Minors’ Contracts in the Digital Age

Abstract

Minority is well established as a form of legal incapacity across jurisdictions and laws. Some countries grant minors with limited capacity to contract while others consider all minors’ contracts to be void. These rules were laid down in the pre-digital age. Minors today are entering into more and varied transactions than the generations before them, be it shopping on e-retail websites, creating social media accounts, or the more traditional employment contracts. This paper examines how the three jurisdictions of England, India and South Africa deal with minor contracts in the digital age. While South Africa permits minors above the age of seven years to enter into contracts with parental assistance, the English and Indian position is that minor contracts are unenforceable against minors, unless they are ‘contracts for necessaries’ or contracts for the benefit of the minor. Judicial interpretation of these categories has been fluid and indeterminate, creating its own set of problems. This paper argues from the Indian standpoint that the current understanding is inadequate to address the issues that will arise from the mismatch between law (where minority is almost synonymous with incapacity) and reality (where minors are increasingly entering into contracts). The author suggests that the definition for minority for contractual liability should be graded after the model of criminal liability and demonstrates that there are some, albeit imperfect, gains to be had from the South African system.

Introduction

The Indian Contract Act, 1872 (ICA) is a progressive legislation that seeks to go beyond the constraints present within its source, the English common law. In several areas, be it consideration, communication of offers, or remission of performance, amongst many others, the rules embodied within the ICA are an improvement on the source material Swaminathan 2008; Swaminathan 2017; Swaminathan 2018). However, one area where this assertion does not hold is that of incapacity, specifically those agreements where one of the contracting parties is a minor. Minority is well established as a form of legal incapacity across jurisdictions and laws. Some countries grant minors with limited capacity to contract while others consider all minors’ contracts1 to be void and unenforceable. This bar, whether partial or absolute, is in place to protect the interests of the minors Beatson et al. 2020; MacFarlane 2001; McKendrick 2015; Pollock and Mulla 2014). There are two questions to consider here. Do all individuals below the age of 18 years need protection? Is it always in the interest of minors to prevent them from entering into fully legally enforceable contracts?

To answer the first question, this paper does not make the argument that all minors must be recognised under Indian law as capable of entering into contracts. However, it does argue that it is expedient to grant limited contractual capacity to some minors, as has been done in several other countries. A lack of capacity does not equal a lack of understanding (MacFarlane 2001). Once we accept that freedom to contract is a central tenet, what matters is the meeting of the two minds—many minors can assent to the terms of a contract in the same manner as adults (Ibbetson 2001). It is also apposite to remember the origin of this rule is common law principles that once considered married women to be incapable of entering into contracts (MacFarlane 2001). From a law and economics perspective, prohibiting an entire class of willing and able individuals to enter into contracts is inefficient. Such a policy imposes private costs on the parties willing but unable to enter into a contractual relationship with each other. It also imposes widespread social costs since the economy is deprived of several contracts that could have made a positive contribution to the wellbeing of society as a whole (Cooter and Ulen 2008; Posner 2010).

To answer the second question, the idea that all minors “require protection from certain bargains seems out of step with modern psychology and the economic realities of life” (MacFarlane 2001). These rules were laid down in the pre-digital age. Minors today are entering into a greater volume and diversity of transactions than the generations before them, be it shopping on e-retail websites (like Amazon and Etsy), creating social media accounts (such as Facebook, WhatsApp, Instagram and Snapchat) or providing online services on online platforms (e.g., creating or consuming products for e-education sites like Unacademy or apps for Play Store or the App Store). These transactions are distinct from and in addition to, the minors’ contracts that have existed for centuries (such as contracts for necessary goods, employment, apprenticeship, service or education) in terms of both the nature and mode of the contract. Legislatures and judiciaries have sufficiently engaged with the latter categories of minors’ contracts but the former is a different beast altogether. Indian courts have recently started recognising e-contracts, i.e., contracts formed via electronic means such as email and WhatsApp messages.2 However, these are examples of contracts formed electronically; contracts that are performed in the online realm are yet to be fully considered by the Indian judiciary (Pandey and Raghunath 2020). As we traverse further into the digital age, it is the world wide web that is increasingly becoming the cornerstone rather than the marketplace (MacFarlane 2001).

This paper seeks to look at those minors’ contracts that take place on the world wide web and not the physical marketplace. It will examine how the three jurisdictions of India, England and South Africa deal with minors’ contracts. While South Africa permits minors above the age of seven years to enter into contracts with parental assistance, the English and Indian position is that minor contracts are unenforceable, unless they are ‘contracts for necessaries’ or contracts for the benefit of the minor.3 The paper will summarise the statutory provisions and case law to showcase and compare the different approaches taken by the three countries. Finally, the paper will make the argument that the current understanding of ‘contracts for necessaries’ and contracts for the benefit of the minor is inadequate to address the issues that will arise from the mismatch between law (where minority is almost synonymous with incapacity) and reality (where minors are increasingly entering into contracts). It is proposed that the definition for minority for contractual liability should be graded, as it is with criminal liability, and that there are some gains to be had from the South African system.

Minors’ Capacity to Contract

This section of the paper will evaluate how the three jurisdictions of England, India and South Africa engage with the issue of minority as incapacity and state their distinct and disparate positions on minors’ contracts. Minors’ contracts are voidable or void under English common law, subject to certain exceptions. Minors’ contracts in India are void ab initio, subject to the exceptions of executed contracts, contracts of marriage and some contracts of apprenticeships. The South African position is at odds with the English and Indian position in that minors have limited contractual capacity granted by statute.

England

The current position in common law is that, except for contracts for necessaries, education, service and apprenticeship, minors’ contracts are either voidable at the option of the minor, or unenforceable against them unless ratified by the minor after attaining majority (Beatson et al. 2020). In both situations of voidable or unenforceable contracts, the minor could enforce the contract if s/he so chooses, and could even recover damages if the other party breaches the contract, though the remedy of specific performance is not available to them (Beatson et al. 2020). The age of majority is fixed at 18 years by the Family Law Reforms Act, 1969. In 1984, the Law Commission considered the question of minors’ contracts. In an earlier Working Paper, the Commission had proposed the principle of “qualified unenforceability” under which contracts were unenforceable against minors.4 They also discussed an “Alternative Proposal” whereby the line would be drawn at age 16; all contracts would be enforceable against a minor above the age of 16 years as if they were adults, and no contract would be enforceable against a minor below that age, regardless of the nature of the agreement.5 This was proposed to be fair to the adults who entered into transactions with minors. Public opinion, however, did not support the “Alternative Proposal”.6 Therefore, the Commission decided against codifying all aspects of the law relating to minors’ contracts, instead seeking to remedy the defects in the existing law.7 And so, the Commission simply recommended that Sect. 1 of the Infants Relief Act, 1874 be repealed,8 which ensured that no adult could be sued for contracts entered into during infancy, even if they had ratified the same. This was, following the Commission’s recommendation, repealed by the Minors’ Contracts Act, 1987 (Beatson et al. 2020).

Contracts for necessaries

Contracts for necessaries could always be enforced against the minor. In Peters v. Fleming9, the question before the court was whether a gold ring, a gold watch chain and other items of jewellery were necessaries or not. The defendant was an undergraduate student at the University of Cambridge and the minor son of a member of Parliament. Parke, J. stated that “the word necessaries was not confined, in its strict sense, to such articles as were necessary to the support of life, but extended to articles fit to maintain the particular person in the state, station, and degree in life in which he is.”10 It was held that articles were not merely ornamental but had real use and thus, were necessaries.11

The authority on this issue is the judgment of Nash v. Inman12 where the court expounded on what constitutes necessaries. A tailor plying his business on Saville Row, London brought this action against an undergraduate student at the University of Cambridge, a minor, to recover the price of the eleven waistcoats, amongst other items of clothing, that he had supplied to the defendant. While ruling for the defendant, Buckley L.J. noted that two conditions must be met to hold enforceable a minor’s contract for necessaries: “the contract must be for goods reasonably necessary for his support in his station in life, and…he must not have already a sufficient supply of these necessaries.”13

Contracts for the Benefit of the Minor

Minors’ contracts of employment or education are enforceable as long as they are beneficial to the minor (Beatson et al. 2020). An example is provided by Clements v. London and North Western Railway Company.14 A minor was employed by a railway company as a porter. He also became a member of an insurance society, agreeing to contribute to the fund and also waiving his rights under the Employers’ Liability Act, 1880. One of the advantages of this insurance society was that it provided compensation for even those injuries which were not caused by the negligence of the employer. The plaintiff suffered an accident and sued the railway company. Lord Esher noted that a minor cannot repudiate a contract if it was for his advantage.15 The appeal was dismissed since it was held that the contract was for the benefit of the minor and thus binding on him.16 Kay, L.J. added that “contracts of apprenticeship and with regard to labour are not contracts to…which the plea of infancy is a complete defence, and the question has always been, both at law and in equity, whether the contract…is for the benefit of the infant.”17

Chaplin v. Leslie Frewin (Publishers) Ltd.18 is an interesting case that involved the minor son of the famous filmmaker and comedian, Charlie Chaplin. Michael Chaplin, the 19-year-old minor son son,19 who was estranged from his father, entered into an agreement with two journalists to ghostwrite his autobiography, I Couldn’t Smoke the Grass on My Father’s Lawn. His wife and he also entered into an agreement with a firm of publishers to sell this work. An advance amount from the royalties was paid to the couple. They approved the galley proofs but sought to repudiate the contract a few weeks later on the ground that the finished work showed the plaintiff in a bad light. It was argued that the plaintiff was entitled to avoid the contract since it was “neither for necessaries nor for his advantage.”20 Danckwerts, L.J. did not accept this argument and held that the contract under question was advantageous since it would aid the plaintiff to start his career as an author, while also enabling him to maintain his wife and child.21 One could not avoid a contract merely because the benefits were “not as great as the parties anticipated.”22 The judge also famously remarked that the “mud may cling but the profits will be secured.”23

Compare this with the case of De Francesco v. Barnum.24 Helen Maude Parnell, a girl of 14 years, executed an apprenticeship deed with the plaintiff, Giuseppe Venuto de Francesco, in December 1886, for a period of seven years. She was to learn his art, be remunerated for performances if and when they took place, and not contract any professional engagements without his consent, among other conditions. Another deed, on the same date and with similar terms, was executed between the plaintiff and Ada Parnell, Helen’s 12-year-old sister. In August 1889 both girls contracted with the defendant, Phineas T. Barnum, to perform as stage dancers for his show for a weekly wage. The plaintiff sued the minors for damages and for an injunction to restrain them from performing in the defendant’s show. Fry, L.J. noted that there was “no provision for remuneration of any sort…except during the engagement.”25 The apprenticeship deed did not require the plaintiff to pay wages to the girls except during engagements. It also empowered the plaintiff to send the girls to perform on shows in foreign countries. Fry, L.J. also expressed concern over the condition that required the girls to not take any other professional engagements for the period of the contract but did not place a similar constraint on the plaintiff.26 The plaintiff also had the power to put an end to the contract unilaterally, after a fair trial and written notice to the minors. Fry, L.J. held that these stipulations put “an inordinate power into the hands of the master” and it was not one for the benefit of the minor.27 Earlier courts had held that “an infant cannot bind himself to be liable to a penalty.”28 The appeal was dismissed as the court was loath to turn “contracts of service into contracts of slavery.”29

Another instance where a contract of employment was not enforced against a minor was in the case of Sir W. C. Leng & Co. Ltd. v. Andrews.30 The plaintiffs were proprietors of a newspaper and, in July 1905, employed a 19-year-old William Linton Andrews (the minor defendant) as a junior reporter. One of the conditions of employment was that the defendant, after leaving this employment, could not be connected with any newspaper in the town of Sheffield or within a 20 miles radius of the town hall. Andrews worked for the Sheffield Daily Telegraph till October 1907 and in March 1908 sought employment from the Sheffield Independent Press, Limited, a rival newspaper business. Plaintiffs claimed this was a breach of their agreement and sued for an injunction to restrain the defendant from working for the second newspaper. Cozens-Hardy, M.R. found that this restriction was ‘unusual’.31 It was also unreasonable and against public policy to expect a young man to bind himself for the rest of his life in such a manner, in a business and employment of this kind.32 Even if this unusual condition was valid in the case of an adult contracting party, it was invalid in the case of a minor defendant.33

Voidable Minors’ Contracts

Those contracts which involve the devolution of continuous rights and duties, or where the minor acquires interest in property or avails of some benefit under the contract, are voidable at the instance of the minor (Beatson et al. 2020). S/he has the option to avoid the contract during the infancy or within a reasonable period upon attaining majority and must exercise this option in a timely manner or remain contractually bound.34

Unenforceable Minors’ Contracts

Contracts entered into by minors that do not fall in the preceding three categories, fall within this category, viz. they are enforceable by the minor but not binding upon them unless ratified upon attaining majority (Chitty 2018). Most of the minors’ contracts can be grouped in this class (Chitty 2018).

Williams v. Moor35 concerned itself with a minor’s contract for sale and delivery of work and materials, not being necessaries. The defendant minor ratified this contract after coming of age and before the commencement of this suit. Parke, B. observed such a contract is void in the sense that it cannot be enforced against the minor.36 However, the law allows the minor contracting party to validate contracts entered into during their infancy because, upon coming of age, they acquire the power to decide for themselves whether the contract is of “meritorious character” or not.37 The judgment was entered for the plaintiff since the defendant had ratified the contract after attaining majority and made himself liable under it.38

India

Under Sect. 3 of the Indian Majority Act, 1875, one attains majority at the age of 18 years (or at the age of 21 years if a guardian has been appointed by the state for the individual).39 Section 11 of the ICA states that every person who has attained the age of majority is competent to contract, provided that s/he is of sound mind and not otherwise disqualified. Two interpretations are possible: the minor is incompetent to contract and thus their agreement is void, or that h/she is not bound by the contract, while the other major contracting party is, which results in a voidable contract (Pollock and Mulla 1919). Several Indian courts followed English common law and held that minors’ contracts were voidable at the option of the minor (Gooderson 1958).40 Other courts strictly interpreted Sect. 11 to mean that all minors’ contracts were void (Pathak 2011). This lack of consensus arose because the ICA does not explicitly state the consequences of a minor entering into a contract; nowhere is it mentioned in the ICA that the status of a minors’ contract is void (Swaminathan and Surana 2018). It is this ill-drafted provision that seems to be the source of the difficulties faced by the Indian courts (Gooderson 1958).

Minors’ Contracts are Void ab Initio

In 1903, the Privy Council sought to bring this controversy to rest by making a final determination on the validity of minors’ contracts. Mohori Bibee v. Dhurmodas Ghose41 is considered the authority on the question of the status of minors’ contracts. Ghose executed a mortgage deed in favour of Brahmo Dutt in July 1895 to secure a loan of Rs. 20,000 at 12% interest. Kedar Nath Mitter, acting as the attorney and agent of Brahmo Dutt, was aware at the time of the execution of the mortgage deed that Ghose was a minor. In September 1895, Ghose, through his mother and guardian as next friend, sued Brahmo Dutt, seeking that the mortgage deed be declared void and inoperative. Writing for the court, Sir Ford North held that given the ambiguity regarding the interpretation of Sect. 11, the bench considered itself “at liberty to act on their own view.”42 The court held that under the ICA only those parties who were ‘competent to contract’ were allowed to enter into enforceable contracts.43 Thus, a person who was incompetent to contract because of their minority, could not enter into a contract within the meaning of the ICA. “The question whether a contract is void or voidable presupposes the existence of a contract within the meaning of the Act, and cannot arise in the case of an infant.”44 The court ruled in favour of Ghose, who was not required to return the loan amount since the doctrine of restitution, enshrined in Sects. 64 and 65 of the ICA, presupposed the existence of a contract, whether voidable or void.45

After the decision in Mohori Bibee, minors’ contracts have been considered as void ab initio by subsequent judicial decisions and contract law scholars, even though this phrase was not actually used by the Privy Council (Swaminathan and Surana 2018). These contracts cannot be enforced by or against the minor, and nor is restitution of any benefits that may have passed between the parties possible.

Even after the decision in Mohori Bibee, some courts had been loath to hold all minors’ contracts void. The High Court of Madras’ decision in A. T. Raghava Chariar v. O. A. Srinivasa Raghava Chariar46 also dealt with a minor’s contract in the form of a mortgage deed. In this case, contrary to the facts of Mohori Bibee, the mortgage deed was executed in favour of the minor, who had already advanced the loan amount to the adult mortgagor. Since the minor had already performed his obligations under the contract, the issue was whether he could enforce it against the major contracting party? Wallis, C. J. drew attention to the English common law position where minors’ contracts dealing with the purchase of immovable property were voidable at their instance.47 He also noted that the “provision of law which renders minors incompetent to bind themselves by contract was enacted in their favour and for their protection and it would be a strange consequence of this legislation if they are to take nothing under transfers in consideration of which they have parted with their money.”48 It was inequitable to allow someone to take advantage of a minor’s incapacity to contract, the statutory prohibition being imposed to protect the interests of the minor. Wallis, C. J. held that transfers by way of mortgage and sale in favour of a minor were not void; if the ICA and the Transfer of Property Act, 188249 sought to do this, the legislators would have used “clear and unambiguous language.”50 Abdur Rahim, J., in his concurring opinion, also drew this distinction of minor as a mortgagor and minor as a mortgagee. He noted that the issue before them was not one of enforcing a contract made by a minor, but of enforcing the promise of an adult mortgagor.51 Since an infant can acquire immovable property through a bequest or a gift, it was untenable to hold that s/he could not acquire it by way of transfers such as a mortgage, more so when the Transfer of Property Act nowhere states that only a person competent to contract can be a transferee of immovable property.52

In this case of an executed contract, we can see how the judges sought to revert to the position under English common law regarding the status of minors’ contracts. However, even today, Mohori Bibee is the locus classicus on the validity of minors’ contracts. Mohori Bibee’s ratio was reaffirmed in the Indian Supreme Court decision of Mathai Mathai v. Joseph Mary.53 The plaintiff’s mother loaned a sum of Rs. 7000 to his uncle when she was 15 years old. The plaintiff’s uncle mortgaged some land to his mother as security for this loan and she retained possession of said land for over 50 years. Upon her death, the plaintiff wanted to be declared a deemed tenant of the said land so that he would gain the statutory right to purchase the mortgaged land. Gowda, J., writing for the Division Bench, rejected this application, holding that the mortgage deed in question was invalid, given that one of the parties to the contract was a minor.54 A mortgage deed in the name of a minor cannot be held valid merely because it is in the minor’s interest.55 “The law cannot be read differently for a minor who is a mortgagor and minor who is a mortgagee.”56 Since the mortgage deed was void ab initio, the Appellant was unable to claim any rights flowing from it.

The decision is Mathai Mathai has been criticised (Wadhwa 2015) and it does not foreclose the possibility of future benches either relying on the already carved out exceptions or creating their own exceptions. It is possible to distinguish this Supreme Court judgment on the ground that it is the final word only on mortgages and not on other kinds of minors’ contracts (Mulla 2015).

Marriage and Executed Contracts

The other instance where courts have carved out an exception to the rule laid down in Mohori Bibee is that of contracts of marriage. One example is that of Rose Fernandez v. Joseph Gonsalves, where the High Court of Bombay adjudicated upon the validity of a marriage contract entered into by a minor.57 Decided a few years after judgment in A. T. Raghava Chariar, this judgment considered the twin issues of privity and incapacity. Joseph Gonsalves and Fernandez, the plaintiff’s father, worked together at the docks. Gonsalves asked Fernandez for his daughter’s hand in marriage and even asked the 13-year-old Rose to marry him. Both agreed. On 26 May 1919 Gonsalves, in writing, agreed to marry Rose within two years or pay Rs. 2000 as damages if he failed to marry her. In 1921 Gonsalves married another and Rose filed suit for damages for breach of the contract of marriage. Taraporevala, J. distinguished this case from Mohori Bibee, opining that he was “doubtful” that the “Lordships of the Privy Council would have applied the same principle to a contract of marriage” as they did to a contract related to property.58 Going into questions of personal law, the judge noted that, in India, it was considered to be the religious duty of parents to arrange the marriages of their daughters and thus they could make binding contracts of marriage on behalf of their daughters.59 The court was not prepared to declare void a contract that was entered into for the minor’s benefit by the guardian on her behalf and who was the only person who could have entered into such a contract.60 The judge also considered the social ramifications of a breach of promise to marry in the Indian milieu, and how this would affect the chance of the girl in question in finding another match.61 It was thus held that when a “contract is made by a guardian of the minor so as to be binding on the minor and which is for the benefit of the minor there is an enforceable contract in law and the minor can enforce it” (emphasis added).62

The short order of the High Court of Lahore in Abdul Ghaffar v. Piare Lal Salig Ram63 also relied upon the judgment in A. T. Raghava Chariar to hold valid minors’ contracts. The plaintiff firm consisted of two minors and had supplied ivory goods to the defendant firm. The defendant firm contended that this agreement of sale was void and could not be enforced. Addison, J. held that there was no reason why the defendant should not tender the consideration when they had received the ivory goods.64 He set aside the order of the court below dismissing the suit and remanded it to be tried on merits.65

Raj Rani v. Prem Adib is another High Court of Bombay decision that dealt with a contract entered into by a father on behalf of his minor daughter.66 Prem Adib, a film producer, entered into an oral agreement with Dhiraj Singh Muramal in January 1947 to employ his daughter Raj Rani for one year to act in his movie. Raj Rani diligently attended the rehearsals, shooting and track recording sessions but, in February 1947, Adib employed another artist for her role. Raj Rani was not given any work thereafter. Next month, Adib terminated the contract of service between them and refused to pay her the salary that was due. Raj Rani brought suit to claim damages resulting from this breach of contract. The issues raised before the court dealt with consideration, privity and incapacity. Desai, J. held that a contract of personal service did not stand on the same footing as that of a contract of marriage or one of apprenticeship.67 The Fernandez decision was cited to support the claim that contracts entered into by the minor’s guardian for the benefit of the minor were enforceable.68 However, Desai, J. disagreed, holding that the mere fact that a contract was for the benefit of the minor did not render the contract enforceable.69 The judge further reasoned that a contract of service, entered into on behalf of a minor by their guardian, was unenforceable for want to consideration, as the consideration for the contract had to flow from one who was not competent to enter into a contract.70 Seeking grounds upon which it could distinguish the rationale of the Fernandez judgment, Desai, J. also distinguished the exception for marriage contracts on the grounds that a guardian acts as a trustee (of the minor) when s/he enters into a contract of marriage on behalf of the minor, and this is not the case when the contract is of service.71 Thus, Raj Rani was unable to obtain any remuneration though she was willing to perform, and had in fact partly performed, her obligations under the contract. The exceptions to the Mohori Bibee rule, namely executed contracts and contracts of marriage, were held not applicable to this case (Gooderson 1958).

Contracts for Necessaries

This common law exception to the voidable status of minors’ contracts is codified in Sect. 68 of the ICA. Any person who supplies goods to a minor, which are in nature of necessaries suited to the minor’s condition in life, can get reimbursed for such supplies from the property of the minor. The section applies to anyone who is incapable of entering into a contract and thus includes both minors and persons of unsound mind, and their legal dependents. However, this provision falls under that chapter of the ICA which deals with quasi-contracts, to wit those situations which resemble contracts. Thus, strictly speaking, these transactions are not contracts but are enforced because of principles of equity. As has been noted by the court in Mohori Bibee, under Sect. 68, a minor is not personally liable to honour contracts for necessaries and only a statutory claim exists against his or her property.72

Kunwarlal Daryavsingh v. Surajmal Makhanlal is a decision of the High Court of Madhya Pradesh on this point.73 Tulsiram, the minor son of Surajmal and the second defendant in this suit, took a house on rent from the plaintiff in Shujalpur. Later the father-son duo refused to pay the rent and hence Kunwarlal brought a suit for recovery of Rs. 15, the arrears of rent. Khan, J. allowed the revision, holding that a house rented to a minor so that he could reside there and continue his studies, was a necessity suited to his condition in life.74

Contracts for necessaries, though, predominantly find expression in credit sales. If a minor is in a position to pay for the item in question and does so before taking possession of the goods, it will not be a contract for necessaries. It is for this reason that shopkeepers have no qualms in conducting business with minors as long as they pay upfront. We all can speak from experience of buying personal goods from the neighbourhood store as children. Most shopkeepers will first take the money and then supply goods, making this transaction an executed contract. It is only in cases of credit sales (which is an executory contract since the shopkeepers supply the goods first) that this situation of contracts for necessaries arises, and the attendant need to be reimbursed for goods already given away.

The Treatment of Minority Under Other Indian Legislations

Section 10 of the ICA provides a general principle that minors cannot enter into legally binding contracts. As has been pointed earlier, law and the courts do not prevent minors from entering into contracts, they simply will not enforce such agreements; mostly against the minors, sometimes even against the adult contracting parties. Minors’ contracts occupy a grey area that is found in other civil statutes as well. For instance, Mohori Bibee dealt with the transfer of immovable property, which is a special contract and thus governed by different rules. Under Sect. 7 of the Transfer of Property Act, 1882 (TPA), minority is not an absolute bar to being a transferee in certain cases. Since minors are not competent to contract, they are also not considered competent to transfer property. However, property can be transferred to them if certain conditions are met. Examples include gifts in favour of minors that do not impose onerous obligations, a conveyance where consideration is provided by a third party and one that does not impose any obligations on the minor, and even conveyances where the minor provides the consideration and the transaction is complete, if the minor does not need to perform any outstanding obligations (Sarathi 2005). The underlying theme seems to be that minors can enter into commercial transactions which do not impose any obligations on them. This is akin to the category of contracts entered into for the benefit of the minor. Minors thus cannot enter into lease agreements, whether as lessor or lessee, since this instrument, in some cases, has to be executed by both parties, or usually requires the payment of rent periodically after the formation of the contract (Sarathi 2005).

Another legislation that provides limited recognition to the contractual capacity of minors is the Apprenticeship Act, 1961. Section 3 of this statute states that no one below the age of 14 years can be engaged as an apprentice. Under Sect. 5, a minor can start apprenticeship training in specified trades only after his guardian enters into a contract of apprenticeship with their employer. Thus, despite the agreement placing obligations on the minor, the promise flowing from the minor and consideration flowing towards the minor in the form of stipends, the minor is not a contracting party under this Act.

South Africa

South Africa has a mixed legal system; it contains elements of both Roman-Dutch law and English common law (du Plessis 1998). The common law of South Africa also incorporates elements of the customary law of several African tribes (Schreiner 1967). English common law’s contribution to the formation and development of contract law in South Africa has been ‘appreciable’ albeit with significant departures (Schreiner 1967). One such notable difference is the treatment of minors’ contracts.

Limited Capacity to Contract

Section 17 of the Children’s Act, 2005 has fixed the age of majority at 18 years. An additional distinction is created at law between infants and minors (Watt 2012). Infants, i.e., children below the age of seven years, are absolutely barred from entering into a contract. Minors, those individuals between the ages of 7 and 18 years, have limited contractual capacity; they can enter into valid contracts with the consent of their guardians (Christie and Bradfield 2011). However, it is still open to the minor to avoid this contract, otherwise valid in the eyes of law, until a reasonable time upon attaining majority, if s/he can show that it was prejudicial to their interests at the time of its formation (Scott 2013). The contract will be invalidated and the minor can claim restitutio in integrum. In Wood v. Davies,75 the minor plaintiff’s father, acting as his legal guardian, used a portion of his inheritance to purchase a house from the defendant. The plaintiff sought to avoid the contract in court. Sutton, J. found that the father exceeded his capacity while entering into this contract of sale.76 The minor plaintiff resided in a boarding school while the house was purchased, at an excessive price, for his family, making it an unnecessary and expensive buy. The terms of the contract imposed onerous obligations on him that would extend beyond his minority, while also eating into a substantial portion of his inheritance. Since this was held to be a contract prejudicial to the interests of the minor, he was entitled to cancel the contract and claim restitutio in integrum.77

In Edelstein v. Edelstein, it was held that a contract entered into by a minor without their guardian’s consent cannot be enforced against the minor, but is binding on the other party.78 However, a contract entered into by an unassisted minor can later be ratified by the guardian, or the minor themselves upon attaining majority.79 Interestingly, a contract entered into by an unassisted minor, that is not ratified by them of their guardian, is not void per se. It has been described as a ‘limping contract’—the minor represents the weak leg as s/he has no contractual obligations but only a natural obligation; the other party represents the strong leg as they are fully bound to perform the contractual obligations under the contract (Van Heerden et al. 1999). There have been calls to declare such contracts as voidable or inchoate or sui generis but no consensus has emerged on this point (Watt 2012; Gilbert 2018).

Thus, unlike the English and Indian positions, a contract for necessaries, or one for the benefit of the minor, is not binding and/or enforceable against the minor if s/he is not assisted by the guardian whilst entering into this contract (Bhana and Visser 2014). This was not always the position. At the end of the 19th century, several South African courts started holding, based on principles imported from English common law and later termed the ‘benefit theory’, that unassisted minors’ contracts would be enforced if the minor was enriched under the contract.80 The law came full circle with the decision in Tanne v. Foggit which rejected the benefit theory.81 The appellant ran typewriting classes at a college in Germiston. The minor defendant contracted to take typewriting classes from him three times a week for two and a half months, for a fixed sum which was payable in advance at the beginning of each month. Foggit paid the fees for and attended classes in the first month, but did not pay for or attend classes thereafter. Tanne brought an action for the amount due to him for the remaining months. Tindall, J. ruled in favour of the minor since he had entered into this contract without the consent of his father, his natural guardian.82 It was held that in cases of unassisted minor contracts, the minor is only bound to the extent of the benefit derived from the contract.83 There was no obligation on Foggit since had derived the benefit of only those classes he attended which had already been paid for.

This position of law was later reaffirmed in Edelstein. In this case, a minor woman entered into a marriage with the necessary consent of her mother and her father’s constructive consent (the parents were divorced and custody of the minor was with the mother). She signed a prenuptial contract with her husband, without the assistance of her father (her natural guardian), and under the assumption that her mother’s consent was enough. Later the validity of this prenuptial contract was called into question. Van der Heever, J. conclusively rejected the benefit theory, finding it “incapable of practical application” due to the inherent methodological difficulties in determining what constitutes a benefit to the minor?84 It was held that a contract entered into by an unassisted minor is not binding on them even if it is generally beneficial, as long as it imposes obligations on the minor.85 Thus, an unassisted minor is not liable for necessaries under South African law (Spiro 1985).

Statutory Recognition

The contractual capacity of minors is primarily governed by the principles of South African common law. The Consumer Protection Act, 2008 (CPA) seeks to codify one fraction of minors’ contracts and obligations. Section 3(1)(b) recognises minors as “vulnerable consumers” and aims to reduce some of the potential disadvantages that can be faced by them. Section 39 expounds on the status of minors’ consumer contracts. A contract for the supply of goods or services is voidable at the option of the minor if, at the time of making the agreement, the minor was unemancipated, unassisted by their guardian, or if the agreement has not been ratified by their guardian or by themselves upon attaining majority. This right to avoid the contract is not conferred upon a minor who has acted fraudulently. It has been argued that though the purpose of this provision was to reduce the uncertainty regarding the common law position, rather than to replace it, the section has fallen short of its aim (Bhana and Visser 2014). It does, however, somewhat strengthen the ‘limping’ status of this category of unassisted minors’ contracts.

Two Diverging Roads

A close examination of the approaches taken by the three jurisdictions under question provides us with two options. One is to hold that all minors’ contracts are void subject to the broad exceptions of contracts for necessaries or contracts for the benefit of the minor. The second is to allow a certain class of minors to enter into enforceable contracts with the consent and assistance of their legal guardians, subject to a possible claim of restitutio in integrum in the future if the contract is found to be prejudicial to the minor’s interests. One commonality between the two approaches is the recognition that is it futile and impractical to prevent all minors from entering into any and all sorts of consumer or commercial transactions.

Broadly speaking, contracts in today’s digital age can be categorised into three classes: (i) contracts that are formed and performed exclusively in the physical world; (ii) contracts that can be formed/performed in both the traditional and the electronic way; and (iii) contracts that are formed/performed exclusively in the digital world. The first category of contracts has been in existence since the beginning of commerce in the human world and legal systems have put in place policies and rules, albeit not wholly adequate, to govern minors who enter into such contracts. The latter two categories are a creation of the digital age. The second category of contracts comprises those transactions which enjoy the best of both worlds. An example is that of consumer transactions such as the sale of goods and services. Minors could earlier go to brick-and-mortar stores to buy books, clothes and foodstuff. Now, especially in the current COVID-19 pandemic, most choose to have the same products delivered to their doorsteps, a facility readily offered by e-commerce websites like Amazon, Flipkart or Myntra (Perez 2017). Digital transactions of this nature have not been able to fully replace the traditional methods of entering and performing these simpler consumer transactions. Nor is that the intention. Contracts in this category exist to reduce transaction costs; the means are different but the ends remain the same. The third category consists of those transactions for which there has been no equivalent in the physical world. Examples of this would be the creation of social media accounts such as Facebook (Pandit 2021), providing advertising services or putting up content on personal YouTube channels or podcasts (George 2019), creating apps to be sold on the Google or Apple app stores (Ghosh 2017), esports player contracts (Ranjit and Rastogi 2020) and the like. The subject matter of these contracts exists in the digital realm and they are meant to be performed exclusively in the digital sphere. While it is possible to enter into these contracts using the traditional route, it is more expedient to do so electronically, especially when it requires nothing more than a few clicks of the mouse.

This paper argues that we need to think about how to deal with the second and third categories of contracts. Many of these contracts are novel by-products of the age of technology in the sense that they would not exist had it not been for the technological developments in the recent past. Moreover, it is an inescapable fact that it is the younger generations who are more adept at using technology, faster to adapt to new and emerging applications, and thus are the primary beneficiaries of the digital economy. Perhaps due to these reasons, the contracts in question concern subject matters that appeal more to the digital natives than they do to older generations. In a sense, digital contracts self-select minors as the intended contracting parties. This leads to increased participation by minors in the contractual sphere, and these new contracts are also executory in nature, though not for necessaries, and thus beyond the protection afforded by the existing exceptions to minors’ incapacity. Moreover, in the digital space, there is a methodological problem in ascertaining the age of the contracting parties.

These contracts can be between two minors or between a minor and an adult. The digital age presents tremendous opportunities for both the consumer-minor and the entrepreneur-minor, whether contracting with each other or with major parties individually. For this analysis, let us consider two specific contracts—one where the minor has an Instagram account (the consumer-minor contract), and another where the minor is a professional e-sports player (the entrepreneur-minor contract).

The English Common Law/ Indian Option

The English and Indian courts would have to decide whether minors’ contracts falling in the aforementioned second and third categories could be regarded as contracts for necessaries or contracts for the benefit of the minor.

Signing up for an account on Instagram involves entering into a contractual relationship with its parent company Meta (formerly known as Facebook). The minimum age to have an Instagram account is 13 years (Instagram Help Centre 2021),86 although most social media companies do not have an age verification mechanism in place, potentially enabling under-13-year-olds to enter into these contracts with the company (Ahaskar 2019). Even if they did, their policies nevertheless allow minors between the ages of 13 and 18 to enter into contracts with them. The terms of use for these ‘Meta Products’ include collecting and storing the information and content provided by the user consciously, and the metadata provided unconsciously, and by third parties, among others (Instagram Data Policy 2021).87 Essentially, the consideration provided by the user to partake in these ‘free services’ is the user’s data; minors give information about themselves in return for the opportunity to use the app and engage with the world. Nevertheless, despite both parties doing or abstaining from doing ‘something’ for the other,88 this is not a contractual relationship, merely because one of the parties is not of age. In the absence of a legally enforceable contractual relationship between the two parties, rights and obligations do not flow either way. How, then, can the consumer-minor’s interests be safeguarded in this scenario? Substantial research has been done on the effects of social media on children and young adults (Clinic 2019). Quite a lot is known about the deleterious consequences of the improper use and consumption of these services. In this light, how willing would a court be to hold that having an Instagram account is for the benefit of the minor, or a necessary suited to the consumer-minor’s condition in life?

One may flip the situation to consider the case of an Instagram influencer who promotes and advertises products or services, and gets paid in cash or kind. Unlike a consumer-minor who uses the services rendered by or on Instagram, this entrepreneur-minor provides services to or on Instagram. This is the case of a minor entering into business or commercial transactions with corporations for marketing purposes, making them the promisor rather than the promisee. If they keep up their end of the bargain and put out a sponsored post on their Instagram feed, and the company refuses to pay up, what remedy is available to the minor in this case? If s/he sues the company, will the courts be required to decide whether this employment contract was for the benefit of the entrepreneur-minor? In India, a contract of employment can be considered to be a contract for necessaries if the minor in question is indigent (Pollock and Mulla 2014). It is unlikely, though, that an Indian court would accept that argument. Social media is generally viewed as a distraction and not as a serious money-making venture. Rags to riches stories are few and far between. It is not difficult to imagine a judge ruling that there are better ways to earn a living for an indigent minor. Moreover, an Instagram influencer’s work profile is not protected by the provisions of the Indian Apprentices Act, 1961 and thus that door is shut. When minors across the board are dissuaded by law from entering into contracts, how willing will a court be to rule in favour of this entrepreneur-minor?

One can do deeper down the rabbit hole. Even if a court determines that a social media account is a contract for necessaries, or that it is a contract for the benefit of the minor, will the court go into questions of determining how many social media accounts a minor can contract for, or whether one social media account is more beneficial than another for a minor’s well-being? If a court does find that social media accounts are not necessaries for a consumer-minor, and not beneficial for an entrepreneur-minor, we are faced with a situation where thousands of minors will continue to enter into void contracts that will not confer any rights on them. Although the consumer-minor would have already provided valuable user data, they would not be able to sue the social media company for breach of their privacy obligations. Similarly, despite having worked hard to create a popular YouTube channel, the entrepreneur-minor would not be able to sue YouTube for their proper share under the revenue-sharing contract (YouTube 2021).89 The ICA will be more honoured in the breach than in the observance.

On the other hand, some of these questions shift the focus to judicial regulation of social media consumption rather than protection of minors’ contractual interests. Is it the role of contract law to regulate social media? Decidedly not. One may argue that regulation of social media is not the intention of this judicial inquiry but it is difficult to envision how the courts will rule on the enforceability of these kinds of digital minors’ contracts without considering normative questions surrounding the optimum level of social media consumption. This will open the Pandora’s box by raising its own set of privacy and liberty issues. What started as an innocuous conversation on minors being protected as they engage with the world will devolve into a discussion of who they can interact with and how.

Another example of a digital contract that is being entered into by entrepreneur-minors is e-sport player contracts, which are on the rise with the increasing popularity of competitive gaming. E-sports involve multiplayer video games played online. By their very nature, they can be performed only in the digital realm. E-sport organisations contract with players and hold tournaments, just like regular basketball teams or football clubs (James 2020). The careers of most e-sport athletes (and also traditional athletes) usually take off before they come of age, thus making minority an issue in such contracts (Ranjit and Rastogi 2020). For example, Anathan Pham, a professional Dota 2 player, dropped out of high school, and moved to China from Australia, to turn pro at the age of 16 years (Erzberger 2017). Under English common law, these contracts would be categorised as employment contracts and held enforceable as they are for the benefit of the minor. The validity of e-sports contracts in India turns on the question of whether these are contracts of service or apprenticeship. Following the ruling in Raj Rani, if these are contracts of service, they are void ab initio like most other minors’ contracts. One would then have to show that e-sports player contracts are contracts of apprenticeship to gain the protection of the law. This will be a futile endeavour since the list of trades designated under the Apprentices Act does not include sports players, even though it (ironically) does recognise sports good makers (Directorate General of Training 2021).90 The other issue to be considered is whether these e-sport contracts are for the benefit of the minor. Since the idea of teenage athletes making it big is relatively more plausible, the question here turns on the acceptability of e-sports as a lucrative career option. Hence, there is a possibility that courts may recognize e-sport player contracts as contracts for the benefit of the minor, but it’s difficult to gauge the strength or success of this approach in the absence of precedents.

Once again, we face a situation where the current legal provisions are incapable of dealing with the changing nature of contracts. Both kinds of entrepreneur-minors, whether an Instagram influencer or an e-sports player, are left to fend for themselves, without the protection of the law.91 We have seen earlier how judicial interpretation of these exceptions has been fluid and indeterminate, especially in the Indian context. The imprecise and ambiguous expositions do not bring clarity on how these emerging kinds of minor contracts can be assimilated within the existing rules.

The South African Option

The courts adopting this approach will consider two questions: what is the age of the minor? and whether they had the consent or assistance of their legal guardian while entering into the contract under question?

Minors over the age of seven years have limited contractual capacity under the South African regime. Since most social media companies want their users to be at least 13 years of age, the age requirement in the case of both the Instagram consumer-minor and the entrepreneur-minor contract is met. Then all that remains is to determine whether the consumer-minor had parental consent or the assent of their guardian to open an Instagram account. The same is the case with the e-sport entrepreneur-minor contract. Any child above the age of seven can enter into these e-sport gaming contracts as long as they have the assistance of their guardian. In both these situations, the court will not undertake a normative determination of the nature of the minor’s contract to rule upon its validity. Compared with the English/Indian approach, the South African approach, by focussing on procedural requirements, considerably eases the implementation of rules relating to contractual capacity.

The problem with the South African system lies in determining that the minor had parental assent. It is easier to prove parental supervision in the traditional contracts regime rather than in the digital one. When a minor goes to buy a house or books, the other party can communicate directly with the parents/guardians to check if they have assented, be it face-to-face or through a signed undertaking which they can hold in their hands and verify. This might not be the case given the anonymity provided by the digital space. How does one ensure that the parents/guardians have assented when all communication happens through the impersonal, online medium? How can anyone know who exactly is sending the email or clicking the ‘I Agree’ button? There is also the issue of perverse incentives. Most social media companies are lax about enforcing their age requirements, thus enabling underage children to use their products, and gaining users they might not have had otherwise. They are similarly lax about ensuring that their minor consumers do actually have the permission of their parents. YouTube’s terms of service assume that the minor user has their parent or guardian’s consent to use their services (YouTube 2021).92 It also assumes that a parent or guardian whose ward uses YouTube does so with their permission and thus they are bound by the terms of the agreement, even if they themselves might not be YouTube users (YouTube 2021).93 This is unexplored territory, and policy and technological solutions to the issue of age verification should be further investigated. One hopes that the adult contracting parties will be more particular in dealing with minor parties, and create more robust frameworks for determining the presence of parental or guardian assent. Otherwise, lack of care on their part might lead to a caveat adultus situation, which, in the long run, will be to the detriment of both parties. The other option is that as more cases of digital contracts come up for adjudication, the judiciary and the legislature are able to formulate guidelines for the same.

Concluding Remarks

Anson famously determined contract law to be the child of commerce (Beatson et al. 2020). Minors today are increasingly entering into contracts, whether as consumers or creators and thus it is imperative that “law strik[e] an appropriate balance between the empowerment and protection” of this class of contracting parties (Bhana and Visser 2014). It is this author’s opinion that the present understanding of capacity under Indian law is incapable of effectively dealing with the contracts that are the product of the digital age.

One way forward is to follow the South African system and introduce a limited contractual capacity regime in India. Instead of determining whether the minor’s contract is for their benefit, or is a quasi-contract and thus a transaction for necessaries, in a bid to get around the statutory prohibition against minors contracting, the courts will merely have to determine a question of fact, to wit whether the parent or guardian assisted the minor when forming the contract. Not only will this approach give legitimacy to the many minors’ contracts already in existence, but also it will continue to protect minors from exploitation if their parents or guardians actually do oversee their contractual activities. A variant of the parental or guardian consent system does exist informally in several commercial relationships. Parents are often asked by educational institutions to undertake good behaviour on the part of their wards (Ram Ratna Vidya Mandir 2021).94 A few schools in Bangalore, in a bid to curb cyberbullying, have also asked parents to ensure that their children do not have social media accounts, specifically targeting Facebook (Vivan 2015). Following the South African model will result in formalising existing tried-and-tested systems.

Another way forward would be the partial implementation of the South African system. The ICA can experiment with graded capacity, fixing the age at 7, 12 or 14 years, and hold these minors’ contracts as voidable at the instance of the minor, instead of full-fledged valid contracts. This system takes the age requirement from the South African regime but does away with the parental consent or assistant of the guardian element. Since lack of free consent also results in voidable contracts, this approach utilises a framework that already exists in the Indian contractual regime, instead of adding a new variable as the previous suggestion does. It should be noted that minority does not manifest as incapability across the legal spectrum. Actions can be brought against minors under tort law and criminal law. The Indian Penal Code, 1860 uses a system of graded capacity. Children below the age of 7 years enjoy absolute immunity from prosecution and punishment,95 while those between the age of 7 and 12 enjoy qualified immunity. A child above the age of 7 years will be held as liable as an adult if the prosecution can prove that such child had “attained sufficient maturity of understanding to judge the nature and consequences of his conduct on that occasion”.96 It is preferrable that a graded contractual capacity regime fixes a specific age and use only that as the criteria, because it is much easier to determine the age of a person than it is to determine their state of mind, several years after the fact.

The other form of incapacity recognised by the ICA is insanity, though the lawmakers used a less paternalistic approach when dealing with persons of unsound mind than with children. Section 12 of the ICA does not prescribe a complete bar, drawing upon the disparate approaches taken by medicine and law in defining insanity. The section lays a twin test: at the time of entering into the contract, was the party was capable of understanding the contract; and was the party capable of forming a rational judgment as to the effects of the contract on their interests? This enables a person of unsound mind to enter into contracts during their lucid phases. Why not apply the twin tests to minority too? As long as a child above a certain age is capable of understanding the terms of the contract and the effect it will have on his or her life, such a child should be allowed to enter into such contracts and have the law recognise the same.

The ICA is using traditional methods to address a modern problem. It needs to evolve if it wants to keep up with the rapidly changing times. Whichever way the Indian legislators choose, a change is inevitable. Sir Henry Maine remarked on the movement of progressive societies from ‘status’ to ‘contract’ (Maine 1963). It is time that the ICA also moved beyond a minor’s position and take into account their will and intention.