE BETWEEN VOID AND VOIDABLE CONTRACTS

With a void contract, it does not work from the beginning. In this case, no party can enforce a void contract as it is considered that the contract has never existed. With a contract voidable, it is not invalid until one party submits a valid reason to revoke or cancel it. Thus until any legal objection is raised by any of the parties, the contract may remain in force.

If one party uses a strategy such as fraud or coercion, the contract will become voidable. With a void contract, the contract cannot be operated solely by both parties’ consent to the agreement, as you cannot commit any illegal activity. Voidable contracts may be enforced if the parties agree to give up their redemptive rights.

Few instances of void contracts can be prostitution or gambling. If a person enters into an agreement and is suffering from a serious illness or mental illness, it will be in vain because the party did not have the legal capacity to enter into the contract.

CONCLUSION

The provisions of sections relating to void and voidable contracts under Indian Contract Law are not only simple but have great clarity as well. The fact that this law applies to this day, without the need for amendment stands as proof of its nature. It takes a defensive approach to contract law in the sense that it protects people from fulfilling irrational, illegal, and immoral obligations. The provisions surrounding void and voidable contracts may provide for a non-binding agreement, thus rendering it invalid. Legislation on this issue strikes a balance between the flexibility and severity of its application as it can be consistent with the facts of the case while maintaining its terms and conditions.

 

This blog is authored by Aditi Vishnoi, a student of The ICFAI University, Dehradun.


[1](1831) 1 B & Ad 950; 109 ER 1040.

[2](1917) 57 S.C.R 232.

 


Introduction:

According to Sir William Anson's definition, Wagering agreement is "a promise to give money or money's worth upon thedetermination or ascertainment of an uncertain event“.

A wagering agreement is one in which two or more necessary parties have entered into a contract in which the first party promises to pay a certain sum of money to the second party if a specific event occurs in the future, and the second party agrees to pay the first party if that event does not occur. The presence of two parties who are of sound mind to gain profit or loss is the main essential of a wagering arrangement. In simple words, a wager is a bet or a gamble.

Essentials of Wager –

1. Wager means a bet.

The subject matter of bet may be anything. Generally, it is a game of chance wherein there is either gain or loss but the result wholly depends on an uncertain event. Money is paid by one person to another on the occurrence of an uncertain event in a Wager.

One of the most important aspects of a wagering contract is that both parties should have an equal chance of winning or losing based on the outcome of the future event.

2. Uncertainty

The parties are unaware of the occurrence of an event. They take a chance on the unpredictability of the situation, because their goal is to exchange money. These are futuristic occurrences that may or may not occur, and they should be beyond the power of either party since if either party has influence over it, it will not amount to anything.The wager agreement is fully dependent upon the happening of the futuristic event whether it is contrasted with the past, present or future as to the result of that event.

3.There is no outside interest.

Both parties should have a common interest in the profit or loss as a result of the occurrence, and there should be no outside or personal interest in the unknown futuristic occurrence, as this would not be considered a wager. The transaction must "entirely rely on the risk under consideration," and neither party may look to anything other than the payment of money based on the outcome of the risk. This is what separates an insurance contract from a bet. In certain ways, every insurance contract is a gambling on the outcome of a future unknown event, and it would be a wager if the insurer did not have an insurable stake in the occurrence for which insurance money is due.

4. No real consideration except for the monetary stake

There being no other actual consideration for either party to make such a contract, neither of the contractual parties has any other interest in that contract than the sum or stake he will gain or lose.
A wagering contract requires that each party win or lose, with the winner or loser being determined by the event's issue, which remains unknown until that issue is resolved. It is not a wagering contract if one of the parties can win but not lose, or if one of the parties can lose but not win.

Types of wager[1]

 I. Moneyline betting - Betting on the money line is fairly simple because it is only done on sporting events and games, and it is entirely based on the match's outcome. This sort of betting is prohibited, and it has primarily been observed in cricket, particularly in the Indian Premier League.

II. Spread betting This form of wager/betting occurs when the individual placing the bet believes that the most favoured team in the match will win by a specific margin, or that the underdog side will win or lose by a thin margin.

III. Over betting This sort of betting occurs in a game when the better person, wagers on the total number of points earned or total number of goals scored by both teams using a combination of numbers, and which is a completely unpredictable event over which no one has control.

 IV. Under betting

This sort of betting occurs when the better person wagers that the total number of goals and points scored by both teams will be less than or equal to a specified amount. This form of betting is likewise linked to the game's final conclusion.

V. Prop betting

Since, it is unrelated to the game's eventual outcome, this sort of betting is particularly distinctive and innovative in nature. In this situation, the better bets on the first half of the game or whether or not a super over will be used in a cricket match, for example, as a result, it is also known as prop betting.

Status of Wagering agreements under Section 30 of the Indian Contract Act, 1872-

The first branch declares the agreement of wager void; the second prevents the winner from bringing an action to recover amount won (even under a substituted contract); and the third prevents the winner from suing the stakeholder.

“Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made. —Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game or other uncertain event on which any wager is made."

This clause makes wagering agreements void and forbids actions for the recovery of any money or property gained on a wager or entrusted to a person to abide by the outcome of any game or event on which a wager is made. The goal of declaring such agreements void and hence unenforceable is to remind the courts that they have more important things to do than rule on such matters. Law likes to deal with wagers such as social engagements or family difficulties, which are also resolved outside of the courtroom.

Gambling is by definition a game of chance with no skill, whereas trading is a game of skill with no chance. Some gaming contracts and lotteries have laws that allow wagering if specific circumstances are met. While holding State lotteries for the purpose of raising public funds has been approved and legalised, state-organized lotteries will remain in the sphere of gambling and will not be granted the status of a trade. Prize competitions in which victory is not contingent on a significant degree of talent have also been deemed to be gambling.

Exceptions to the wager agreement 

There are also specific exceptions in wagering agreements, according to Section 30 of the Indian Contract Act, which reads as follows:

 “This section shall not be deemed to render unlawful a subscription or contribution, made or entered into for or towards any plate, prize or sum of money, of the value or amount of five hundred rupees or more, to be awarded to the winner of any horse race. Nothing in this section shall be deemed to legalize any transaction connected with horse- racing, to which the provisions of section 294A of the Indian Penal Code shall apply”.

1. Showcase of talent is not a wager

It is not a wager to use your skills or skill in front of people in a competition (such as sports competitions, puzzles, etc.), but if there is a winning prize based on sheer chance, it is a wager. Prize competitions are not considered wagers in the eyes of the law, but if the sum is not reasonable, it is considered gambling and will be prosecuted.

2. Share market/ Stock exchange

The transactions on the stock exchange are not considered wagers because the shares are purchased and sold, and the mere delivery of shares from one person to another is not considered a gamble.

3. Horse race competition

The state government may occasionally legalise some horse racing competitions if local laws allow it and if people donate RS 500 or more to the prize money to be paid to the horse race winner, then it will not be considered a wager.

4. Insurance contracts 

Since insurance contracts are indemnity agreements, they can’t be considered as a wager. These agreements are made to defend and preserve one party's interests from harm, hence they are not bets.Also, because insurance contracts have the purpose of safeguarding people, and money is not the only consideration or stake.

5. Commercial transactions

Agreements for the sale and purchase of any commodity that will be utilised on a commercial basis in which there is a genuine purpose to conduct legitimate business, are valid, and if they intend to do so, they must pay the difference.

 6. Mere speculation is not wager

The market's rise or decline is the subject of the speculation. Speculative trades in gold, silver, stocks, and other commodities are fairly popular. Contracts like these are legitimate.

Conclusion:

The term Wager is not defined under Section 30 of the Indian Contract Act, and it does not even describe wager agreements; it just states that such agreements are void under section 294A of the Indian Penal Code. Since the law's inception, Indian legislators have never made any changes to this section to define such terms, and the section remains quiet on numerous subjects that need to be stated specifically. So, all we have to do now is wait for lawmakers to alter the following clause to remove the uncertainty that has plagued the judiciary in deciding numerous instances in the past. As a result, it appears that making the necessary adjustments to the act is of critical importance.

 

Bibliography –

Dr. Avtar Singh, LAW OF CONTRACT (A Study of the Contract Act, 1872) and Specific Relief, Sec 30, Twelfth Edition, 2020 

This blog is authored by Vanisha Mishra, student of Institute of Law Nirma University, Ahmedabad.

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Abstract

Act 1872 on the Indian Contract Persons not contractually competent 1. Juveniles 2. Unhealthy people 3. Persons under Minor Law disqualified. Sec 3 of the Indians Majority Act 1875 explains the word Minor "a minor is a person who is not 18 years old." No stuff to a minor If the minor has led the other party to conclude a contract with him by misrepresenting his age, he cannot be held accountable to this contract. No stopping of a minor can take place. It suggests that he is not reluctant to plead his childhood to escape a contract. No performance specific Unless in some circumstances as the contract of a minor is void, the precise fulfillment of such a contract may no longer be considered. A minor guardian cannot bind a minor by a contract to buy an immovable property; hence the minor cannot request the particular execution of the contract, which the minor had no authority to conclude. However, if (a) the contract is in the competence of the guardian or manager on behalf of a child, a contract may be explicitly enforced. (b) it is to the minor's advantage.

Restitution Doctrine The term restitution may be defined as the act of returning what has been removed or lost back to the legal owner. The theory means that a person may have to refund property or commodities to the person from whom it was acquired when he receives property or things by deception. The theory extends to the children, as long as it can be traceable, who can be required to restore the property or the products.

What is restitution?

Under section 2(h) of the Act 1872[1], an agreement is lawfully applicable and is backed by a consideration that might be in cash or kind. This agreement is a contract that is valid under the law. The principal goal of concluding a contract is to legally bind the parties to fulfil the deal.

Removal in a usual meaning involves restoring the advantage a person has earned and is primarily intended to reestablish the victim's standing. i.e. 'Claimant' to prevent the defendant from making any improper profits that he is not permitted by law in respect of the initial position that he possessed before concluding the contract and secondly to prohibit the defendant from unfair enhancement. For example:

A purchase of 10 tons of rice was concluded by Mr Rishabh with M/S XYZ Pvt Ltd. Hyderabad. Deepak paid a Rs 60,000 advance that was 20 percent of the contract's total value. Later on, owing to financial loss, XYZ Pvt Ltd was declared insolvent and chose to end its operations. In addition, the contract was terminated. Now, the contract is invalid in this situation, and XYZ ltd should repay Mr Sharma with Rs. 60,000.

The doctrine of restitution in The Indian Constitution

The theory of restitution, chiefly devoted to the obliging person to gain a benefit by way of a null agreement or contract, is covered in Section 65 of the Indian Act 1872. The principle behind this provision is that an agreement or a contract exists and that, if there is no agreement or contract, the restitution doctrine cannot enter into effect. This philosophy is founded on a fairly prevalent rule of thought, which indicates that a person only pays attention if something returns.

Section 65 provisions only apply if a subsequently reached agreement is found null or if one person or the other later makes a contract invalid. However, Section 65 will never come into play if the contract was invalid from the outset. In the matter of Kuiu Collieries limited vs Jharkhand mines ltd.[2], the Supreme Court of India declared that a later-stage agreement that is null and invalid would invite the party in section 65.

Few key points of the Doctrine of Restitution are as follows: -

¾    One party has concluded an agreement for consideration with another party.

¾    The aforementioned contract entailed considerable consideration.

¾    Both parties had jurisdiction to conclude a deal

¾    Then, owing to some unforeseeable event, a party failed to fulfil its portion of a contract or the deal was invalidated.

¾    The party that has paid the advance any account has the right to the other party's and the other party's right to recover from the advance does not obtain an unfair advantage over it.

How is Section 65 of The Indian Contract Act, 1872 applicable?

Section 65 applies only if a contract was lawful, and only on a future date, was concluded and invalid. If in the case at issue, the agreement has been concluded between the plaintiff of the main person and the lesser defendant, the theory of the restitution will not apply. In Mohiri Bibi v/s Dharmodass Ghosh[3], this was concluded, but the scenario will alter if the minor has falsified his age, and the court can then impose the benefit.

It was decided that an agreement or contract which was nil and unlawful from the beginning can never apply the rules of this concept, in another case Bank of Rajasthan Ltd v/s Sh Pala Ram Gupta.[4]

Exceptions To The Rule/Doctrine Of Restitution[i]

¾    If a deal is known as void: - This theory will not apply to an agreement known as invalid, for example, where a deal is an unlawful or impossible conduct, such as a deal, whereby R will pay S Rs 50,000 when B chooses stars from the sky. R pays Rs 5000 for the safety of S; R cannot recoup even his Rs 5000 now is an impossible task to execute.

 

¾    Where a deal between incompetent individuals has been signed: - Contract between incompetent individuals, like a folly, poisoning, or minor, will not welcome such a doctrine to play.

 

¾    Where the party has to provide security with serious money and later defaults: - This clause addresses a circumstance like paying residential application money. Now if a person does not get future allocation money, then his application money will be likewise lost and he cannot claim his previous income through the revocation of the restitution theory.

 

Who is a Minor?

A minor is an individual who, by law, has not yet completed the age of majority. For different legal jurisdictions, the age set by legislation might be varied. In India, according to the Indian Majority Act, the majority age of 18 years is 1875, except for a person who has been assigned as guardian by the Court; the fixed age is 21. It should nevertheless be emphasized that, regardless of whether that minor has been designated a guardian, the Indian Majority Act of 1875 is changed and the majority age is regarded to be 18 years.

 

Is an agreement with minor voidable or void altogether?

The competence of the parties is discussed in Section 10 of the Contract Act, while Section 11 deals with those not permitted to engage in a contract. But neither section is sure of what the effects of a minor entering into an agreement will be, whether it would be null or void. Thus, these clauses produced legal confusion regarding the nature of the agreement of a minor. In 1903, in a landmark case of Mohori Bibi vs. Dharmodas Ghose, mortgaged his house for Rs. 20,000 to a moneylender, the Privy Council eventually decided this matter. The lawyer acting on behalf of the moneylender was aware at the time of the contract that the party was a minor one. At the time of the contract, the kid filed a lawsuit against the moneylender, saying that he had been a juvenile. The defendant however died during the call to the Privy Council and his widow, Mohori Bibi, filed the appeal.

In clearing the air in the foregoing matter, the Privy Council declared that the agreement of the minor is void from start to finish, i.e. void. In the case of a minor, the common conviction that "every person is the best judge in his own interest" is omitted.

Doctrine of Restitution

If a minor has acquired an item by misrepresenting his age, he may be forced to repay it, but only if it is traceable. The courts can ask a child for his ill-gave earnings, based on equity, because he is not allowed to cheat under the watchdog of childhood freedom. Based on an invalid contract, if the minor sold the property or the products, he cannot be ordered to refund or return the value of the products. In situations that are impossible to locate the commodities or when a minor acquires cash instead of things, the idea of restitution cannot be applied.

A well-known Leslie (R) case v. Sheill,[5] where a youngster misrepresented his age by deceiving certain moneylenders and had them advance him the sum of 400 pounds for thinking he was an adult. As harm for deception, but not because the minor has no stopping, the plaintiff attempts to collect the principal amount and the interest. In addition, the money-lenders relied on the restitution theory, arguing that the minor was due to repay the money for just reasons. The rejection of this claim by Lord Sumner was that the money paid for its purposes to the defendant (minor).No method to trace the funds and no method to restore them is there, because they will cause an invalid contract to be enforced.[ii]

Where nevertheless the minor petitions the Court to terminate his contract, the Court may grant an exception on the condition, under Section 30 and Section 33 of the Specific Relief Act, 1963, that any advantages earned by the member be reinstated, or that the other Party shall get adequate compensation.

Will a minor be liable for a contract for necessaries?

For necessities, a minor is liable. In the judgement of Alderson B in Chapple v Cooper,[6] the phrase 'requirement' is not defined in the Act but is an illustrative explanation of the meaning. "Things are required without which a person cannot survive decently. Food, food, clothing, accommodation and so forth. Mere luxury items are always forbidden, while in rare circumstances luxury items are permitted. A minor is also responsible for the services he receives, such as training, medical facilities and legal guidance.Thus "necessaries," which are relatively different from the conditions and facts in the case, can be decided accordingly.

According to Section 68[7] of the Contract Act, "If someone unable or legally liable to support a contract is provided with a condition in his or her life by another person, the person who has provided such supplies may be repaid for the property of such incapable person." Consequently, two requirements are necessary to demonstrate a minor's responsibility.

¾    The products needed to support it or its level of living shall be covered under the contract.

¾    The supply of such necessaries should not be sufficient already.

If a minor is given the essential supplies, the minor shall not be obligated to repay the provider and the price shall remain irrecoverable if he or she already has enough supply of the essential item. The responsibility of the minor in India does not depend on the permission of the minor. It derives from a quasi-contractual character that means that responsibility is exclusively the responsibility of the estate of the minor.

Conclusion

The position of minor is to be reached according to the Indian Contract Act of 1872 since a minor cannot engage in a contract and the same is void from the start. The minor cannot count on confirmation of his minority contracts to achieve a majority. The rationale is because when the individual was still a child, ratification was a legacy and consequently a contract that was void cannot be rendered lawful. A new contract can be concluded with a new consideration if necessary, after reaching the age of majority.Moreover, it is impossible to ask for a small agreement to achieve specified performance as it would lead to a void agreement. However, only the demand for necessaries is liable to a minor.

 

This blog is authored by Aeshita Marwah,

Student of University of Petroleum & Energy Studies.


[1]The Indian Contract Act, 1872

[2]1974 AIR 1892, 1975 SCR (1) 703

[3]ILR (1903) 30 Cal 539 (PC)

[4]AIR 2001 Delhi 58, 2000 (57) DRJ 863

[5](1914) K.B. 607

[6](1844) 153 ER 105

[7]Indian Contract Act, 1872


[i]The Indian Contract Act, 1872

[ii] Pollock & Mulla On Indian Contract and Specific Relief Acts; with a Commentary, Critical and Explanatory. Bombay :N. M. Tripathi, 1972.