Indian Contract Act

Introduction

It is a landmark case that deals with the concept of minor’s agreement that is void ab initio which means void since the very beginning.

Facts

• Dharmodas Ghose, a minor, mortgaged his property to secure a loan from his uncle, Brahmo Dutt. The mortgage was later sold to the plaintiff, Mohori Bibee.
• At the time of entering into the contract, Dharmodas Ghose was a minor, meaning he was below the age of 18.
• The representative of Brahmo Dutt was fully aware of his legal incompetence to enter into contracts or mortgage his property.
• Dharmodas Ghose and his mother initiated legal action against Brahmo Dutta, arguing that the mortgage executed during Dharmodas's minority was void and improper, requiring the contract's revocation.
• During the proceedings, Brahmo Dutta passed away, and the appeal was continued by his executors.
• The plaintiff contended that no leniency should be granted, alleging that the defendant had knowingly misrepresented Dharmodas's age.
• The Trial Court ruled that the mortgage contract was void since it was entered into by a minor.
• Brahmo Dutta, dissatisfied with the verdict, appealed to the Calcutta High Court.
  • The Calcutta High Court upheld the Trial Court's decision, agreeing that the mortgage contract was void and dismissed Brahmo Dutta's appeal.

Issues involved

• Whether the deed was void under Sections 2, 10 and 11 of the Indian Contract Act, 1872 (ICA) or not?
• Whether the defendant was liable to return the amount of loan which he had received by him under such deed or mortgage or not?
• Whether the mortgage commenced by the defendant was voidable or not?

Observation

• The Privy Council held that the contract was void ab initio (from the beginning) because a minor is incapable of contracting as per Section 11 of ICA.
• The court emphasized the principle that a contract with a minor is void and cannot be ratified even after the minor attains majority.

Conclusion

• It was decided by the court that if the other party had knowledge about the minority of the other party, the agreement is void from the day of execution.

Notes

• Section 11 of ICA: Who are competent to contract

Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind and is not disqualified from contracting by any law to which he is subject.