Mohori Bibee v Dharmodas Ghose judgement

This is a landmark case of the Indian contract law that shines light on an essential aspect of the agreements — when minors enter into an agreement, it will be considered void ab initio as per the Indian Contract Act, 1872. This judgement by the Privy Council made it clear that minors are not legally competent to contract, any contract that engages a minor as a party cannot be enforced, irrespective of the circumstances. This case serves as a landmark precedent for interpretation of the Section 11 of the Act, which states the competency of the parties to form a contract.

Details Of The Case

• Case: Mohori Bibee v Dharmodas Ghose
• Court: Judicial Committee of the Privy Council
• Date of the decision: 1903
• Citation: (1903) ILR 30 Cal 539 (PC)
• Petitioner: Mohori Bibee
• Respondent: Dharmodas Ghose
• Subject: Contract Law

Facts Of The Case

The facts of the case are mentioned as follows:

This case involves a minor named Dharmosas Ghose and a moneylender named Brahmo Dutt. When the agreement was formed, Dharmodas was a minor. His mother was his guardian at that time. Despite his legal status, on July 20, 1895, he executed a mortgage deed in favour of Brahmo Dutt to secure a loan for amount Rs. 20,000 against his immovable property. But, instead of providing the full amount in advance, a fraction of the amount, that is Rs. 8,000 was given. Kedar Nath, an attorney, facilitated the agreement, where he represented Brahmo Dutt.

Prior to the execution of the mortgage, the minor’s mother, acting in the capacity of his legal guardian, issued a formal notice to Kedar Nath and other legal representatives of Brahmo Dutt. She clarified that Dharmodas was a minor and did not possess the legal competency to form any contract. Regardless of the notice, the attorney, Kedar Nath, went ahead with the mortgage transaction. Consequently, Dharmodas was given the advance amount of Rs. 8,000.

Later, Dharmodas filed a suit via his legal guardian seeking a declaration that the mortgage deed was void. He stated that owing to him being minor, he was legally incompetent to contract as per Section 11 of the Indian Contract Act, 1872. The section states that individuals who are 18 years old, possess sound mind, and are not disqualified by the law can contract. The primary argument by the plaintiff was that any contract formed involving a minor is void ab initio, meaning it had no validity in the eyes of law and that no obligations could arise from such contract.

In response to this, Brahmo Dutt, the respondent (and later, his executrix Mohori Bibee), stated that the plaintiff had lied about his age when forming the contract. The defendant claimed that since the minor had already been provided with a portion of the agreed amount as advance, he should be held liable and must pay the money upon achieving the majority age. The defence further stated that if the contract was deemed void, they should have the right to seek remedy, as per the equitable principles, such as the doctrine of restitution, to recover the sum of Rs. 8,000. Moreover, they emphasised that the minor should be estopped from refusing the validity of the agreement as he had misrepresented his age.

The trial court followed by the Calcutta High Court pronounced judgement in the favour of the minor and stated that the mortgage deed was void since the Indian Contract Act does not permit minors to form legally binding contracts. The High Court of Calcutta dismissed the argument for restitution, stating that a contract involving a minor cannot create any legal obligation that must be enforced. It asserted that, in accordance with the law, the minor could not be directed to repay the advance amount given by the defendant.

Aggrieved by the decision of the High Court, Mohori Bibee, appealed to the Privy Council

Arguments Presented By The Parties

A summary of the arguments presented by the petitioner and the respondent in the case is as under:

Arguments Of The Petitioner

Lack of Legal Competence (Section 11 of the Indian Contract Act, 1872)

The petitioner contended that, as per Section 11 of the Indian Contract Act, 1872, a person should be 18 years old or above to enter into a legally valid contract. Since, Dharmodas Ghose had not attained majority at the time of executing mortgage agreement, he lacked the legal competency to form a contract.

Further, the plaintiff asserted that as per the contract law, any agreement with someone who lacks legal competency to contract is void ab initio. Hence, the mortgage agreement was unenforceable.

Contract Void Ab Initio

The petitioner stated that since the mortgage agreement was formed with a minor, it was not merely voidable, but void ab initio. It means that it was null and did not carry any legal validity.

Knowledge of Minority by the Defendant

The legal representatives of the minor argued that Kedar Nath, the attorney, had been notified that Dharmodas Ghose was a minor, prior to the execution of the mortgage agreement. Minor’s mom, acting as his guardian, had notified the representative of the moneylender that he was incompetent to contract.

Regardless of this information, the defendant decided to move ahead with the transaction. The petitioner stated that since the defendant had prior knowledge, his claims had no basis for the enforceability of the contract.

Non-Applicability of the Doctrine of Restitution

The defendant's probable claim that they ought to be granted restitution—the return of money or value—was likewise beforehand addressed by the petitioner. Since there was no legal basis for the transaction in the first place, the petitioner contended that any restitutional principle could not be applied because the contract itself was void.

Dharmodas Ghose's side argued that the law does not require the repayment of benefits where a contract is void because one of the parties (in this example, a minority) is incompetent, particularly if the other party carried out the transaction knowing of the incompetence.

Protection of Minors Under Indian Law

The petitioner emphasized that minors are given extra protection under Indian law to shield them from exploitation or liability for agreements they are not legally able to comprehend or carry out. He said that the purpose of Section 11 was to protect children from legal obligations resulting from contracts they were not legally allowed to form.

Non-Applicability of Estoppel

In order to stop the minor from contesting the legality of the contract, the petitioner contended that the law of estoppel could not be applied in this particular situation. In general, estoppel prohibits someone from denying facts they have previously claimed if doing so will hurt the other party that depended on those claims.

However, the petitioner argued that because minors lack the legal capacity to make legally binding representations, estoppel does not apply to them under Indian law. Therefore, Dharmodas could still use his minority as a defense and avoid any legal repercussions even if he had misrepresented his age.

Arguments Of The Respondent

The counsel on behalf of the respondent made the following arguments :

Misrepresentation of Age by the Minor

When Dharmodas Ghose signed the mortgage agreement, the respondent claimed that he had falsified his age. Dharmodas had presented himself as a person of full legal age and capable of entering into contracts, according to the defense.

The respondent argued that Dharmodas should not be permitted to dissolve the contract because of this alleged deceit. They claimed that Dharmodas had committed fraud and that, since it would provide an unfair advantage, equity standards should forbid him from evading responsibility due to his minority status.

Doctrine of Estoppel

Invoking the law of estoppel, the respondent contended that Dharmodas should be precluded from contesting the validity of the contract after getting the loan since he had misrepresented his own competence to enter into a contract.

The respondent contended that it would be unfair to deny Dharmodas the legal capacity to enter into the transaction while permitting him to benefit from it (the ₹8,000 loan). The respondent claimed that since Dharmodas' representation had persuaded the respondent to part with a sizeable sum of money, equity and fairness demanded that he not be allowed to retract his representation

Validity of the Contract as Voidable, Not Void Ab Initio

The respondent argued that the mortgage contract should be deemed voidable rather than void ab initio, or void from the start. The respondent contended that a contract made by a minor should be regarded as voidable rather than as always void, enabling the minor to either confirm or reject it after reaching majority age.

The respondent argued that Dharmodas should still be held accountable for returning the advance or making reimbursement to the respondent if he decided to repudiate the contract because he was a minoe.

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Doctrine of Restitution (Unjust Enrichment)

The respondent stressed that the moneylender (Brahmo Dutt) should still be able to demand restitution even if the contract were deemed null and void because of Dharmodas's minority status. According to the respondent, the idea of restitution or unjust enrichment should oblige everyone who profits from a contract—even a minor—to refund or make up for the benefit.

Knowledge of Minority Did Not Invalidate the Agreement

Although the respondent admitted that they were aware of Dharmodas's minority status before signing the mortgage, they maintained that this information should not be used as grounds for contract invalidity. They argued that the kid should be held accountable for repaying the debt because they accepted and used it.

Equitable Relief and Protection of the Respondent’s Interests

The respondent contended that since the moneylender had given the money in good faith, the court ought to grant equitable relief to safeguard the moneylender's interests. They claimed that giving the moneylender any remedies based only on Dharmodas's minority would unfairly benefit the petitioner while depriving the respondent of all options.

Issues Involved In The Case

Issues involved in the case are as follows:

1. Whether a Contract Entered into by a Minor is Void or Voidable?

2. Given that the minor profited from the transaction, may the money loaned to them be recovered under the principles of restitution or unjust enrichment if the contract is deemed void?

3. Can an individual who falsely represented his age when signing a contract be shielded from subsequently contesting the legality of the agreement by the law of estoppel?

4. Is the enforceability of the mortgage contract or the respondent's claim for repayment affected in any way by the moneylender's lawyer being informed in advance of Dharmodas Ghose's minority?

Judgement Of The Court

The Court passed the decision in favour of Dharmodas Ghose and stated the following:

Contract Made By A Minor Is Void Ab Initio

A contract made by a minor is void ab initio, or void from the start, according to a decision by the Privy Council. Only those who have reached the age of majority are able to enter into contracts, as stated in Section 11 of the Indian Contract Act, 1872. The court ruled that the contract had no legal force and could not be enforced since Dharmodas Ghose was a minor at the time the mortgage deed was signed.

The Privy Council stressed that since a minor lacks the legal competence to enter into contracts, every agreement made with them is null and void—not only voidable. As a result, when Dharmodas reached majority age, the mortgage was void and could not be ratified.

Rejection Of Restitution Or Recovery Of The Loan Amount

The court dismissed the respondent's claim of restitution based on the unjust enrichment theory. The Privy Council ruled that no responsibilities could result from the contract because it was null and void from the beginning. Consequently, the moneylender was unable to recover the loan sum that was given to Dharmodas.

Non-Applicability Of The Doctrine Of Estoppel

The Privy Council decided that a minor could not be subjected to the doctrine of estoppel. Since Dharmodas was legally unable to engage into a legally binding agreement, he could not be prevented from contesting the legitimacy of the contract, even if he had misrepresented his age at the time of the transaction.

Effect Of Knowledge Of Minority

The court observed that prior to the mortgage deed being executed, Kedar Nath, the moneylender's representative, had been made aware of Dharmodas Ghose's minority status. The court's decision to deem the contract unenforceable was further reinforced by this previous knowledge. It made clear that any claim for recovery was nullified because the moneylender carried out the transaction even though they were aware of Dharmodas's legal incompetence.

Conclusion

In the Mohiri Bibi vs. Dharmodas Ghose case (1903), the Privy Council ruled that contracts with minors are void and unenforceable. Since Dharmodas was a minor when he mortgaged his property, the contract was declared void, and the moneylender, Mohiri Bibi, could not enforce it. This case established that agreements with minors were invalid from the start.