The Law Reform Committee of South Australia, in its Report on the subject, recommended130 that all contracts other than those for necessaries or of service should require subsequent ratification in writing. The Committee believed that:
“if protection for infants is to be effective, ratification of the contract upon attainment of the age of majority must be prohibited (as it is in jurisdictions which have enacted the Infants Relief Act) or restricted. In neither case would there be any inhibition upon the making of a new contract to perform the same obligation as that entered into during infancy. Where ratification is impossible the new promise is likely to make binding only agreements where there are still executory promises on both sides and a fresh promise to pay for property already supplied by the adult may well fall foul of the doctrine of past consideration. But if ratification is possible, then the proposers of the Infants Relief Act feared that an offer of a further minor benefit by the adult might well induce a ratification of the whole contract by the infant upon attaining majority. The Committee has encountered no evidence that this possibility constitutes a pressing social problem in South Australia today, and adoption of the proposal [that all contracts other than for necessaries or of service should require subsequent ratification in writing] may
129
Minors (Property and Contracts) Act 1970, sections 31, 38. Cf. The Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.67 (1978):
“With typically youthful inaction the consequences of this provision is that a minor might inadvertantly find himself bound in later life by a particularly harsh contract which he entered into only because of his immaturity.
130
Forty-First Report on the Law Reform Committee of South Australia Relating to the Contractual Capacity of Infants, p. 7 (1977).
perhaps give further weight to the retention of the power to ratify the contract ….”131
The Law Reform Commission of Western Australia favoured a different approach. They recommended that a minor on reaching full age should be bound by a contract which he or she then ratifies “in writing, words or otherwise and whether communicated to the enforcer or not”.132 If he or she does not ratify it, the adult should be able to apply to the Court for an order requiring the former minor to make a decision either to ratify or to repudiate the contract.133 The Commission considered that, in view of this proposed procedure, it might be unnecessary and undesirable to provide that any contract with a minor should be automatically binding if not repudiated before he attains the age of nineteen.134
In Canada, Alberta’s Institute of Law Research and Reform recommended that after a minor reached full age, he or she should be able to affirm a contract made during minority, even though that contract was unenforceable against him or her during minority.135 The Institute also considered that:
“the danger that the minor may repudiate the contract should not threaten the adult party indefinitely. It is sufficient that the law gives him a reasonable time after majority to repudiate the contract, and if he does not do so the contract should become binding upon him. We think that a reasonable time is one year.”136
Subject to a dissent by two out of their eight members, the
131
Id., pp. 7–8.
132
Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 3.14 (1978).
133
Id.
134
Id. See also id., paras. 1.67, 1.71.
135
The Alberta Institute of Law Research and Reform’s Report on Minors’ Contracts, p. 34 (1975).
136
Id.
Institute also recommended that an adult party who wished to ascertain his or her position should be able to give a written notice to the minor after majority requiring the minor to affirm or repudiate the contract within thirty days of the receipt of the notice. If the minor did not repudiate, the contract should become enforceable against the minor. If the minor did repudiate, then the adult party would be entitled to ask the Court for whatever relief he or she was entitled to under the restitutionary principle.137
The Law Reform Commission of British Columbia took a similar approach. They stated that their recommendations were:
“based on the judgment that while minors ought to continue to receive some protection in the law, adults have no need of the particular protection [that makes it impossible for a minor, on reaching majority, to affirm a contract made during minority]. It seems to us to be a logical extension of this judgment that if an adult decides that it is to his advantage to consider himself bound by a contract made during his minority, he is capable of taking responsibility for that decision.”138:
The Law Reform Commission of British Columbia agreed with the Alberta Institute’s proposals on this question, as they believed it to be:
“reasonable that once a minor has reached adulthood the law should not go out of its way to extend a privilege and protection that is attributable to minority. The parties may deal with each other as adults, and we can perceive no reason why one party should not be entitled to ask the other to declare himself on whether he intends to affirm or repudiate the contract.”139:
The only matter on which the Commission differed from the Alberta Institute was the length of time suggested for the former minor to make a decision. The Commission recognised
137
Id., pp. 34–35.
138
Law Reform Commission of British Columbia’s Report on Minors’ Contracts, pp. 55–56 (1976).
139
Id., p. 56.
that, while any chosen period would be “largely arbitrary”,140 sixty, rather than thirty, days would be more appropriate.
In England the Latey Committee recommended that the law should contain no provision preventing persons from ratifying contracts they made during their minority. The Committee were:
“quite clear that while protection against contractual liability is needed by persons under the age of majority there is no justification for protecting adults against the consequences of fresh contracts or of ratification.”141:
The English Law Commission, in its Working Paper published in 1982, expressed the provisional view that it was not desirable that contracts made during minority should be capable of being ratified after the minor reaches full age.142 The Commission went further by stating that:
“While we do not think it is practicable to propose that an adult, albeit one who has only just come of age, should not be permitted to enter into a new contract binding himself to perform an act which he agreed to do during his minority, we would, in any action brought against him on any such contract, allow him to plead that the effect of the contract was to render enforceable an obligation previously unenforceable because of his minority; that its terms are unfair; and that he should therefore be relieved in whole or in part from its performance. It would be for the court to determine whether the contract was a contract of that kind and to what extent it should be enforced against the former minor.”143
140
Id., p. 57.
141
Latey Committee’s Report on the Age of Majority. para. 339 (Cmnd. 3342, 1967).
142
English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 9.8 (1982).
143
Id. The Commission (id., fn. 195) noted that their proposals need not affect sections of the Betting and Loans (Infants) Act 1892, which precludes a new contract for the repayment of an existing loan contracted during minority.
The English Law Commission considered that it was not realistic to afford to a minor legal protection against the consequences of his immaturity and inexperience and yet to allow that protection to be withdrawn retrospectively immediately he comes of age:
“A minor may choose voluntarily to perform his contracts even while he is a minor. Similarly, he may after he comes of age choose to do that which he agreed to do while he was a minor. For example, having entered into a hire purchase agreement during his minority, he may continue to make the payments under it after he comes of age. No law can, or should attempt to, prevent this. But this is not at all the same thing as to permit a former minor to assume a legally binding obligation to do that which he was not previously bound to do. We think that to allow this would be to subject young adults to the obvious risk of pressure from creditors (and others) which in some cases might negate the whole purpose of the law which previously protected him.”144
The English Law Commission took a different view in their subsequent Report, published in June 1984. They noted that their proposal had found no favour with those who had commented on the Working Paper. The commentators had preferred the Latey Committee’s approach. The Commission added:
“As we recognise, there is an inescapable measure of illogicality in a law which allows an 18-year-old to bind himself absolutely, however imprudent he may be, by entering into a contract unconnected with any previous transaction, while imposing a restriction on his liability if the contract in question reproduces an existing, though unenforceable, obligation. Our original proposal is also open to two other objections:-
(a)
by making the erstwhile minor’s defence to an action on a new contract dependent on what is ‘fair’, it introduces an element of uncertainty into the law;
(b)
while getting rid of one source of fine distinctions (between ‘ratification’ and a ‘new
144
English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 9.9 (1982).
contract’), it may let in another (between a new contract that reproduces an existing obligation marginally different).”145
The English Law Commission recommended the repeal of section 2 of the Infants Relief Act 1874 “to ensure that ratification of a minor’s contract should be made effective and that no qualification should be imposed on the effectiveness of a ‘new contract’”.146 In their view,147 in order that no qualification should be imposed on the effectiveness of a new contract, it became necessary to repeal section 5 of the Betting and Loans (Infants) Act 1892.
On the question of contracts binding on a minor until repudiated by him or her, the English Law Commission in its Working Paper recommended148 that there should be no such separate category of contracts. Whether or not there was a justification for this category of contracts under existing law,149 the Commission did not think that the contracts that comprise the category “are of sufficient importance today to warrant their continued exception from the general rule”.150 The Commission considered that, in any case, the reduction in the age of majority to eighteen “makes it less likely that a minor will enter into any of these contracts”.151 In its subsequent Report,152 the English Law Commission abandoned its proposal on this question.
145
Law of Contract: Minors’ Contracts, para. 4.7 (Law Com. No. 134, 1984).
146
Id., para. 4.8.
147
Id., para. 4.11.
148
Para. 7.40 of Working Paper No. 81.
149
As to which, see supra, pp. 19ff, and the English Law Commission’s Working Paper No. 81, Minors’ Contracts, paras. 2.10 – 2.12 (1982).
150
English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 7.40.
151
Id.
152
Law of Contract: Minors’ Contracts, para. 5.2 (Law Com. No. 134, 1984). See further fn. 106, supra.
Our Proposals
We have come to the following conclusions as to how this aspect of the law should best be reformed. First we propose that minors, once they come of age, should be free, if they wish, to ratify undertakings made during minority as well as making new contracts with a fresh consideration with respect to such undertakings. We make this recommendation, not principally because of the difficulty in practice in distinguishing between ratification and a new contract,153 but because we consider that a person who has become an adult should be treated as such. We do not see merit in the legislation creating inhibitions on the capacity of persons who have recently come of age. The only exception – which we have already proposed154– concerns contracts with respect to loans.
We would of course be anxious that a person who has recently come of age should not be exploited by others, unscrupulous and more experienced. We are satisfied that existing principles, such as those relating to mistake, misrepresentation, duress and undue influence, will adequately protect the former minor.
We must now consider the position of contracts involving continuing obligations which commence when a party is a minor but which continue after that party comes of age. When the contract begins, it is under our proposals, unenforceable. We consider that after the minor comes of age a contract involving continuing obligations should become fully enforceable, with respect to obligations contracted and to be discharged by the parties whether before or after the minor comes of age. In other words, if a minor wishes not to be bound by a contract of this nature, he or she must take steps to have the Court apply the restitutionary principle before he or she reaches full age.
We consider that this recommendation provides an appropriate solution for the cases where under present law a contract will be binding unless repudiated within a reasonable time
153
As to which see supra, pp. 25–27.
154
Supra, p. 127.
of reaching full age. Such contracts will in future fall under the restitutionary principle while the minor is under age but will be binding once the minor has come of full age.
Validation
We must now consider whether it would be desirable for the proposed legislation to include a validation procedure whereby the court (or other agency or person) would be empowered to approve of a contract at the time it is made; a broader form of validation procedure would enable the Court to confer contractual capacity (whether or not subject to limitations) on a minor.
Before examining in detail the several issues of policy raised by this question we must refer briefly to experience in other jurisdictions.
In New South Wales the Supreme Court is empowered to grant to a minor “capacity to participate in any civil act or in any description of civil acts or in all civil acts”155 unless it considers that the order is not for the benefit of the minor concerned.156 A court of petty sessions may, on application by a minor, by order approve a contract that the minor proposes to make, where the minor is undertaking obligations to the value of no more than seven hundred and fifty dollars, and the order is for the benefit of the minor.157
In New Zealand, the Magistrate’s Court may give its prior approval to a contract entered into by a minor, on application to it by the minor, any other party to the proposed contract or the minor’s guardian.158
155
Minors’ (Property and Contracts) Act 1970, section 26(1).
156
Id., section 26(3).
157
Id., section 27.
158
Minors’ Contracts Act 1969, section 9.
Proposals by law reform agencies have varied widely. The Alberta Institute of Law Research and Reform in its report in 1975 recommended that judicial approval, whether before or after the making of a contract by a minor,159 should render it enforceable against the minor. An application for such approval could be made by the minor or “any adult party to the contract”160 the Court might not approve the contract unless satisfied that approval was for the benefit of the minor.
The Institute also recommended that the Trial Division of the Supreme Court of Alberta, on application by a minor, might by order grant to the minor “capacity to enter into contracts or any description of contracts”.161 The Court might not make such an order unless satisfied that it was for the benefit of the minor.162 A contract made by the minor under any subsisting grant of capacity should be enforceable against the minor.163
The Law Reform Commission of British Columbia made a detailed examination of the subject. We will be considering specific aspects of their analysis below, but at present we will merely note their recommendations. The Commission recommended that the Supreme Court of British Columbia, on application by a minor or his parent or guardian, might by order grant to the minor capacity to
159
Alberta Institute of Law Research and Reform’s Report on Minors’ Contracts, recommendation No. 11, p. 39 (1975). The Report recommended that where the consideration given by the minor under the contract or disposition had a value not exceeding two thousand, five hundred dollars, jurisdiction should lie with a Judge of the Family Court; in any other case the Trial Division of the Supreme Court of Alberta should be empowered to give its approval: recommendation No. 11(4).
160
Id., recommendation No. 11(2). The reference to “any adult party” should presumably extend also to the rare case where both parties to the contract were minors.
161
Id., recommendation No. 12(1) (p. 40).
162
Id., recommendation No. 12(2).
163
Id., recommendation No. 12(3).
enter into all contracts or any description of contracts.164 The Court should not make such an order unless satisfied that it was:
“for the benefit of the minor and that, having regard to the circumstances of the minor, he is not in need of the protection offered by law to minors in matters relating to contracts.”165:
A contract made by a minor under any subsisting grant of capacity should be enforceable against the minor.166
The Commission also recommended that “a minor, his parent or guardian or any adult party to the contract”167 might apply to the Public Trustee for a grant of capacity to the minor to enter a particular contract either before or after the contract is entered into. The Public Trustee should have “complete discretion”168 in determining the best interests of the minor, but without restricting the generality of this discretion, might take into account:
“
(a)
the nature, subject-matter and terms of the contract;
(b)
the requirements of the minor, having regard to his particular circumstances;
(c)
the financial resources available to the minor; and
(d)
the wishes, where they can be reasonably ascertained, of any parent or guardian of the minor.”169
164
Law Reform Commission of British Columbia’s Report on Minors’ Contracts, p. 72 (L.R.S. 26–1976).
165
Id.
166
Id.
167
Id. (Note, in this context, the comments in fn. 159, supra with respect to the proposal of the Alberta Institute of Law Research and Reform.)
168
Id., p. 73.
169
Id.
An appeal would lie to the Supreme Court against a refusal by the Public Trustee to grant the minor the capacity to enter a contract. The Public Trustee might be directed to state his reasons for his refusal, and the Court would be entitled to substitute its own discretion for that of the Public Trustee.170
A contract entered into by a minor would be enforceable against him if a grant of capacity had been made to him.171 Furthermore “no liability of any kind”172 should attach to the Public Trustee as the result of the exercise of his discretion in respect of granting a minor the capacity to enter a contract.
In England, neither the Latey Committee nor the English Law Commission favoured the introduction of a validation procedure.
In their Working Paper,173 the English Law Commission took the provisional view that there was no specific case for either judicial conferment of contractual capacity on a particular minor or for validation of transactions of small economic value. They also took the provisional view, though less strongly, that a validation procedure for transactions of considerable economic value should be established.
In their subsequent Report, the English Law Commission recommended that no validation procedure of any kind should be introduced. Their arguments are worth recording in detail:
“
(a)
The evidence we have received does not make us think we were wrong in supposing that the absence of any such procedure does in fact (though it could in theory) cause problems; and it would be inconsistent with our present approach to legislative reform of
170
Id.
171
Id.
172
Id.
173
Working Paper No. 81, Minors’ Contracts, paras. 10.3 – 10.16 (1982).
this area of the law to make any recommendation unless it were aimed at resolving some practical difficulty or removing some anomaly in the law.
(b)
It would not be easy for the Master or Registrar to reach a satisfactory decision. Every party appearing before him would want him to approve the proposed contract and there would be no “contradictor” ready to argue on the other side. That role could be filled only by the Master or Registrar himself, and he would face difficulty in filling it. In the family ‘minor’s settlement’ application, the court can draw on its wide experience of similar claims for damages; the parties are adversaries and the issues are usually not complicated. Whether the terms of a contract offered to a 16 year old pop-singer are on balance for his own benefit may pose questions both unusual and complicated.
(c)
We doubt whether, in reality, any minor who wishes, for example, to become a pop-star or a film-star and who has found a potential employer has failed to conclude a contract of employment simply because he is a minor. At present, those who are concerned with the drawing-up of such contracts have to resolve any doubts in favour of the minor if they are not to run the risk of the contract being held to be unenforceable because [it is] not for the minor’s benefit. A validation procedure would probably be useful to some employers but, while they would have the advantage of there being no risk of contract subsequently being held to be unenforceable, they would be likely to seek to draft the contract less in the minor’s favour and to try to have that draft validated by the court. If the court disapproved of the provision in question, it could be altered but if the court approved it the contract would be binding. In most cases the principal consideration in the minor’s mind would be that he should end with a concluded contract. He is unlikely to want to raise difficulties with the court about the contract proposed by his potential employers.”174
The Law Reform Commission of Western Australia, in its
174
Law of Contract: Minors’ Contracts, para. 5.8 (Law Com. No. 134, 1984).