Mohori Bibee vs Dharmodas Ghose

Case Citation: 7CWN441; (1903)L.R. 30 I.A. 114; 30M.I.A.114;

Date of Judgment: 4 March 1903

Court: Judicial Committee of the Privy Council

Appealed from: High Court of Judicature at Fort William

Parties to Suit

Plaintiff:

• Dharmodas Ghose, Minor
• Mohori Bibee, Wife of Brahmo Dutt and his legal representative of the case.

Respondent: Brahmo Dutt, the moneylender who entered in contract with minor.

Kedar Nath: Attorney, agent of Brahmo Dutt.

Bench: Lord McNaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir Andrew Scoble, Sir Andrew Wilson

Decision by: Sir Ford North

Introduction

Every day, people engage in different forms of agreements, whether they realize it or not. However, not all of these contracts are legally binding. For example, if a father promises to buy a bicycle if he scores well on a test, he is not legally obligated to honour his promise. Here the Indian Contract Act, 1872 comes into play. The Act was framed by the Third Law Council of India[1] and is based on the principles of English common law, and prescribes the circumstances in which promises are legally enforceable. The law of contract, which forms an integral part of Indian law and has been instrumental in many important decisions related to its complex policies. This special case focuses on legal contracts with minors, defined as persons under the age of eighteen. It highlights the fundamental difference between contracts that apply to adults and contracts that apply to minors, on the basis that minors are incapable of seeking the necessary reasoned deliberation and judgment

The case deals specifically with contracts with minors, arguing that such contracts are invalid from the outset, or invalid from the outset. This decision highlights that minors are generally considered incapable of forming binding contracts or making important decisions. Given that minors do not have the legal capacity to enter into contracts, the decision highlights the need for their protection in transactions involving substantial commitment.

Facts of the Case

In Mohori Bibi v. Dharmadas Ghosh, plaintiff Dharmadas Ghosh was a minor and owned an immovable property. His mother Jagendra Nandini acted as his legal guardian. On July 20, 1895, Dharmadas obtained a loan of Rs.1000 from Brahmadatta, a moneylender in Calcutta as security for one of his properties. 20,000 at an interest rate of 12% per annum. However, the actual loan amount was less than Rs. 20,000 square feet. Despite knowing that the appellant was a minor, Kedarnath, counsel for Brahmadatta, handled it. Dharmadas misrepresented his age to appear as a celebrity, thus making a deal. Before the completion of the mortgage, Dharmadas’s mother, by letter dated July 15, 1895, informed Kedarnath that she had informed him of Dharmadas’s minority and that any contract with him would be void. Consequently, the contract was only partially concluded when plaintiff was found to be in the minority. Knowing this, Dharmadas sought to terminate the contract on the grounds that it was not of necessity and impracticable because of his minority status

In legal proceedings, after the death of Brahmadatta, his wife Mohori Bibee continued the suit. The main contention is that Rs. 10,500 in advance to the appellant. Dharmadas and his mother filed a suit on September 10, 1895 seeking a declaration that the rent was void on the ground that Dharmadas was a minority at the time of his murder. It was held that the contract could not be enforced against a minor. The courts ruled in favour of Dharmadas, holding that the contract was void at the outset, and stressing that contracts with a minor were inherently void because minors lacked legal capacity to execute binding contracts said and dismissed the appeal.

Ultimately, this case highlights the legal principle that minors cannot form binding contracts, shielding them from liabilities and obligations beyond their legal control

Issues Raised

1. If a minor has benefited by misrepresenting his age, whether the rule of estoppel must be applied, so as to afford him no relief?
2. If the mortgage is held void or extinguished, whether the minor shall return Rs 10,500? This is in line with sections 39[2] and 41[3] of the Specific Relief Act of 1877 in particular.
3. The minor also claimed the amount under Sections 64[4] and 65[5] of the Indian Contract Act, 1872 respectively. Whether the claim is maintainable?
4. Whether the action violates sections 2[6], 10[7] and 11[8] of the Contract Act?
5. Whether the mortgage originated by the respondent was valid?

Legal Principles Involved

1. Section 2[9]: Interpretation Clause:

• Every promise or set of promises forming the consideration for each other constitutes an agreement.
• An agreement not enforceable by law is considered void.
• An agreement enforceable by law is a contract.
• An agreement enforceable by law at the option of one or more parties, but not at the option of others, is a voidable contract.

2. Section 10[10]: What Agreements Are Contracts:

   All agreements are contracts if they are made with the free consent of parties competent to contract, involve lawful consideration and objects, and are not expressly declared void.

3. Section 11[11]: Who Are Competent to Contract:

   Every person is competent to contract if they have attained the age of majority according to applicable law, are of sound mind, and are not disqualified from contracting by any relevant law.

Arguments

Appellant’s Agruments

In this case, the plaintiff presents several submissions. First, Appellant disputes Plaintiff’s claim that he was a minor at the time the mortgage was executed, arguing instead that Plaintiff was of legal age at the time Defendant appellants and their representatives assert that the Petitioner was not known to be small. It was held that the defendant deliberately misrepresented his age and therefore should not be entitled to any statutory relief. The appellant invokes Section 115[12] of the Indian Evidence Act 1872 that if a person intentionally believes something to be true by the act, declaration or omission of another, and the other acts on that belief. Subsequently none of them can deny the true side of the story in legal proceedings. Applying this principle, the plaintiff argued that the defendant should pay the advances to him.

The appellant in support of his contention refers to Section 64[13], Section 38[14] of the Indian Contract Act 1872 and Section 41[15] of the Specific Relief Act 1877. Section 38[16] of the Indian Contract Act provides that if a person who promises to perform his contractual obligation and promisor does not accept the offer holds the right. Section 41[17] of the same Act provides that if the promisor accepts performance from another, the original promisor cannot thereafter be held liable for the promise. Section 64[18] of the Indian Contract Act states that on rescission by the person entitled to rescind the contract the other party is discharged from his contractual obligations as promisor. The appellant submits that because the defendant elected to terminate the contract and electing to do so, the defendant must restore the benefits under the contract i.e. Rs. 10,500, that was carried forward.

By making these allegations, the plaintiff aims to compel the defendant to refund the advances with respect to his seniority and benefits under the contract by misrepresenting it, and preventing the defendant from avoiding the obligation that specific principles and contractual provisions apply.

Respondent’s Arguments

In this regard, the representatives of defendant Dharmodas Ghosh (hereinafter mentioned as “Dharmodas Ghosh”) raised several important contentions relating to his junior position at the time of the conclusion of the lease agreement, claiming that he made the agreement void.

First, Dharmodas Ghosh claimed to be a minor when he executed the mortgage deed in favour of Brahmadatta. According to Section 11[19] of the Indian Contract Act, 1872, a person is deemed competent to contract only if he is of majority, clear minded, and no law disqualifies him from doing so. He therefore held that the mortgage was void ab initio, that is, invalid from the outset and therefore unenforceable.

Secondly, in dealing with the appellant’s contention that Dharmodas misrepresented his age in order to present himself as a major, Dharmadas asserted that no such misrepresentation altered the legal fact that he was a minor. Under the law, contracts with minors are void, regardless of any false representations as to their age. Consequently, the agreement could not be ratified on the basis of the alleged misrepresentation.

Besides, Dharmadas’ mother had informed Brahmadatta’s agent Kedarnath about a few of her son before the contract was finalized, these details were significant as they showed that the plaintiff’s agents knew what was the minor’s actual age but acted anyway. Furthermore, the defendant relied on the principle of law that minors are legally shielded from contractual liability due to their inability to make fully informed decisions the Indian legal system prioritizes the protection of the safety of minors from exploitation or coercion into contracts they cannot understand or negotiate. This legal precedent underlies defendant’s contention that any contract entered into by a minor is inherently void.

On the basis of these allegations, Dharmodas sought a statutory declaration of nullity of the mortgage deed and requested the court to rescind the contract. He argued that the contract was void from the outset, there was no consequential legal obligation, and he could not be held liable for any refund or performance under the void contract

Judgement

Courts at several levels upheld the principle that contracts with minors are void ab initio. Initially, the trial court held that the mortgage deed between Dharmadas Ghosh and Brahmodatta was void, as Dharmadas was a minor at the time of the contract. Dissatisfied with this decision, Brahmodatta appealed to the Calcutta High Court. The Supreme Court reaffirmed the decision of the trial court and upheld that the agreement was not void as Dharmadas was a minor. Then Brahmadatta disappointed, presented his petition to the Privy Council. The Privy Council also rejected the appeal, ruling firmly that any contract between a minor and a knight was void from the beginning.

It was held that Dharmadas Ghosh was a minor in the execution of the mortgage note, therefore the contract is void and no relief is available to the appellants. It was further held that the contract was originally void on account of few Dharmadas for some reason, which rendered him unable to enter into a contract under Section 11 of Indian Contract Act[20], Brahmodatta could not compel him to return the loan amount received. The Courts also examined the operation of Sections 64[21] and 65[22] of the Indian Contract Act, 1872 respectively. Section 64[23] requires that benefits received under a void contract must be returned, while Section 65[24] mandates the return of any benefit received under a void contract.

However, the Privy Council concluded that these arguments were not relevant in this case, as a contract with a minor is inherently void and not merely void. The Law Council of India did not agree that it should minors whose ages were misrepresented are expected to be reimbursed. However, the Privy Council held that since a minor is not legally bound by a promise in a contract, he cannot be compelled to pay the advances agreed upon. The courts found that Brahmadatta’s agent, Kedarnath, had informed Dharmadas’ mother about Dharmadas’ true age, and reasoned that this knowledge was imparted to Brahmadatta, so no misleading statement about Dharmadas’ age could be made.

Further, under Section 41[25] of the Specific Relief Act, 1877, a party has to compensate the other party on cancellation of an instrument. The courts in this case, however, found that the advance payment to which, Dharmadas was known as a minority, was properly paid, invalidating such a claim as the minor cannot be made liable to any promise and the contract was void ab initio. The Lahore High Court and the Allahabad High Court have previously expressed their views in agreement with this interpretation. The decision reinforced the principle that contracts with minors are void at the outset. Courts at all levels, including the Privy Council, have emphasized that Dharmadas Ghosh, being a minor at the time of the contract, was not legally bound by the mortgage deed. Therefore, he could not be compelled to pay the debt, and the principles of restitution and damages did not apply.

Conclusion

In this case, the court held that contracts involving minors were invalid from the outset. Minors do not have the legal capacity to approve contracts, as they do not fully understand what they mean. Thus, the equitable principles of restitution and limitation do not apply to minors in contract law. Young children can benefit from a promise made on their behalf, even if they cannot make it themselves. However, an agreement on essential qualifications may result in a claim for damages against the other party. Overall, the judgment highlights the way Indian law protects minors, ensuring that their rights are protected.

[1] https://lawcommissionofindia.nic.in/report_third/

[2] https://indiankanoon.org/doc/1558146/

[3] https://indiankanoon.org/doc/1436285/

[4] https://indiankanoon.org/doc/934524/

[5] https://www.indiacode.nic.in/show-data?actid=AC_CEN_3_20_00035_187209_1523268996428&orderno=66

[6] https://www.indiacode.nic.in/show-data?abv=null&statehandle=null&actid=AC_CEN_3_20_00035_187209_1523268996428&orderno=2&orgactid=AC_CEN_3_20_00035_187209_1523268996428

[7] https://www.indiacode.nic.in/show-data?actid=AC_CEN_3_20_00035_187209_1523268996428&orderno=10

[8] https://www.indiacode.nic.in/show-data?actid=AC_CEN_3_20_00035_187209_1523268996428&orderno=11

[9] See Supra Note⁵

[10] See Supra Note⁶

[11] See Supra Note⁷

[12] https://indiankanoon.org/doc/565781/

[13] See Supra Note³

[14]https://indiankanoon.org/doc/1344659/#:~:text=Effect%20of%20refusal%20to%20accept,his%20right%20under%20the%20contract.

[15] See Supra Note²

[16] See Supra Note¹³

[17] https://indiankanoon.org/doc/934524/

[18] See Supra Note¹²

[19] See Supra Note⁷

[20] Ibid.

[21] See Supra Note³

[22] See Supra Note⁴

[23] See Supra Note³

[24] See Supra Note⁴

[25] See Supra Note²