Problems based on Contract and the solution -3

Indian Contract Act, 1872

TANMOY MUKHERJEE INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherjee

Advocate

Problems based on Contract and the solution -3

 

Tanmoy Mukherjee

Advocate

Question-

Sarit, a minor was studying in BA LLB(H) in a college. On 1st July, 2015 he took a loan of Rs. 50,000 from Amit for payment of his college fees and to purchase books and agreed to repay by 31st December, 2020. Sarit possesses assets worth Rs. 20 lakhs. On due date Sarit fails to pay back the loan to Amit. Amit now wants to recover the loan from Sarit out of his assets.

Decide whether Amit would succeed referring the relevant provisions of the Indian Contract Act, 1872.

Fact-

-Sarit, a minor, takes loan of Rs 50,000 from Amit for college fees.

-He possesses assets worth Rs 20 lakhs.

-He fails to repay to Amit

-Amit seeks recovery from the minor's assets.

Legal Provisions and Principles-

Minor's Agreement is void ab-initio-

Under Sec 11 ICA, 1872, a minor is not competent to contract.

Therefore, any contract with a minor is void from the beginning.

Muhuri Bibi v. Dharmodas Ghose (1903)-

→ A minor's agreement is absolutely void and

→ No decree for repayment can be passed against a minor. (Sec 65, ICA, 1872 is not applicable).

No personal liability for minor-

Since a minor cannot enter into a valid agreement, he cannot be made personally liable for repayment of any loan.

Minor's property to also not liable-

-A minor cannot bind his property for repayment of loan because there is no valid contract.

-Even if the minor's substantial assets, the creditor cannot recover from these assets.

Doctrine of Restitution (Sec. 33, Specific Relief Act, 1963)-

Restitution applies only when-

-Minor has fraudulently represented his age.

-Property or money received by the minor is still traceable.

However, even under restitution-

-Court cannot enforce a void agreement.

-Court can only direct the minor to return the specific property; not compensate with money.

This is also affirmed in Leslie v. Sheill (1914) – No personal liability even under fraud.

Application of law to the given problem-

-Sarit is a minor.

-He took a loan which amounts to a void agreement.

-Amit cannot recover the loan as there is no enforceable agreement.

-Sarit's assets worth Rs 20 Lakhs cannot be attached since minor's property cannot be made liable for a void agreement.

-The money (loan) was spent on college fees, so it is not traceable.

Thus. Restitution cannot be applied.

Conclusion-

Amit cannot recover the loan amount from Sarit or from his assets.

As per Sec. 11, ICA, 1872 and the ruling in Muhuri Bibi v. Dharmodas Ghose, the minor's agreement is void and neither the minor nor his property can be made liable.