Mohiri Bibee V Darmodas Ghose Case (Landmark Case)
MOHORI BIBEE Vs. DHARMODAS GHOSE ILR (1903) 30 CAL 539 (PC)
Section 2(h) of the indian contract act defines a contract as a legally binding agreement. Contracts cannot be entered into by anyone; competency in this regard is outlined in Section 11 of the Act. Section 11 of the Indian Contract Act of 1872 states that anyone of majority age, of sound mind, and not disqualified by law is competent to contract. The Indian Majority Act of 1875 established the age of majority; according to Section 3 of the Act, anyone who has reached the age of 18 is a major. The Contract Act establishes the law regarding competency, but it makes no mention of the effect of a contract entered into by a minor. The following landmark case has resolved this conundrum.
BENCH:
Lord Mcnaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir Andrew Scoble, Sir Andrew Wilson
COURT:
Privy Council
FACTS
In this case, Dharmodas Ghose, while still a minor, entered into an agreement with Brahmodutt, a moneylender, to secure a Rs 20,000 loan. At the time of the transaction, the attorney acting on behalf of the moneylender was aware that Dharmodas was a minor. Later, the minor filed an action against the defendant, claiming that because he was a minor at the time the mortgage was executed, the mortgage was void and inoperative and should be cancelled. In this case, Brahmodutt's executors filed an appeal, arguing that because the minor fraudulently represented his age, the law of estoppel should apply, and that if the instrument is cancelled, as pleaded by the Dharmodas, he should be forced to repay the loan under Sections 64 and 65 of the Contract Act.
ISSUES
1) Whether or not the deed was void under sections 2, 10, and 11 of the Indian Contract Act of 1872?
2) Whether the defendant was required to repay the loan amount received under such deed or mortgage?
3) Whether or not the defendant's mortgage was voidable?
JUDGMENT
After considering the facts of the case, the Privy Council determined that the agreement entered into with the minor is void ab initio, or void from the start. The court also held, in response to the defendant's arguments, that the law of estoppel will not apply because Brahmodutt's attorney was aware of Dharmodas's minority. Second, Sections 64 and 65 of the Indian Contract will not apply because there was no agreement in the first place, and for Sections 64 and 65 to apply, the contract must be between competent parties.
As a result, a precedent of minor's agreements being void ab initio had been established in this case.
ANALYSIS OF THE CASE
In this case, the following legal principles were examined and established:
1) Law of Estoppel:
The law of estoppel states that if a person incurs liability as a result of another person's representation, that person cannot change his position. The law of estoppel was not applied in this case because an appellant's attorney was aware of the fact of a minority of minors. However, it has been held in a number of other cases that the Law of Estoppel does not apply to minors, and that even if the minor made an intentional misrepresentation, he can still use his minority as a defence to avoid liability. The reason for such a proposition is that the law made minors incompetent to contract because such persons should not be made liable to incur liabilities, and applying the law of estoppel would defeat the purpose of S.11 of the Contract Act, which makes the minor incompetent. As a result, the law of estoppel will not apply to the minor because such application would subject him to liability.
2) Section 64 and 65 of Indian Contract Act, 1872:
Sections 64 and 65 of the Indian Contract Act, respectively, deal with the restoration of benefits received under voidable and void contracts. The court stated that Sections 64 and 65 apply to contracts between competent parties that have been declared void or voidable. However, because the contract's parties were incompetent in the present case, the provisions of the Contract Act governing benefit restoration will not apply.
3) Refund under the 1877 Specific Relief Act
Section 41 of the Specific Relief Act of 1877, which is now Section 33 of the Specific Relief Act of 1963, states that the court may require the party to whom such relief is granted to make any compensation to the other that justice may require. Essentially, this provision states that the party seeking cancellation of the instrument from the court must restore the benefit received under the instrument.
- In this case, the appellant seeks cancellation of the instrument as well as restoration of benefit; thus, he cannot claim refund under the Specific Relief Act.
To address the issue of minor agreements, the Law Commission proposed in its 13th Report that an explanation be added to Section 65 and that it be made applicable to minor agreements as well.
- In the case of a minor's agreement, various courts have developed the equitable doctrine of restitution. According to this doctrine, if the benefit received by the minor under the transaction is either goods or anything other than money, such goods or things, as long as traceable, must be returned to the bona fide party to an agreement. However, the law concerning restitution of money, i.e. where the benefit received under the transaction is in the form of money, has not yet been settled; courts disagree on this point.
- Agreements with minors are void from the start, according to established law
References
1. Contract Act- Dr Jyoti Rattan
3. Law of Contract- Prof. G.C.V. Subba Rao
Author
Farjana Akter
Department of LLB Lovely Professional University, Punjab
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