Is minor a boon or bane for business matters?

According to Indian Majority Act, 1875, as amended by Indian Majority (Amendment) Act, 1999, a person, domiciled in India, who is under 18 years of age is a minor. And as per sec.10 the parties to a contract must be competent.

Who are incompetent to contract for the business laws?

1. A minor, (though in partnership he/she can be included to gain the benefits but not bear the losses)
2. A person who is of unsound mind
3. A person disqualified by law

What do you think, is choosing a minor as a partner in the firm beneficial or not? Provided that he/she will not be liable for the consequences or to bear any loss though performed under his/her own conduct as the contract is said to be void-ab initio i.e. void at the very beginning. But acceptable for sharing the profits.

Have a look at the following provisions and laws established in this regard-

1. Restitution means restoration of previous state. Doctrine of Restitution isn’t applicable in case of a minor. It means if a person has obtained property or goods from the other person, he can be directed by the court to restore it to the owner of the property or the goods. Thus, it isn’t applicable in case of agreements being void-ab-initio and illegal agreements.

Position of law regarding restitution in favour of person dealing with a minor can be summarised as follows-

• In case, the person is aware of or has reason to be aware of the other party being minor, no restitution shall be granted to that person.
• Were minor fraudulently representing that he was of full age enters into contract, restitution shall be available to the deceived party under Sec.33 of the Specific Relief Act, 1963, in the following situations:
• Where minor is the plaintiff and demands his property restored, the court will expect the same from him.
• Even in cases where minor is a defendant, the court will order restoration of property or money traceable in his hands. Judge opined ‘minor can have no privilege to cheat man’.

2. Any agreement which is for the benefit of the minor and under which he is required to bear no obligation, is valid. Any contract in which a minor is a beneficiary or a promise ma be enforced by the minor, but not at the option of the other party. It is rightly said that ‘minority is a boon’.
3. Ratification means subsequent adoption of some previous act. Valid ratification of the act requires that the person ratifying the act must be competent to contract both at the formation of contract and at time of ratification. An agreement void ab initio cannot be ratified.
4. Estoppel means a legal bar to denying a fact because of one’s own previous actions or words to the contrary. The rule of estoppel does not apply in case of a minor. That means even if minor has by misrepresenting his age, induced the other party to contract with him, he can still plead minority and cannot be sued for fraud because if the injured party was allowed to sue for the fraud it would be equivalent to enforcing the void agreement by indirect means.
5. A minor being incompetent to a contract cannot become a partner in a partnership firm. But with the consent of all other partners can be admitted to the benefits of the partnership firm only for sharing profits and not losses. On attaining the majority such a minor has an option either to become a partner or not to become a partner and leave the firm. This option can be exercised by him within a period of six months from the date of attaining the If he fails to exercise the option either ways then on the expiry of the above stated period of six months he automatically becomes a partner i.e. by default.
6. Minor can be appointed as an agent. He shall bind the principal by his acts done in the course of such an agency and cannot be held personally liable even in case of breach of agency i.e. exceeding authority given to him. Thus in appointing the minor as an agent the principal takes a great risk.
7. Minor and Insolvency- A minor cannot be adjudged insolvent because he cannot be held liable even for necessaries supplied to him/her or his/her dependents.
8. Where in a contract of guarantee, an adult stands surety for a minor the adult is liable under the contract as a whole can be enforced against the adult.
9. The parents of the minor are not responsible or liable for the agreement made by the minor, whether the agreement is for the purchase of necessaries or not. The parents will be held liable only when the child is contracting an agent for the parents.
10. A minor cannot be a shareholder of the company. A company can also refuse to register transfer or transmission of shares in favour of minor unless shares are fully paid. Thus, a minor through his guardian can be a part of company as a shareholder on buying fully paid shares.
11. Under the LLP Act, 2008 there is no specific provision to admit minor to the benefit of partnership or as a member of LLP.
12. Minor can be appointed as an agent. He shall bind the principal by his acts done in the course of such an agency, i.e. exceeding authority given to him. So, it’s a great risk in appointing him as an agent.

As stated, it’s rightly said that the law protects minors against their own inexperience and against the improper designs of those more experienced. But the law also tries not to cause unnecessary hardship to persons who deals with minors.