Contracts with Minors
What are the issues surrounding contracts entered into with minors or for business, personal and household purposes?
In our last article, we looked at issues around entry into contracts faced by Farmer Freddy at the Fieldays.
Today we look at issues that arise when Freddy's teenage son, Jack enters into a contract and how the law applies differently to contracts entered into for business purposes and contracts entered into for personal or household purposes.
Contracts with minors
Freddy's son, Jack is 16 years old. Jack discussed with his parents buying a car of his own; his parents agreed to think about contributing towards the cost.
At the Fieldays, Jack sees a brand new car he decides he just has to have.
Jack's parents have told Jack that they do not think the car is appropriate for someone his age and is far too expensive.
Freddy is worried that Jack will try to sign up to purchase the car anyway and wants to know whether Jack will be bound by this.
Minors are those who are under 18 years of age.
The Minors Contract Act 1969 governs the enforcement of contracts against minors. The act provides that a contract with someone under 18 years of age is presumed to be unenforceable against that person (except for certain excluded contracts such as some contracts for life insurance and some employment contracts).
However, a court may enforce a contract against a minor in whole or in part if it concludes that the contract was fair and reasonable in all the circumstances and should be enforced.
There are a number of factors a court will take into account in making the decision whether a contract is fair and reasonable, including:
- The circumstances surrounding the making of the contract.
- The subject matter and nature of the contract, and
- The age and the means (if any) of the minor.
It is unlikely that a court would hold a contract between the car company and Jack to be enforceable because, if the car company made simple inquiries of Jack, it could soon find out Jack is only 16, is still at school and has no real income.
Contracts for goods or services
The Consumer Guarantees Act 1993 offers a number of protections for the purchase of goods or services by a consumer.
To be a consumer, you must acquire goods or services of a kind ordinarily acquired for personal, domestic, or household use or consumption and you must not be acquiring the goods or services for business purposes (or hold yourself out as acquiring the goods of services for business purposes).
This means that items Jill purchases at the Fieldays for domestic use are covered by the protections in the act. However, items Freddy purchases for use on the farm will not be covered.
Jill and Freddy should also be aware that by purchasing items for domestic use under the name of the trust through which they own the farm ("putting it through the farm for tax reasons", as Freddy says) will likely lead to them losing the protections offered under the act.
Goods not covered by the Consumer Guarantees Act are instead covered by the Sale of Goods Act 1908, which offers some protections for buyers (but not as many as under the Consumer Guarantees Act).