(17)
That, where statutory provision had already been made for allowing minors, at particular ages and in particular circumstances, to make binding contracts, those provisions should remain in force (with the exception of section 4 of the Infants Act, R.S.B.C. 1960, c. 193 (concerned with employment contracts by orphans).222
(18)
That Section 9 of the Sale of Goods Act223 should be amended to exclude the reference to the liability of minors to pay a reasonable price for necessaries which have been sold and delivered.224
(19)
To the extent that it was necessary to give effect to the purpose of a grant of contractual capacity, according to its tenor, under the Report’s recommendations, all other statutory provisions relating to the contracts or property of minors should be regarded as inapplicable.225
(20)
That nothing in the recommendations should be construed as
(a)
disentitling a minor to any defence available to an adult; or
(b)
imposing upon a minor a greater liability than that of an adult by reason only of his minority.226
There has not yet been any legislation in British Columbia in response to the Commission’s recommendations.
222
Id.
223
R.S.B.C. 1960, c. 34, expressed in terms similar to section 2 of the Sale of Goods Act 1893.
224
Supra, fn. 204, at 46.
225
Id.
226
Id.
CHAPTER 4: PROPOSALS FOR REFORM OF THE LAW RELATING TO MINORS’ CONTRACTS
Options for Reform
The present law relating to minors’ contracts, as we have seen, is in a number of respects confused and contradictory, yet experience suggests that, with all its difficulties, it works reasonably satisfactorily. A case for reform has not been made by sections of the general public – adults or minors – who claim that they have suffered from the operation of the present law; nor has there been any significant resort to the courts in recent years by parties seeking to have aspects of the law clarified or developed. The essential argument in favour of reform is based on the inherent lack of order, conceptual clarity or consistency of policy in the present law.
The range of possible general approaches that we might recommend may most easily be considered under the following headings:
1.
Leaving the Present Law Unchanged;
2.
Unqualified Contractual Enforceability;
3.
Unqualified Contractual Unenforceability;
4.
Unqualified Unenforceability of Contracts Against, but not By, a Minor;
5.
A Qualified Enforceability Approach;
6.
Reduction of the Age of Contractual Equality;
7.
A Restitutionary Approach.
Option 1: Leaving the Present Law Unchanged
It can be argued that the best course would be to leave the present law unchanged. With all its theoretical weaknesses and inconsistencies the present law appears to give rise to no substantial difficulties in its practical operation.
Commercial practices have been built up over the years, resulting in a practical compromise between the various interests of minors and adults. A change in the law would inevitably result in at least a period of uncertainty as to the scope and application of the new rules; there can be no guarantee that, in their practical operation, new rules, whatever they might be, would work out as satisfactorily as the present law, with all its conceptual imperfections.1
It can also be argued that to concentrate on the imperfections and uncertainties of specific aspects of the present law would involve an out-of-focus perspective of present law. The present law seeks, albeit somewhat imperfectly,2 to establish a balance between the competing policies of protecting minors against exploitation as well as ensuring that the legitimate interests of adults are not prejudiced. That it succeeds in its central aims is evidenced by the complete absence of public discussion of the subject, let alone public pressure for reform.
Finally, it may be argued that, in view of the recent reduction in the age of majority, brought about by the Age of Majority Act 1985, the practical size of the problem has been very significantly reduced.
We appreciate the force of the argument in favour of leaving the present law unchanged, which, we admit, serves as a necessary test against which any proposals for reform must be judged. Only if the proposed changes are likely to result in improvements in practice, as well as in theory, should they be contemplated seriously. But we consider that we should examine all the options for reform in detail rather than decide, at the threshold, that the task is not worth the effort.3
1
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 5.8 (1982). See also its Report, Law of Contract: Minors’ Contracts, paras 3.2–3.4, 5.3 (Law Com No. 134, 1984).
2
Cf. Evans, The Need for Reform in the Law of Infants Contracts – Some Comments on the Latey Report, Auckland U. L. Rev. 65, at 72 (1969).
“The present law both mollycoddles and hampers infants.”
3
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 5.8 (1982).
We consider that it would be unwise to conclude from the relative paucity of litigation on minors’ contracts that the law is therefore satisfactory.4 As Michael Kindred has observed:
“The infrequency of court decisions can be otherwise explained: an unjust but clear law may give rise to no litigation, since without a legal basis for argument few people go to court; those prejudiced by an unjust law may be of a social or economic class that cannot or does not litigate; the amount ordinarily involved may be so small that the costs of litigation outweigh the possible gain from success. Several of these factors probably combine to keep litigation concerning minors’ capacity to a minimum.”5
Option 2: Unqualified Contractual Enforceability
The second option would be for the proposed legislation to dispense with any specific principles relating to contracts made by minors. The English Law Commission gave short shrift to this argument:
“[T]his approach has only to be stated in order to be rejected immediately. To make a child of twelve fully liable for damages for breach of contract seems to us to do such violence to the first and primary policy consideration [that the law should protect minors against their inexperience and immaturity] as to enable us to dismiss this approach without further discussion.”
We think that this is too swift a dismissal. In favour of
4
As does Denton (in respect of Tennessee law): Infants’ Contracts: Rights and Remedies, 28 Tenn. L. Rev. 395, at 411 (1961). See also the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.2 (1978); and contrast id., para. 1.5
5
Kindred, Basic Problems of Minors’ Contractual Capacity, Festschrift Rheinstein, vol. 2, p. 523, at p. 526.
6
Para. 3.11 of Working Paper No. 81.
this approach it can be argued that such a change would be likely to be far less radical in its practical effects than might at first appear.7 The courts would be required to apply the wide range of general principles of contract law that protect the weak and mentally incapacitated against the strong and the oppressive. For example, the principles relating to duress, undue influence, estoppel, mistake (including non est factum), and misrepresentation could all afford relief to minors in certain circumstances.
We are confident that, if legislation were enacted repealing the present specific statutory protections for minors, the courts would strive successfully to fashion and extend principles that would be fair to both minors and adults. But we see two major objections to this approach, which make us reject it as a possible solution.
First, it may be argued that, if the courts can fashion sound and sensible rules in relation to minors’ contracts, then presumably the legislature is also competent to do this task. If the legislature were to do no more than abolish the existing specific rules relating to minors’ contracts, leaving it to the courts to develop new rules, the legislature could be criticised for having failed to resolve a matter well within its competence. Of course there are areas of the law that may best be developed through the judicial process with little or no legislative intervention and control; but we do not think that minors’ contracts constitute such an area.
The second major objection is that it could take a considerable time before the courts would develop a coherent set of principles in relation to minors’ contracts.8 Until
7
Cf. Payne, The Contractual Liability of Infants, 5 Western L. Rev. 136, at 136 (1966). See also Norwood National Bank v Allston, 152 S.C. 119, 149 S.E. 593, 65 A.L.R. 133 (1929).
8
This has certainly been the experience under the Infants’ Relief Act 1874, where, well over a century after the enactment, several questions of interpretation of the statute’s provision remain as yet unanswered – and in some cases unaddressed – by the courts in either Britain or Ireland. Whether the same slow development would take place under legislation that had removed explicit rules relating to minors’ contracts is, however, impossible to predict.
then, the law would be uncertain and the legal position of minors in some respects more vulnerable than today. In the absence of the present specific (primarily statutory) exemptions of minors from liability, it could (and presumably, by some adults, would) be argued that a minor was no longer exempt from liability. If the issue were eventually litigated, the Court might well hold that the minor was exempt from liability but the individual circumstances of many minors could encourage them to settle the case to their detriment rather than risk speculative litigation.9
We should also discuss briefly a separate argument in favour of abolishing all existing specific protections for the minor against contractual liability. This argument reflects a radically different approach from the argument that the courts may be relied on to protect the minor, which we have just considered. This argument is based on a principle of equality between contracts and torts: it contends that, if the law makes minors capable of being held liable for their torts,10 it is not inherently unreasonable that minors should also be liable for their contracts.11 The English Law Commission disposed of this argument as follows:
“A tort …. is a unilateral act, of which the consquences are an injury to an innocent victim, wholly or partly unavoidable by him. A contract on the other hand is a two-sided relationship. An adult is not bound to contract with a minor, and the law protects minors in part by discouraging adults from doing so. Adults are deemed to know that they deal with minors at their peril. The younger the minor is, the greater his need for protection on account of his greater immaturity, and in our view there is no acceptable basis on which to make a young minor fully liable for breach of contract.”12
9
Cf. Kindred, supra, fn. 5.
10
Cf. McMahon & Binchy, 65–72.
11
Cf. H.H.W., Note: The Status of Infancy as a Defense to Contracts, 34 Virg. L. Rev. 829, at 831 (1948).
12
English Working Paper No. 81, Minors’ Contracts, para. 3.11 (1982).
We are somewhat less than confident that this analysis fully disposes of the issue: there is, after all, a wide variety of circumstances in which a tort may be committed in the context of “a two-sided relationship”13 moreover, if protection on account of immaturity is a sound policy in relation to minors’ contracts, it could be argued that the same policy should also apply in relation to minors’ torts. Nevertheless, like the English Law Commission, we take the view that the law of contract raises somewhat different issues of policy from that of tort. Accordingly we do not consider that minors should be rendered fully liable for contracts, as this argument would propose.
Option 3: Unqualified Unenforceability of Contracts, Both By and Against a Minor
Under this option contracts made by a minor would be totally unenforceable by either the minor or the other party. This approach would unquestionably protect minors but it would do so at the expense of introducing what would appear to us to be manifestly inappropriate disincentives to adults to contract with minors in circumstances where this would be for the benefit of the minors in question.14 Moreover, it could result in cases of hardship and injustice for parties contracting with minors.15 we do not consider that this approach is satisfactory and will not discuss it further.
13
Cf. Holyoak, Tort and Contract after Junior Books, 99 L. Q. Rev. 519 (1983).
14
Cf. the English Law Commission’s summary dismissal of this option in its Working Paper No. 81, Minors’ Contracts, para. 3.9 (1982).
15
Of course it could be argued that a party who chose to enter into an unenforceable contract with a minor would have only himself to blame and that it is not therefore appropriate to speak of such a condition as involving self-induced “hardship and injustice”. This would not be the case, however, where the minor induced the contract by fraudulently representing that he or she was of full age.
Option 4: Unqualified Unenforceability of Contracts Against, but not By, a Minor
Under this option, minors would be entitled to enforce contracts they make but the other party or parties to these contracts would not be entitled to enforce them against the minors. Although this option is marginally more attractive than Option 3, it still suffers from the major objections16 affecting that option, namely, the important disincentives to making contracts with minors that are for the benefit of the minors concerned and the risk of hardship and injustice for parties contracting with minors in some cases. Accordingly we do not consider that this option would be a good basis for the proposed legislation.
Option 5: Qualified Enforceability of Contracts
An approach that has been favoured in some other jurisdictions may for convenience be described as that of qualified enforceability. This approach may take one of two forms. Under the first form, certain categories of contract are presumed to be enforceable, subject to certain exceptions; under the second form, certain categories of contract are presumed to be unenforceable, subject to certain exceptions.
An example of the first form is contained in the New South Wales legislation of 1970.17 Under this Act a contract is presumptively binding on a minor if it is for his benefit unless at the time he made it he lacked, by reason of youth, the necessary understanding of its consequences.18 A disposition of property to the minor is presumptively binding on him unless the consideration was manifestly excessive, and a disposition of property by the minor is presumptively binding on him unless the consideration was manifestly inadequate.19
16
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 3.10 (1982).
17
Minors’ (Property and Contracts) Act 1970.
18
Id., sections 18, 19.
19
Id., section 20.
Where a minor participates in a civil act and a bona fide purchaser for value who is not party to the act acquires a property interest as a result of the act, the act is presumptively binding on the minor, provided the third party was without notice of the minority.20
A minor, or a court, may repudiate a civil act that is not for the minor’s benefit before he reaches the age of majority.21 The act of repudiation does not have effect against other parties where the civil act is presumptively binding on the minor.22 Where the civil act is not presumptively binding, a court, on application to it by any interested party, may either affirm or repudiate the civil act.23 Where there has been a repudiation, the court is empowered to adjust rights between the parties, but where the civil act is presumptively binding in favour of any person, the court may not make any order adversely affecting his rights except with his consent.24
This approach has not met with widespread support. The Alberta Institute of Law Research and Reform noted that the 1970 legislation:
“imposes liability upon the minor in cases in which the common law did not do so and its policy is therefore open to argument by those who think that his liability should not be increased. It may also be open to criticism on the grounds that it will be difficult for an adult party to determine whether or not a contract is for the benefit of the minor so as to be binding, a problem comparable to that of determining whether or not goods are necessaries. The court will face the same problem.”
20
Id., section 24.
21
Id., section 32, 34.
22
Id., section 35.
23
Id., section 36.
24
Id., section 37.
25
Alberta Institute of Law Research and Reform’s Report on Minors’ Contracts, p. 26–27 (1975).
The Law Reform Commission of British Columbia agreed with these comments. They added:
“The principal object of the [New South Wales] legislation, with its use of the concept of ‘presumptive binding’ would appear to be to encourage adult parties to deal with minors and to secure title to property. Yet although it is difficult for us to make completely informed judgments at this distance, it would seem that the legislation, although comprehensive, is sufficiently complex to create some uncertainty in the minds of adult parties concerning their positions regarding minors. To this extent we are disposed to speculate whether adult parties are in fact encouraged to deal with minors by the terms of the legislation.”26
Under the second form of the qualified enforceability approach, to which we have referred,27 certain categories of contract are presumed to be unenforceable, subject to certain exceptions. The Alberta Institute of Law Research and Reform, by a majority, favoured this form of approach. Having recommended28 that contracts in general should not be enforceable against a minor, the majority proposed the introduction of the following legislative provision:
(1)
(i)
An adult party may enforce a contract against a minor if he satisfies the court:
(a)
that at the time the contract was made the adult party believed it to be fair and reasonable in itself and in the circumstances of the minor; and
(b)
that his belief was reasonable.
26
Law Reform Commission of British Columbia’s Report on Minors’ Contracts, p. 39 (1976). For criticism along similar lines, see Beale, Book Review, 39 Modern L. Rev. 358, at 360 (1976) and the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 3.5 (1978).
27
Supra, p. 91.
28
Alberta Institute of Law Research and Reform’s Report on Minors’ Contracts, pp. 28–29 (1975).
(ii)
In determining whether or not the adult party’s belief was reasonable the court shall have regard only to the circumstances which were or should have been known to the adult party.
(2)
Notwithstanding subsection (1) a court may refuse to enforce a contract against a minor if the minor satisfies the court:
(i)
that the contract was improvident in the interest of the minor; and
(ii)
that the minor by restitution or compensation or a combination of both has put or will put the adult party in as good a position as if the contract had not been made.”29