Case name: Mohori Bibee vs. Dharmodas Ghose (1903) 30 Cal 539
Jurisdiction: The Privy Council
Decided on: 04 March 1903
The bench of Judges: Lord McNaughton, Lord Davey, Lord Lindley, Sir Ford North, Sir Andrew Scoble, Sir Andrew Wilson, JJ.
What is the case about?
The landmark case of Mohori Bibee vs. Dharmodas Ghose addresses the validity of an agreement with a minor. In this famous case, the Court declared that any contract made by a minor or any minor’s agreement is void, and this view has been strictly followed for years. The case was decided in 1903 when the Privy Council ruled that a minor’s contract is void ab initio, which means that it is void from the beginning.
Facts of the case (Mohori Bibee vs. Dharmodas Ghose)
A mortgage deed was entered between two parties on the 20th of July, 1895. Dharmodas Ghose, a minor plaintiff, mortgaged his property to defendant Brahmo Dutt, a money lender, in order to acquire a loan of Rs. 20,000. The minor immediately received Rs. 8,000 as part of the loan.
Brahmo Dutt was a money lender having his business at Calcutta and the mortgage deed with Dharmodas Ghose was executed by Kedar Nath, the attorney of Brahmo Dutt, on his behalf.
At the time of the mortgage, the plaintiff was still a minor and he had not attained the age of twenty-one years. His mother who was appointed as his legal guardian had sent a notice on 15th July to Kedar Nath stating the fact that Dharmodas Ghose was a minor and hence, any contract entered into with him should be at the concerned party’s own risk.
Even though the attorney and managers of Brahmo Dutt had full knowledge that he was a minor and was incompetent to mortgage his property, the amount of loan was given to him.
Subsequently, the minor through his guardian (mother) filed a lawsuit for cancellation of the mortgage, claiming that he was a minor at the time he executed the mortgage. Hence, he asked that the mortgage should be declared void and inoperative.
Brahmo Dutt contended that neither he nor his attorney received any notice regarding the minority of Dharmodas Ghose and that the Courts should not provide any relief to Dharmodas Ghose without requiring him to refund the money advanced.
The Courts of the first instance took a decision in favor of the minor. Later, an appeal was filed by Brahmo Dutt and his attorney. The Appellate Court dismissed the appeal, and Brahmo Dutta died soon after, and his legal executors, i.e., Mohori Bibee (wife of Brahmo Dutta) filed an appeal in the Privy Council.
What issues were raised?
Whether the law of estoppel be applicable?
Whether the mortgage deed was void or not under the provisions of the Contract Act?
Whether the minor was liable to return the money advanced to him?
The case revolves around the capacity of a person to contract and its related provisions under the Contract Act.
According to Section 10 of the Indian Contract Act of 1872, persons who enter into a contract must be “capable”. It indicates that the parties must be competent to enter into a legally binding contract.
In other words, the parties must be of legal age to enter into a contract.
Further, Section 11 of the Contract Act specifically states that “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and is of sound mind, and is not disqualified from contracting by any law to which he is subject.”
As a result, minors, those of unsound mind, and those debarred by law are not competent to contract.
Regarding the age of majority, the Majority Act of 1875 fixes the age of a person to attain majority as 18 years. But in instances where a legal guardian has been appointed by Courts for a minor or for the property of a minor or both, then, in that case, the age of majority will be 21 years and not 18 years.
Contentions of the appellant
The appellant’s counsel contended that Section 115 of the Indian Evidence Act, 1872 should be applied. The section (on estoppel) states “When one person through an act, an omission, or a declaration has caused another to believe something to be true and convince them to act on it, then in no circumstance can that person or his legal representative later in a lawsuit or in a proceeding deny the truth of that thing.”
However, the Court refused to rely on Section 115 of the Indian Evidence Act, stating that both parties were aware of the truth of the minority of Dharmodas Ghose and that it would be impossible to use Section 115 of the Indian Evidence Act, thus there is no sense in using Section 115 of the Indian Evidence Act.
In addition, the appellant also contended that Sections 64 and 65 should be made applicable. According to Section 65 which deals with the doctrine of restitution, when an agreement is determined to be void, or when a contract becomes void, any person who has obtained any benefit under such agreement or contract is obligated to restore the same or compensate the person from whom he received it. The principle stated in this section is that when the parties engage in a lawful contract and some benefits are passed under it, and the contract is later determined to be void, the party who received the benefits must return them to the other party.
However, the Courts held that for the applicability of Section 65, there has to be a valid contract in the first place. Since the case of Mohori Bibee vs. Dharmodas Ghose had no valid contract and the contract was void ab-initio, the question of restoration of benefit does not arise. It can only be applied to contracts that have some legal backing.
Judgement of the Court in Mohori Bibee vs. Dharmodas Ghose
The Privy Council ruled that “it is important that all contracting parties be competent to contract, and a person who is incapable of contracting by reason of infancy cannot make a contract within the meaning of the Act. The question of whether a contract is void or voidable is dependent on the existence of a contract within the meaning of the Act, and thus cannot arise in the instance of a minor.” In other words, a minor’s agreement is completely null and void. As a result, all of the consequences of a minor’s agreement must be determined independently of any contract.
The Court held that the mortgage by Dharmodas Ghose (the minor) was void-ab-initio and ineffective. That is, the agreement was void right from the beginning.
Further, even though a contract by a minor is void and no liability can be committed by a minor under a contract, a minor is not precluded from receiving a benefit therein.
As a result, the minor had the option to terminate the mortgage and was not required to repay the loan amount advanced, i.e., Rs. 8,000.
As the contract was void-ab-initio, there could be no grounds for a claim of the loss amount by the appellant i.e., the legal executors of Brahmo Dutt.
Conclusion (Mohori Bibee vs. Dharmodas Ghose)
In the case of Mohori Bibee v Dharmodas Ghose, the Privy Council firmly stated that all agreements with minors would be null and void right from the beginning in the eyes of law, i.e., void-ab-initio.
An arrangement(s) with a minor is not an agreement in the eyes of the law. Hence, the Court dismissed the appeal and Dharmodas Ghose was not ordered to refund the money back.
The above decision protects the rights and interests of the minor, who is in a vulnerable position while entering into a contract with a major.
And this rule has been observed throughout India and by virtue of the provisions of the Indian Contract Act.
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