Mohori Bibee V. Dharmodas Ghose (Case analysis)

Mohori Bibee V. Dharmodas Ghose (Case Analysis)

  • Introduction:

The law relating to contracts in India is contained in the Indian Contract Act, 1872. The Act was passed by British India and is based on the principles of English Common Law. It is applicable to all the states of India except the state of Jammu and Kashmir. It determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties on the contracting parties. Hence this legislation, Indian Contract Act of 1872, being of skeletal nature, deals with the enforcement of these rights and duties on the parties in India.

It was enacted mainly with a view to ensure reasonable fulfillment of expectation created by the promises of the parties and also enforcement of obligations prescribed by an agreement between the parties. British India formed in 1861 under the stewardship of chairman Sir John Romilly, with initial members as Sir Edward Ryan, R. Lowe, J.M. Macleod, Sir W. Erle (succeeded by Sir. W.M. James) and Justice Wills (succeeded by J. Henderson), had presented the report on contract law for India as Draft Contract Law (1866). The Draft Law was enacted as The Act 9 of 1872 on 25 April 1872 and the Indian Contract Act, 1872 came into force with effect from 1 September 1872.

Before the enactment of the Indian Contract Act, 1872, there was no codified law governing contracts in India. In the Presidency Towns of Madras, Bombay and Calcutta law relating to a contract was dealt with the Charter granted in 1726 by King George I to the East India Company. Thereafter in 1781, in the Presidency Towns, Act of Settlement passed by the British Government came into force. Act of Settlement required the Supreme Court of India that questions of inheritance and succession and all matters of contract and dealing between party and party should be determined in case of Hindu as per Hindu law and in case of Muslim as per Muslim law and when parties to a suit belonged to different persuasions, then the law of the defendant was to apply. Outside Presidency Towns matters with regard to contract were mainly dealt with through English Contract Laws; the principle of justice, equity and good conscience was followed.

The Act as enacted originally had 266 Sections, it had a wide scope and included.

  • General Principles of Law of Contract- Sections 01 to 75.
  • Contract relating to Sale of Goods- Sections 76 to 123.
  • Special Contracts- Indemnity, Guarantee, Bailment & Pledge- Sections 124 to 238.
  • Contracts relating to Partnership- Sections 239 to 266.

Indian Contract Act embodied the simple and elementary rules relating to Sale of goods and Partnership. The developments of the modern business world found the provisions contained in the Indian Contract Act inadequate to deal with the new regulations or give effect to the new principles.

Subsequently, the provisions relating to the Sale of Goods and Partnership contained in the Indian Contract Act were repealed respectively in the year 1930 and 1932 and new enactments namely Sale of Goods and Movables Act 1930 and Indian Partnership act 1932 were re-enacted.

At present, the Indian Contract Act may be divided into two parts

  • Part 1: deals with the General Principles of Law of Contract Sections 1 to 75
  • Part 2: deals with Special kinds of Contracts such as

(1)Contract of Indemnity and Guarantee

(2)Contract of Bailment and Pledge

(3)Contract of Agency

  • Definition of Proposal (Offer):

According to Section 2(A) of the Indian Contracts Act, 1872, when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal.

Hence, a proposal is synonymous to offer. So, we can say that the above definition of the proposal is also valid for an offer.

  • Definition of Promise:

According to Section 2(B) of the Indian Contract Act, 1872, when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.

Offer is an open invitation by the promisor for the acceptance of the terms and conditions of the undertaking, which when accepted by the promisee becomes binding on both parties and the proposal becomes a promise. Hence the difference between an offer (proposal) and a promise lies in acceptance of the offer (proposal).

  • Definition of Offer:

In American Law, an element is required in the creation of an enforceable contract. An offer is a proposal to enter into an agreement and must express the intent of the person making the offer to form a contract, must contain the essential terms — including the price and subject matter of the contract — and must be communicated by the person making the offer. A legally valid acceptance of the offer will create a binding contract.

  • Definition of Contracts:

In the Indian Contract Act, 1872, under Section 2(h) it is said that an agreement enforceable by law is said to be a contract.

American Law defines a contract in the following manner -A contract is a promise or a set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes as a duty.

  • How an Offer Becomes a Contract:

An offer when accepted gives rise to an agreement. It is at this stage that the agreement is reduced into writing and a formal document is executed on which parties affix their signature or thumb impression so as to be bound by the terms and conditions of the agreement as set out in the document. Such an agreement has to be lawful and we know from the definition of contract of the Indian Contract Act, 1872 that an agreement enforceable by law is a contract. This is how an offer becomes a contract.

In contracts, a promise is essential to a binding legal agreement and is given in exchange for consideration, which is the inducement to enter into a promise. A promise is illusory when the promisor does not bind herself to do anything and, therefore, furnishes no consideration for a valid contract.

For an offer to be accepted there must be an offer and that has to be accepted to make an agreement. Though this might seem self-explanatory, one has to differentiate it from the legal phrase ‘amounts to a valid offer’. The various modes of making an offer are oral, in a written form or by conduct. Irrespective of the mode in which the offer is made, it is the intention or willingness of the offeree which is of paramount importance and that is clearly a subjective issue.

It is important to differentiate at this point between an offer and an “invitation to offer”. Carlill v Carbolic Smoke Ball Co. is an important case which brings out the difference between offering an “invitation to treat.” Parties may enter into preliminary negotiations before entering into a contract. The issues they discuss will not necessarily be a part of the contract and are considered to be ‘invitations to offer’. A classic example of this is the display of products at Supermarkets and on shelves, e.g. Pharmaceutical Society of Great Britain v Boots. The advertised price results in an ‘invitation to an offer’ only.

The offer does not become a contract until the merchandise is taken to the counter and the price checked. At this point the customer can accept the merchandise and pay the price, thereby completing the transaction and forming the contract. Also, the legality of acceptance is equally as important as the offer and this acceptance to the terms of this offer must be an ‘unqualified expression’ of acceptance of the offer. Acknowledgment of an offer would neither amount to credence acknowledgment nor would a ‘statement of intent’. On the footing laid forward by the offer, there must be a clear unequivocal communicating of acceptance of the offer.

The offer and acceptance are the prominent conditions of the contract, but perhaps even more prominent is the requirement of ‘consideration’. Consideration means the transaction of money for goods or services rendered or the exchange of an item of ‘value’ to the parties. It perhaps can be regarded as extremely contentious of the requirements for a legal and valid agreement and also the most complex.

In English Law, a promise will never materialize into an enforceable contract without some form of consideration. But it is not enough that the parties make this exchange of worth, the consideration must be of ‘adequate value’ and not ‘inadequate’ consideration.

There are various rules governing the law of consideration:

  1. It must not be a past consideration.
  2. It might be a sufficient consideration but it does not have to be sufficient.
  3. The consideration must come from the side of the promisee.
  4. A valid consideration will not amount to an existing public duty.
  5. A valid consideration will not amount to an existing contractual duty.
  6. For a promise to forgo the balance, part payment of a debt is not valid consideration.
  • Case Brief :

The plaintiff, Dharmodas Ghose, while he was a minor, mortgaged his property in favor of the defendant, Brahmo Dutt, who was a moneylender to secure a loan of Rs. 20,000.  The actual amount of loan given was less than Rs. 20,000.  At the time of the transaction the attorney, who acted on behalf of the moneylender, had the knowledge that the plaintiff is a minor.

The plaintiff brought an action against the defendant stating that he was a minor when the mortgage was executed by him and, therefore, the mortgage was void and inoperative and the same should be canceled.  By the time of Appeal to the Privy Council the defendant,  Brahmo Dutt died and the Appeal was prosecuted by his executors.

The Defendant, amongst other points, contended that the plaintiff had fraudulently misrepresented his age and therefore no relief should be given to him, and that, if the mortgage is canceled as requested by the plaintiff, the plaintiff should be asked to repay the sum of Rs. 10,500 advanced to him.

  • Judgement:

According to the verdict of Trial Court, such mortgage deed or contract that was commenced between the plaintiff and the defendant was void as it was accomplished by the person who was an infant at the time of execution of mortgage.

When Brahmo Dutta was not satisfied with the verdict of the Trial Court he filed an appeal in the Calcutta High Court.

According to the decision of Calcutta High Court, they agreed with the verdict that was given by the Trial Court and it dismissed the appeal of Brahmo Dutta.

Then he later went to the Privy Council for the appeal and later the Privy Council also dismissed the appeal of Brahmo Dutta and held that there cannot be any sought of contract between a minor and a major person.

 The final decision that was passed by the Council were :-

1.Any sought of contract with a minor or infant is void/ void ab-initio (void from beginning).

2.Since minor was incompetent to make such mortgage hence the contact such made or commenced shall also be void and id not valid in the eyes of law.

3.The minor i.e. Dahrmodas Gosh cannot be forced to give back the amount of money that was advanced to him, because he was not bound by the promise that was executed in a contract.

  • Principles of Law:

The principles of law that were laid down in this case are:-

  1. Any contract with a minor or an infant is neither valid nor voidable but is void ab-initio(void from beginning)
  2. Section 64 of Indian Contract Act,1872 is only applicable in the case, where the parties entering in contact are competent to make such a contract and is not applied to cases where there is no contract made at all.
  3. The legal acts done by a representative or any knowledge of an agent means that such acts done or having knowledge of anything is of his principal.
  • Majority Act, 1875:

Majority Act, 1875 was enforced on 2ndMarch 1857. It is a law that was enacted to introduce various laws relating to the “law of majority”. Prior to the enactment of this act, there was no surety or certainty about the age limit of attaining majority. This act has basically fixed the age limit of attaining majority and i.e. 18 years of age. It states that, every single person who is domiciled in India can only achieve the age of majority only after the completion of age of 18 years, and not before that at any cost. There comes an exception in the case where any particular personal law provides the age of attaining majority only and if not provided then, else any person domiciled by India shall only achieve majority after the completion of 18 years of age.

In the case were the guardian or a custodian is appointed by any court of justice for a minor in case of a person or his property or for both before the age of 18 years, then in such a case the age of majority would be after attaining the age of 21 years instead of attaining 18 years of age.

  • Critical Analysis:

In the case of Mohori Bibee V/S Dharmodas Ghose, the Privy Council strictly defined that any sought of contract or agreement with a minor or with any infant shall be null and void. All contacts with the minors will be void ab-initio. Majority Act, 1875 outlined the definition of a minor, according to such act, any person who is below the age of 18 years or has not completed the age of 18 years shall not be competent to create or enter into any sought of contract or agreement.

According to me any sought of contract in which a minor is party to contract or whether he/she is involved in it shall be void. This perception is correct because minors or infants come in the category of such people who cannot give their free consent along with the reason that they are not in a situation where they can think in a manner in which a prudent or an ordinary person could do it. An agreement is a deal where free an equal consent of all parties are given but in case of a minor there consent can be dominated by major ones as a result of which , it leads to the violation of one of the condition to form a contract, i.e. free consent(a consent is said to be free when it is not caused by Coercion, Undue Influence, Fraud, Misrepresentation and Mistake).

The court also through its verdict has propounded that, a contact with an infant shall be declared null and void it means that it is neither valid nor voidable. According to me, minors’ contracts shall be avoided and stopped because it sometimes leads to the harmful social, economic and legal effects on the lives and conditions of the minors. Any such person who commits such offence shall be strictly punished by court of law, either through imprisonment or with a fine or with both according to the ambit of the offence committed by the major person.

  • Conclusion:

In the due course of the project the researcher has dealt with the case of Mohiri Bibee and the judgment given by the Privy Council. The following is the summary of the laws of contract with a minor:

1. Agreement with or by a minor is void;

2. Minor can be a promisee or a beneficiary;

3. Minor’s agreement cannot be ratified by him;

4. No estoppel against minor;

5. No specific performance of the agreements;

6. No compensation by minors;

7. Minor’s property liable for necessaries;

8. Minor as a partner;

9. The Minor as an agent;

10. Minor as an insolvent;

11. The minor can execute a negotiable instrument;

12.  The liability of minor’s parents or guardians.

  • Reference:
  4. Articles by Prof. Prakash Mokal

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