Working Paper175 expressed the tentative view that a minor should be bound by contracts up to the value of five hundred dollars which had been approved in writing in advance by his parents or parent or guardian. In the event of a dispute or of approval from parent or parents or guardian not being forthcoming, application for approval might be made to a magistrate for contracts up to the value of three thousand dollars or to the District Court for contracts up to a value of twenty thousand dollars or to the Supreme court where no maximum limit would apply.176
The Commission considered that the Supreme Court, or possibly the District Court, should have power to grant capacity to a minor to enter into certain types or categories of contracts, or contracts generally.177 A court, when considering an application for approval for a contract should be empowered to obtain a report or other assistance from a minor’s parents or guardian, the Public Trustee or possibly a solicitor instructed independently of the parties.178 We will also be examining the Commission’s policy analysis of these various issues below.
The Law Reform Committee of South Australia recommended179 that a provision be introduced enabling the Court to permit a minor to enter binding contracts and dispositions. The Committee considered that it was unlikely that recourse to such a provision “is frequent, but there may be circumstances in which such a power in the Court would be useful”.180 Victoria’s Chief Justice’s Law Reform
175
Law Reform Commission of Western Australia, Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 3.29 (1978).
176
Id.
177
Id.
178
Id.
179
Forty-First Report of the Law Reform Committee of South Australia Relating to the Contractual Capacity of Infants, p. 8 (1977).
180
Id.
Committee recommended181 the introduction of provisions based on the New South Wales model.
We will now consider the argument in favour of introducing a validation procedure in our law, and we will then examine the argument against taking this step.
The Argument in Favour of a Validation Procedure
The central argument in favour of introducing a validation procedure182 is that it would enable minors and parties contracting with them to enter into contracts with the reasonable expectation that the contracts will be legally enforceable. If such a procedure were not available, there might well be cases where a minor’s interests would be prejudiced. An adult might make it clear that he would be willing to contract with a minor if he could be assured that the contract would be enforceable, but that he would not be willing to do so if the contract was unenforceable: for some adults the protection afforded by the restitutionary principle might be considered too meagre or too uncertain. The imprimatur of a court (or other agency) could well be the incentive that would encourage them to enter the contract with a minor.183
So far as the grant of contractual capacity to a minor is concerned, the advantage would be that a minor with sufficient maturity to engage in contracts – whether of
181
Victoria’s Chief Justice’s Law Reform Committee’s Report on Infancy in Relation to Contracts and Property, p. 8 (1970).
182
We are speaking here of a procedure that would permit the validation of particular contracts and the granting of contractual capacity (general or restricted) to minors.
183
Cf. the Law Reform Commission of British Columbia’s Report on Minors’ Contracts, p. 66 (LRC 26–1976), and the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, paras. 3.19–3.20 (1978).
every kind or of a limited range – would not have to come back to the court on frequent occasions in respect of different contracts. Minor traders would be particularly likely to benefit from this change in the law.
The Argument Against a Validation Procedure
The argument against the introduction of a validation procedure is essentially a practical one. Where the contract is for a small economic value, parties are unlikely to resort to a validation procedure because it would not be worth the time and money involved.184 The number of minors under the age of eighteen years seeking a grant of general contractual capacity is likely to be very small.185 Moreover, there are other, more certain, options available to parties wishing to contract with minors but hesitant to do so on account of the lack of enforceability of the contract. Such parties may more conveniently seek a guarantee of indemnity from an adult party.
There is moreover, little likelihood that many important contracts of employment with young persons have not been
184
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 10.8 (1982). The cost factor could, of course, be reduced or entirely removed by a State subsidy, and the process could be made very informal, so as to reduce the time and effort involved in seeking approval; but to the extent that the procedure became less formal it would run the possible risk of becoming less effective.
185
Cf. the Law Reform Commission of British Columbia’s Report on Minors’ Contracts, pp. 65–67 (1976).
entered into simply because of the fact of their minority.186
Our Recommendations
We have concluded that, on balance, it would be desirable for the proposed legislation to include a validation procedure, whereby approval may be obtained for a contract to which a minor is a party, and for the granting of contractual capacity, general or subject to limitations, to a minor. We share with other law reform agencies the view that this procedure is not likely to be of major practical significance, but such effects as it may have seem likely to be beneficial.
A number of specific aspects to the validation procedure must now be considered. The first concerns the person or agency to be charged with responsibility for making the decision as to whether validation should be permitted. As we have seen, a wide range of persons and agencies has been adopted or proposed elsewhere, including the Court, the Public Trustee, a solicitor or the parents of the minor concerned. We do not consider that parents should be
186
Cf. the English Law Commission’s Report, Law of Contract: Minors’ Contract, para. 5.8, clause (c) (Law Com. No. 134, 1984). We should note at this point that we do not take the view, adopted by the English Law Commission (id., clause (b)) that “[I]t would not be easy” for the judicial authority to make a decision as to validation in the absence of a “contradictor” ready to argue against the benefits of the proposed contract. We are satisfied that the judicial capacity to authorise proposed courses of action, which already extends very widely, would comfortably embrace a validation procedure. Nor are we convinced by the English Law Commission’s argument (id., clause (c)) that a validation procedure would encourage employers to draft contracts less in the minors’ favour than at present. This speculative argument (based on an unproven assumption as to existing practices) ignores the fact that the Court (or other authority) must oversee and be satisfied with the fairness of the contract.
given new powers in this respect. Of course, it is proper that parents may, if they wish, with their minor children’s consent, become parties to contracts to which these children are also parties, or that parents may give guarantees or indemnities with respect to contractual obligations undertaken by their minor children; but we do not consider that parents should be permitted, by their mere consent, to render enforceable contracts that would otherwise be unenforceable. As has been pointed out more than once, in some cases parents may not be in a position to exercise an informed and helpful decision as to whether it would be desirable for their minor children to make a particular contract or be given contractual capacity.
This is not to say that we consider the role of parents in this context to be irrelevant; on the contrary, we recommend that the wishes of parents, whether supporting or opposing the making of the contract in question, should be taken into account by the person or agency charged with the decision.187
If parents are not to be charged with the decision, who should be? We have no strong views on this question. We consider that the aim of the legislation should be to maximise ease of access by the parties involved, as well as minimising costs and delay. On the other hand, the decision whether or not to validate a contract is an important one, involving consideration of issues of justice and equity. While we appreciate the advantages involved in charging solicitors or other officers of the court with this task, we consider that, on balance, it is more desirable to situate the power within the judicial process. We therefore consider that the Courts should have jurisdiction to make an order validating contracts or granting contractual capacity. The District Court should have jurisdiction where the consideration of the contract or value of the property concerned does not exceed£2,500. The Circuit Court should have jurisdiction up to a value of £15,000. We have selected these jurisdictions to accord with the general levels of jurisdiction laid down in the Courts Act 1981. The High Court would have no monetary limits on jurisdiction.
We consider that any party to the contract should be permitted to apply to the Court for an order for
187
Cf. id., p. 70.
validation;188but we recommend that such application should be made only before the contract has been made or, if it has already been made, only when the contract contains a condition precedent that application for validation will be obtained. We consider that to permit applications for validation to be made at a later stage might bring about a situation of some considerable confusion in practice: the restitutionary principle would become subject to significant qualification by what would in effect be a principle of qualified enforceability.189 We have already rejected190 the introduction of the principle of qualified enforceability on the basis that, although desirable in theory, it would lead to some uncertainty and confusion in practice; when combined with the principle of restitution, it would in our view lead to even greater uncertainty and confusion.191
As regards the considerations to be taken into account by the Court in deciding whether or not to validate a proposed contract or confer contractual capacity (whether absolute or subject to limitations) we recommend that the court should have regard to all the circumstances, but, without prejudice to the generality of this discretion the court may take into account:
(a)
the age of the minor;
(b)
the nature, subject-matter and terms of the contract;
(c)
the reasonable likelihood of performance of the contract by each of the parties to it;
(d)
the requirements of the minor, having regard to his particular circumstances;
188
Where an application for the granting of contractual capacity is concerned, the minor would be the appropriate applicant.
189
As to which see pp. 91ff, supra.
190
Supra, pp. 99–100.
191
Cf. the Forty-First Report of the Law Reform Committee of South Australia Relating to the Contractual Capacity of Infants, p. 6 (1977), stating that the Committee were unanimous in rejecting the principle that a Court may declare a contract previously entered into to be binding, “on the basis that it renders the status of all contracts uncertain at the time of their making”.
(e)
the financial resources of the minor;
(f)
the wishes, where they can reasonably be ascertained, of the guardian or guardians of the minor.192
Contracts Between Minors
There has been very little discussion about the specific question of contracts between minors. The number of occasions where such contracts are of significant financial dimensions must be relatively small, but it is reasonable to assume that minors have frequently bought from other minors items of some value, such as guitars, stereos, motorcycles and cars. We consider that our proposals should address the question, since clearly it is one that will present itself to the courts sooner or later.
One possible approach considered, but rejected, by the English Law Commission would be to treat both minors as adults. We also reject this approach. A minor does not cease to be in need of protection on account of his or her immaturity and lack of experience merely because the party with whom he or she is contracting happens also to be a minor.193
In our view the restitutionary principle will cope adequately with problems that may arise in relation to contracts between minors. The Court will be able to have regard to the respective ages, degrees of maturity, and business capacity and experience of the minors; this discretion will ensure that an experienced or exploitative minor will not be able to profit unjustly at the expense of a less experienced minor.
192
Some of these considerations, proposed by the Law Reform Commission of British Columbia in their Report on Minors’ Contracts, p. 73 (1976), have already been set out supra.
193
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 11.6 (1982).
Tort and Contract
The present distinction that is made in the law194 between a wrongful mode of performance of a contract, on the one hand, and the commission of a tort in a contractual setting, on the other, has frequently been criticised for its conceptual uncertainty, but it is not so clear how the law should best be reformed.
Several solutions have been adopted or proposed. In New South Wales, a minor is liable for all torts, including deceit, whether or not the tort is connected with any contractual obligation.195 As well, the court may enforce a non-binding contract against a minor where this has been procured by a fraudulent misrepresentation by him as to his age.196
In New Zealand the legislation comprises the common law rules relating to torts connected with a contract, including the tort of deceit. But the restitutionary principle applies where the minor has procured a contract by fraudulent misrepresentation as to his own age or any other matter.197
Canadian law reform agencies have taken differing approaches to the question. The Alberta Institute of Law Research and Reform in its Report on Minors’ Contracts198 in 1975 recommended that a minor should not be liable to an adult for damage resulting from false representations as to the age of the minor, but that, in all other cases, it should no longer be a defence to an action in tort against a minor that either (a) the tort was connected with a contract, or (b) the cause of action for the tort was in substance a cause of action in contract, save to the extent that the contract would provide a defence for the minor if he had attained his majority.
194
Cf. supra, pp. 30–31.
195
Minors (Property and Contracts) Act 1970, section 48.
196
Id., section 37(2).
197
Cf. the Minors’ Contracts Act 1969, section 15(4).
198
Pages 36–37 of the Report.
The Law Reform Commission of British Columbia, in its Working Paper on Minors’ Contracts, published in 1975, recommended that the general principle relating to minors’ exemption from liability for torts connected with a contract should continue; by way of exception, however, it recommended that minors should be liable in tort for deceit as to their age. In their Report, however, the Commission no longer recommended that this exception should be made. The measure of damages in actions for deceit (as in other torts) is to place the plaintiff in the same position as if the tort had not been committed,199 and the Commission considered that such a measure of damages would “rarely exceed in scope the best relief available”200 to the party contracting with the minor under the restitutionary principle that the Commission had proposed elsewhere in its Report.
In two respects, the Commission considered that special provision should be included as a gloss to the restitutionary principle in cases of fraud as to age by the minor. First the Commission was concerned about the use of standard form contracts containing forms of words such as “I warrant that I have attained the age of majority”. While the Commission did not think that the situation was likely to arise frequently, it believed that a document containing this or a similar form of words, signed by the minor would probably be the evidence of fraud most frequently advanced by a small number of unscrupulous adults seeking to mitigate their losses in contracts involving minors.
The solution proposed by the Commission was that a minor should not be held to have induced another person to enter a contract by means of a fraudulent misrepresentation as to the Minor’s age by reason only of the fact that the minor signed or otherwise adopted a document relevant to the transaction that:
(a)
contained a statement that the minor was of full age or otherwise had contractual capacity; and
199
Cf. Hepting v Schaaf, [1964] S.C.R. 100, Parna v G. & S. Properties Ltd., 5 D.L.R. (3d) 315 (Ont. C.A., 1969) Northern & Central Gas Ltd v Hillcrest Collieries Ltd., [1976] 1 W.W.R. 481 (Alta. S.C.).
200
Page 60 of the Report.
(b)
was prepared and tendered by or on behalf of the plaintiff; and
(c)
was preprinted and used by the plaintiff in like transactions.201
The other aspect of the problem related to the rule that it is not ordinarily a defence to an allegation of fraud that the plaintiff was negligent or had an opportunity for verifying the fraudulent statement. The Commission considered that:
“even where an adult is confronted with a deliberately fraudulent minor who lies about his age in order to induce a contract, it ought to be a condition of the minor’s liability that the adult’s belief in the truth of the statement ought to be reasonable. It would, in our view, be going too far to allow an adult to aver that he relied on the fraudulent statement of the average twelve-year-old that he was nineteen.”202:
The Law Reform Commission of Western Australia endorsed203 the approach favoured by the Law Reform Commission of British Columbia.
In England the Latey Committee recommended that no change be made in the law save in relation to a minor’s fraudulent misrepresentation: where the misrepresentation was unconnected with the minor’s age, the minor should not be permitted to escape liability, but where the misrepresentation related to age the minor should continue to be exempt from liability (although subject to the possibility of having an order for restitution made against him or her).
201
Page 63 of the Report.
202
Page 62 of the Report.
203
The Law Reform Commission of Western Australia’s 2nd Working Paper, para. 3.49 (1978).
The Committee feared that:
“If the law were to provide simply that an infant who held himself out as being of full contractual age should be liable in contract as if he were of full age, or be liable in tort for his fraud, then a way round the whole law of infancy might be opened. We should soon find in contracts a clause to the effect that ‘I am over 18′ (or whatever the age of capacity is to be). The adult party would refrain from asking questions and would, no doubt, in many cases be able to show that he relied on the infant’s misrepresentation.”204:
In its Working Paper on Minors’ Contracts, the English Law Commission considered the questions of minors’ liability in tort and the liability of fraudulent minors. It recommended that the present law relating to a minor’s liability in tort should be retained, subject to a qualification it proposed regarding fraudulent misrepresentation.
The Commission referred to the position in Scotland,205 where a minor who falsely represents himself to be of age, and is reasonably believed, loses his protection. The Commission commented.
“If all cases of fraud involved planned, deliberate and calculated lies this approach might well be justified. In practice, however, many cases of fraud will consist of a fraudulent misrepresentation as to age, and many of these representations may be made by the minor more or less on the spur of the moment. A minor may, for example, sign a tear-off slip attached to an advertisement containing a statement that the person who signs is over the age of 18, or he may answer an unexpected question as to his age by saying that he is 19. This type of fraud may be committed without any premeditation. We appreciate that when an adult enquires about a person’s age, precisely so as to avoid dealing with a minor, it is hard on the adult if the
204
Latey Report.
205
Cf. supra, p. 37.
fraudulent minor still retains his protection from liability under the contract. However, we consider that the probable absence of premeditation outweighs this factor. In any event we think that if the minor is to be punished because of his fraud, this should be achieved by the criminal law.”206
The Commission took the provisional view that a fraudulent minor should not forfeit the protection against liability in contract which he would otherwise have under the Commission’s recommendations in the Working Paper; but the Commission considered that the present law goes too far in protecting the fraudulent minor by refusing the adult a remedy in tort in circumstances where allowing such a remedy would be an indirect way of enforcing the contract. They supported the rule under present law that the adult party should be entitled to rely on the minor’s fraud as a ground for rescission, or as a defence if the minor sues to enforce the contract.
The English Law Commission provisionally recommended207 that, while the minor should retain his protection in respect of actions in contract, he should nevertheless be liable for the tort of deceit and that he should be so liable whether or not the remedy sought by the adult might amount to indirectly enforcing the contract. In their Report,208 published in June 1984, the Commission did not proceed with this recommendation on the basis that, on balance, change was not necessary.
Our Recommendations
We have come to the conclusion that the best approach for the legislation to take would be to retain the rule that a minor should not be exposed to an action in tort where this would amount to an indirect enforcement of an unenforceable
206
W.P. No. 81, Minors’ Contracts, para. 11.1 (1982).
207
Id., para. 11.2.
208
Law of Contract: Minors’ Contracts, para. 5.3 (Law Com. No. 134, 1984).
contract. We are satisfied that the restitutionary principle will afford the adult party adequate protection in such circumstances. On the more difficult question of fraudulent misrepresentation as to age, it would in principle be difficult to justify a rule which enabled such a fraudulent minor to “get away with it” with no protection for the adult party. Such an absolute exemption could perhaps be defended on the basis that fraudulent misrepresentation of age is just the type of youthful indulgence that is to be expected of minors and that it would be wrong, and inconsistent with the general policy of protecting minors against indulgence, to hold them liable for such misrepresentation.209 Moreover, as we have seen, many law reform agencies consider that there is a risk that some adult parties might tempt a minor into making a misrepresentation as to his or her age by inclusion of a question regarding age on an application form.
In our view, the best approach is to let the restitutionary principle apply to cases of misrepresentation as to age. This seems to us to be the most sensible and fair solution – demonstrably better than any other that has been adopted or proposed elsewhere. The weaknesses of the other solutions may be mentioned briefly. Absolute liability in tort could be unjust to the minor in cases where, for example, he had acted in an unpremeditated manner,210 where the adult party, whether wittingly or otherwise, had “walked him into” making the misrepresentation or where the adult party had not acted reasonably in relying on the misrepresentation. It would be possible for the
209
Cf. Kindred, Basic Problems of Minors’ Contractual Capacity: Reform in England, France, Ethiopia and the United States of America, Festschrift Rheinstein, vol. 2, p. 523, at p. 539. See, however, H.H.W., Note: The Status of Infancy as a Defense to Contracts. 34 Virg. L.Rev. 829, at 832 (1948), arguing that the imposition by estoppel of contractual liability on minors who deliberately misrepresent their age is:
“manifestly fair since most [minors] artful enough to successfully practise such subterfuge are also of sufficient intelligence to be charged with the contractual responsibility of their deceit.”
210
We have already mentioned that the English Law Commission had regard to the fact of the presence or absence of premeditation in this context in its Working Paper No. 81, Minors’ Contracts, para. 11.1 (1982).