Case Laws on Capacity of Infant to a Contract

Q.
List out some case laws on the subject of capacity of infant/minor to a contract.

A.
Section 11 of Contract Act, 1950 specifies 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.

In Malaysia, the Age of Majority is 18 years old - Age of Majority Act, 1971.

Age of majority 

Section 2. Subject to section 4, the minority of all males and females shall cease and determine within Malaysia at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.

Hence, persons less than 18 years of age are considered 'minors'.

Minors and Contractual Capacity.

A minor (typically under 18) can disaffirm a contract made, no matter the case. However, the entire contract must be disaffirmed. Depending on the jurisdiction, the minor may be required to return any of the goods still in his possession. Also, barter transactions such as purchasing a retail item in exchange for a cash payment are generally recognized through a legal fiction not to be contracts due to the absence of promises of future action. A minor may not disavow such a trade.

Meaning of 'disaffirm' is

'repudiate' (a settlement), "to disaffirm a contract is to say it never existed", or
Repudiate; revoke consent; refuse to support former acts or agreements.

Meaning of 'disavow' is

abnegate, back down, back out, call back, declare not to be true, decline, deny, deny absolutely,

Ref:
Legal Dictionary. The Free Dictionary, available at
http://legal-dictionary.thefreedictionary.com/disaffirm
http://legal-dictionary.thefreedictionary.com/disavow

Case 1:

Nash v Inman (1908) 2 KB 1

Nash,a tailor on Savile Row, entered into a contract to supply Inman (a Cambridge undergraduate student) with, amongst other things, 11 fancy waistcoats. Inman was a minor who was already adequately supplied with clothes by his father. When Nash claimed the cost of these clothes Inman sought to rely on lack of capacity and succeeded at first instance.

Fletcher-Moulton LJ

‘An infant, like a lunatic, is incapable of making a contract of purchase in the strict sense of the words; but if a man satisfies the needs of the infant or lunatic by supplying to him necessaries, the law will imply an obligation to repay him for the services so rendered, and will enforce that obligation against the estate of the infant or lunatic.’

However, the foundation of such a claim is not contractual, but rather an obligation to make ‘fair payment in respect of needs satisfied.’

Buckley LJ

‘At common law … the contracts of an infant were voidable except such as were necessarily to his prejudice; these last were void.’

However, infants have a limited capacity to contract. To succeed, the plaintiff had to prove the contract within this limited capacity, which his Honour defined as follows:

an infant may contract for the supply at a reasonable price of articles reasonably necessary for his support in his station in life if he has not already a sufficient supply. To render an infant's contract for necessaries an enforceable contract two conditions must be satisfied, namely, (1.) the contract must be for goods reasonably necessary for his support in his station in life, and (2.) he must not have already a sufficient supply of these necessaries.

This could not be satisfied here.

Case 2:

Mohori Bibee v. Dharmodas Ghose (1903) 30 Cal. 539
(Minor Agreements)

FACTS:
Agent of defendant advanced money to plaintiff, an infant, fully knowing his incompetency to contract, against mortgage of property belonging to latter. Plaintiff commenced this action to get the mortgage declared as void u/s 2, 10 and 11 of ICA and repossession of property thereunder conveyed to defendant.

ISSUES:

• Whether the mortgage was void u/s 2, 10, 11 of ICA?
• Whether plaintiff to return the money received by him under such mortgage?

HELD:
Laying emphasis on true literal construction of Indian Contract Act, notwithstanding the rules as to enforceability of contracts entered into by minors, Supreme Court held that unless the parties are competent to contract as u/s 11, no agreement is contract as u/s 10 and hence, is not enforceable by law u/s 2(h) and is void u/s 2(g). Since minor is not competent to contract u/s 11, hence every such agreement entered into by a minor is void ab initio (void from the very inception). Even u/s 68, a minor is deemed as incompetent to contract and is not to be personally liable for any necessaries supplied to him, albeit a statutory claim is created against his property.

Author’s Comment: Quite controversially, Supreme Court observed, “S.65 like S.64, starts from the basis of there being an agreement or contract between the competent parties and has no application to a case in which there never was and never could have been any contract.”

Ref:
Vishrut Kansal. 2013. National University of Juridical Sciences, Kolkata, available at
https://indiancaselaws.wordpress.com/2013/01/17/mohori-bibee-v-dharmodas-ghose/

Case 3:

If there is a contract between minor & adult:

A minor who had transferred his property on receipt of the purchase money, may get the contract declared void and at the same time, have the advantage of not returning the money’s received.

TAN HEE JUAN BY HIS NEXT FRIEND TAN SEE BOK v TEH BOON KEAT; LAI SOON

[ORIGINAL CIVIL JURISDICTION] NEGRI SEMBILANHEREFORD, JCIVIL SUIT NO 5 OF 193317 November 1933

Land Code 1926, s 42 -- Transfer executed by a minor -- Order avoiding the transfer -- Discretion of Court to order refund of purchase money -- Specific Relief Enactment, ss 38 and 41

The plaintiff, an infant, executed transfers of lands in favour of the defendants. The transfers were witnessed and subsequently registered.The plaintiff by his next friend applied to the Court for an order setting aside the transfers and for incidental relief. The Court made an order declaring the transfers void, and refused to order the refund of the purchase price paid by the defendants.

Held 

, that the discretion possessed by the Court under the Specific Relief Enactment will, in the case of contracts which are void, only be exercised where the parties stand in such a fiduciary relationship to oneanother that it would be unfair to the defendant to allow the plaintiff to retain both the advantage of thepurchase money standing as part of his Estate and also to recover the property.

Dutt for Plaintiff.
Hastings for Defendants.

HEREFORD, J
In this case it appears that two transfers were executed by the infant Plaintiff of two pieces of land in Mentakab to the two Defendants respectively, and the action actually brought by the Plaintiff's next friend appointed by an order of Court is to have these two transfers set aside and other relief incidental thereto, on the ground that at the time the transfers were executed the Plaintiff herein was a minor.

There is no doubt about that fact: it is quite clear now, and I do not think it is seriously disputed, that at the time when the transfers were executed the Plaintiff, Tan Hee Juan, was in fact an infant and, therefore, unable to contract.The Privy Council have held that the effect of sections 10 and 11 of the Contract Act of India is that an infant cannot make a contract within the meaning of the Act, and that a contract made by an infant is not only voidable but void.

Mohori Bibee v Dharmodas Ghose 30 Calcutta 539.

That decision of the Privy Council is binding on this Court, and therefore there can be no doubt whatever that those transfers are void. That being so, as the registration of these proprietors has been obtained by a void instrument, the effect of section 42(iii) of the Land Code is that the registration is void, and I have no option or alternative that I know of or can discover but to declare that registration void. That has the effect of restoring the property to the minor, and the order which I will have to make will be to that effect. To my mind there is no way of avoiding that decision,although I realise there may be circumstances in this case which may make it a harsh one because the Defendants say they had no reason to suppose that the vendor was in fact an infant. Some underhand work in connection with these transfers probably took place, because attached to the transfers there is a certificate by a Solicitor to say that the vendor was in fact of full age. How he came to sign that certificate there is no evidence to shew, but it is difficult to avoid the conclusion that some deception was practised.

The Defendants do not claim that there was any deception practised on them: they appear to have accepted the transfers without troubling to enquire who the vendor was and did not even take the trouble to see him. They do not suggest that an adult was put off upon them as the vendor, and the evidence of the infant himself is that he signed these transfers actually in the Solicitor's office while the evidence of the Defendants also shews that they attended the Solicitor's office where they signed the transfers as transferee. It is possible that they and the Plaintiff attended at different times, but I think that the purchaser of these lands who purchased without enquiring as to who the vendor was or taking any steps to see him, must take the consequences if it turns out subsequently that the vendor was an infant and the contract void. However that might be, to my mind, it does not relieve me of the necessity of declaring these two transfers void.

The real question that I have to decide in this case is whether I ought to order that the purchase prices of these lands which were admittedly paid by the Defendants should be refunded to them as a condition precedent to the cancellation of these two transfers. The first case quoted

1934 1 MLJ 96 at 97

is the case to which I have referred. At page 549 the following passage occurs:--

"Another enactment relied upon as a reason why the mortgage money should be returned, is section 41 of the Specific Relief Act (1 of 1877), which is as follows:--

Section 41. On adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted to make any compensation to the other which justice may require.'

Section 38 provides in similar terms for a case of rescission of a contract. These sections no doubt do give a discretion to the Court, but the Court of First Instance and subsequently the Appellate Court, in the exercise of such discretion, came to the conclusion that under the circumstances of this case justice did not require them to order the return by the respondent of money advanced to him with full knowledge of his infancy, and their Lordships see no reason for interfering with the discretion so exercised."

Now, that part of the judgment of the Privy Council in this case has been held in the textbooks to be an authority for the Court having a discretion in proper cases to order the refund of the purchase money. I find myself doubtful whether the case really goes so far, because the judgment continues as follows:--

"It was also contended that one who seeks equity must do equity. But this is the last point over again and does not require further notice, except by referring to a recent decision of the Court of Appeal in Thurstan v. Nottingham Permanent Benefit Building Society since affirmed by the House of Lords. In that case a female infant obtained from the Society of which she was a member part of the purchase-money of some property she purchased; and the Society also agreed to make her advances to complete certain buildings thereon. They made the advances and took from her a mortgage for the amount. On attaining 21 she brought the action to have the mortgage declared void under the Infants Relief Act. The Court held that, as regards the purchase-money paid to the vendor, the Society was entitled to stand in his place and had a lien upon the property; but that the mortgage must be declared void and that the Society was not entitled to any repayment of the advances.

Dealing with this part of their claim Lord Justice Romer says at page 13: 'The short answer is that a Court of Equity cannot say that it is equitable to compel a person to pay any moneys in respect of a transaction which, as against that person, the Legislature has declared to be void.' So here."

Therefore I think it is right to say that if the Privy Council's decision is that there is a discretion, in a case of this sort, to order the refund of the purchase money, it is only where there are very unusual circumstances that that discretion can be exercised.

A good many cases have been quoted to me during the arguments in this case, but I think I am correct in saying that there is only one case quoted in which the Court has exercised the discretion, which it is alleged to have under section 41 of the Specific Relief Enactment , or of the Specific Relief Act of India. That case is the case of Dattaram v Vinayak 28 Bombay 181 where money which had been paid upon a mortgage was ordered to be refunded by the Court of Appeal. In that case the following words occur on page 192 of the report:--

"The facts in the case of Mohori Bibee v. Dharmodas Ghose show that the restitution there claimed but disallowed had no other basis than that of a simple money demand--the person who had lent money to the minor on a mortgage knew the debtor was a minor, there was no fiduciary or other relation between the two to give rise to an equity in favour of the creditor, and the minor had dissipated the money in extravagance. In the present case the restitution claimed is not a mere money demand; the parties (defendants 1 and 3) stand in a state of accountability to each other; and the amount claimed by defendant 1 stands as part of the mortgage account which defendant 3 wishes to reopen."

That, so far as I know, is the only case to which I have been referred in which the discretion under section 41 of the Specific Relief Enactment or Act has been exercised, and it seems to me that, before such discretion is exercised, there must be some fiduciary relation between the parties. Now, in this case, there is no such relation at all between the parties. They never saw each other; neither did the two defendants see the vendor, nor did the infant vendor see the persons to whom the lands were to be sold. Furthermore, I think that the principle at the back of this section giving the Court a discretion to order refund of the purchase money or the mortgage money, as the case may be, is this: it would be unfair to the defendants that if the infant has had the advantage of the purchase money or the proceeds of the mortgage he should have the advantage of being the owner of the property as well without being called on to return that money or those proceeds. In this case, the infant Plaintiff's estate "qua" such has not received any advantage at all. The

1934 1 MLJ 96 at 98

mother says she received the $17,000/- and spent $15,000/- on the estate: that is not the infant's estate "qua" such. The balance of the money, she says, was used in maintaining this family of which the infant plaintiff was a member. There again, although he has received the benefit of a portion of this money it cannot be said, it seems to me, that his estate had the advantage of all or any part of the purchase money and that therefore I can order its refund.

A number of English cases were cited to me in some of which restitution by the infant has been ordered, but in the cases of Valentini v Canali (1889) 24 QBD 166 and Steinberg v Scala Ltd (1923) 2 ChD 452 the contracts were contracts which in the view of the Common Law were not void but only voidable, and the principle on which restitution is ordered is different in such cases as compared with cases where the contract is absolutely void.

This appears to me to be well brought out in the case of Thurstan v Nottingham Permanent Benefit Building Society (1902) 1 ChD 1. In that case the infant had borrowed money from the Defendant Company--

(a) to complete purchase of the property,

(b) to effect certain improvements to the property,

and had executed a mortgage in favour of the Defendant Company for the total sum due. The trial Judge held that that transaction was one transaction and was therefore voidable, but the House of Lords confirming the decision of the Court of Appeal held that in fact there were two transactions and that while (a) was a voidable transaction (b) by virtue of the provisions of the Infants Relief Act was absolutely void. As a result the Defendant Company was given relief in regard to (a) but not in regard to (b), and it is in the judgment of Romer, L.J., in relation to the second part of this case that the following words occur:--

"A court of equity cannot say that it is equitable to compel a person to pay any moneys in respect of a transaction which, as against that person, the legislature has declared to be void."

Although the decision which I have come to may be a harsh one to the Defendants, it is my duty to protect the interests of the infant while he is an infant, and I have to take such steps as the law provides to protect the property even against his will: the infant now says that he does not want the property protected. What the infant thinks or says about the property, while he is still an infant, is, I am afraid, a consideration which cannot move me.

It has been suggested that Tan See Bok was not the proper person to bring this suit because he is not the Plaintiff's lawful guardian. On that point I merely say that Tan See Bok was appointed the next friend of the plaintiff in this case by an order of Court; that order of Court clearly stands until it is set aside. If the infant or any of the infant's people think that it was an improper one or that somebody should be appointed in his place, an application should have been made to the Court to that effect. The mother was originally a Defendant in this suit but action was successfully taken to have her name struck out. If there is any justification for saying that Tan See Bok is not the proper person to bring this suit, there has been ample opportunity, for action to be taken to have that order set aside, and it is a matter with which I cannot now deal.

Under these circumstances, it seems to me that the only order I can make is an order that the transactions are void. I therefore declare that the two transfers registered 37 and 38, volume 39, in the Registry of Titles, Kuala Lipis, are void and that the registrations of the two Defendants as proprietors by virtue of these deeds are also void. The Defendants to pay the costs.

Ref:
Malayan Law Journal Reports/1934/Volume 1/TAN HEE JUAN BY HIS NEXT FRIEND TAN SEE BOK v TEHBOON KEAT; LAI SOON - [1934] 1 MLJ 96 - 17 November 19332 pages[1934] 1 MLJ 96

Case 4:

Mahomed Syedol Ariffin vs Yeoh Ooi Gark on 20 July, 1916

Case 5:

Malaysia Government vs Gurcharan Singh [1971] 1MLJ 211

FACTS

This case is about the government of Malaysia as the plaintiff whom had sued Gurcharan Singh the first defendant whom is a promisor of a contract and ORS as the second and third defendant whom act as the sureties of the contract for breaching the contract made between them. The contract is about the government of Malaysia providing the first defendant a scholarship for his study at Malayan Teacher’s Training Institution with an agreement that the first defendant will serve the government inconsideration for being trained as a teacher. The duration of the contract is 5 years while the first defendant only served the government for 3 years 10 months only. However during the time the contract was made, the first defendant was in a minor state. The claim for the compensation for this case is $11,500.

ISSUES

There are three issues evolved in this case, these are:

1) Whether the contract made between them is a valid contract?

2) Whether the first defendant is liable on the claim for necessaries?

3) Whether the amount claimed or payable for compensation is reasonable and accepted regarding the case?

DECISIONS

The contract entered into by the first defendant was a void contract as he was an infant at the relevant time. Thus the principal debtor was not held liable and consequently the second and third defendants whom were the sureties of the contract also were not held liable. However, due to the exception on necessaries claim, the first defendant was therefore liable for the repayment of the sum expended for his education and training as being expended on necessaries. The amount of damages payable in this case must be based on repayment of the proportion of the actual sum expended based on the completed months of service and in the circumstances judgment would be given for the plaintiff against the defendants for $2,683.

PRINCIPLES VALIDITY OF CONTRACT (MINOR)

In order for a contract to be valid, the participants of the contracts must possess the legal capacity as governed by S10 Contracts Act 1950.

The section states that there must be free consent of "parties competent to contract ". Moving on S11 of the Act defines these competent persons. Accordingly the following are the persons who are deemed to be competent in accordance to the Act:(a) one who has attained the age of majority(b) sound of mind(c) not disqualified by any law he/she is subjected to. A minor is a person who has not reached the age of majority which is 18 as per Age of Majority Act, 1971. Thus, under the Act, contracts entered into by a minor person are void

NECESSARIES

Under common law, a minor is liable on contracts for ‘necessaries’.

S69 of the Contracts Act merely embodied the common law of England regarding liability for necessaries supplied to a minor. In this case the necessaries term has been broadly defined to include scholarship supplies as one of necessaries. Thus, it means that if a minor contracted for any kind of necessaries including scholarship to pursue studies, such contracts are not void. Thus, the minor in this case is liable to pay the reimbursement to the government for breaching out the contract under necessaries exception.

AMOUNT PAYABLE:

All the decisions on the payment for necessaries have referred to the payment not of the stipulated prices but of a reasonable price for them. However learned federal counsel relied on the case of Government of Malaysia v. Thelma Fernandez and Anor in which Raja Azlan Shah J. Held that the provision for repayment for breach was not a penalty but a genuine and reasonable estimate of the damages suffered following the breach.

COMMENT

After reviewing this case, I found myself agreed to the decisions of this case. This is because the decisions protected the government from incurring more losses from the breaching of the contract. Even the government did not receive the full amount of their claim but still they received the amount reasonable to the damages they incurred. The decisions also protect the defendants as they do not need to pay the whole amount of the scholarship as the defendant had served the government almost 4 years out of 5 years. Thus, as for me the amount payable is reasonable for both parties.

In respect of Islamic perspective or shari’ah views in this case I found that the decisions made are seemed to be fair and protective as both parties received reasonable consequences. The main concepts in Islamic law are justice and fairness and the decisions in this case seemed to be compliance with Islamic concepts.

Ref:
Malaysian Government vs Gurcharan Singh, available at
http://www.academia.edu/4104877/CASE_REVIEW_ASSIGNMENT