Guarantee contract involving minors

In this paper I will explain the contract of guarantee, what it is and what
are its elements, essentials etc. Then we will see the contract of
guarantee which will involve contracting with minors. What are the rights
of minors to a contract as per the Indian contract act 1872, what will be
the position of the parties to a guarantee contract when a minor is
involved.

A guarantee is a way of assuming responsibility for paying anothers

debts or responsibilities. It can be a promise for the execution,
completion or existence of something.
The english law defines guarantee as a promise to answer for the debt,
default or miscarriage of the other.
The contract of guarantee as per section 126 of the Indian contract act,
1872, is a contract to perform the promise or discharge the liability of a
third person in case of his default.
Illustration: If Ninad gives an undertaking stating that if 500 rupees are
lent to Prakhar by Shubham, and Prakhar does not pay, Ninad will pay
back the money in case of his default or failure to pay, it will be a

contract of guarantee. Here, Ninad is the surety, Prakhar is the principal

debtor and Shubham is the creditor.
Surety is the person who gives the guarantee, the Principal debtor is the
person for whom the guarantee is given and Creditor is the person to
whom the guarantee is given.
The word surety is used in the contract act same as guarantor,the surety
is not undertaking to perform the contract, rather the surety undertakes
to make sure that principal debtor performs his part of the contract.
Anything done or any promise made for the benefit of the principal
debtor, is consideration sufficient for the surety. There must be a
deterioration to the surety and a gain to the principal debtor.
Illustration: Prakhar requests Shubham to sell and deliver him goods on
credit. Shubham agrees to do so, provided that Ninad will guarantee the
payment of the price of the goods. Ninad promises to guarantee the
payment in consideration of Shubhams promise to sell and deliver to
Prakhar. This is consideration sufficient for Ninads promise.
The basic function of the guarantee contract is to enable a person to buy
some goods on credit, help him get a loan etc, when the seller asks for a
guarantee for payment of the goods, which gives him assurance that the
payment will be made, even if the principal debtor defaults.Guarantee is
security in form of a right of action against a third party called the surety
or the guarantor.

There are some situations in which minors are required to enter into
some contracts, let it be for education loans, necessities etc, which
forces the law to take adequate measures for a minor entering into a
contract.
Section 10 of the contract act requires that the parties should be
competent to a contract. Competency is defined in section 11 of the act,
where every person who is of the age of majority is competent to
contract, who is of sound mind and not disqualified by law, and it also
defined the parties which would be incompetent to a contract, namely
minors, persons of unsound mind, and persons disqualified by law.
Hence, a minor as per section 3 of the Indian majority act 1875, defines
minor as a person under 18 years of age, who is domiciled in india.
The famous case of Mohori Bibee v Dhurniodas Ghose identifies the
nature of a minors agreement, according to section 11 of the act, all
parties should be competent to contract, and minors are incompetent to
contract and hence cannot enter into a contract,the question as to
whether a contract with a minor will be void or voidable presupposes the
existence of a contract and a contract cannot arise in the case of a minor
as they are incompetent to contract.

But, if the contract is within the competence of the guardian and it is for
the benefit of the minor it is specifically enforceable. 1
As per the case of Raghava Chariar v Srinivasa, a minor is
allowed to enforce a contract which is of some benefit to him
and under which he is required to bear no such obligations. On
the principle that, minor had already given the full
consideration to be supplied by him, and there is nothing that
remains to be done by him in the contract, he is mere promisee
and prays to the court the recovery of the benefit stipulated.
As per the case laws stated above, few things can be identified
about a minors position in a contract, that the contract should
be for the benefit of the minor where the minor has to bear no
obligation, and no order can be made for compensation against
a minor for a benefit obtained under a void agreement.
So lets assume that the minor becomes a principal debtor in a
guarantee contract, where the contract between him and the
creditor is for some necessities provided to him and the surety
can be a guardian or a person who makes sure that the minor
provides his part of the contract, but, as stated above, the
Indian contract act does not allow minors to bear any obligation
to pay and here, the contract of guarantee requires the
contract between creditor and principal debtor to be the
primary contract, which means the principal debtor has to pay,
and the contract between surety and creditor is a secondary
1 Gopalkrishna Govind v Tukaram Narayan, AIR 1956 Bom 566; CIT v Shah Mohandas Sadhuram,
AIR 1966 SC 15.

contract, a contract collateral to the primary contract, which is

between the principal debtor and the creditor. Because the
main purpose of the surety is to make sure that the principal
debtor pays and completes the promise on time and not the
other way round by paying and completing the contract for
him.
Hence, the conclusion would be that, a guarantee contract,
even when it is for a necessary supplied to a minor, would be
void under the Indian Contract Act, 1872.