legislation to attempt to introduce specific rules covering circumstances such as these but, in our view, such a solution would almost certainly fail to cover some cases where it would not be fair to impose full liability on the minor. The restitutionary principle appears to us to afford the degree of sensitivity to individual circumstances that is necessary on this question.211
Another objection to the solution of absolute liability (whether or not subject to qualifications of the type mentioned above) is that the tort formula of seeking to restore the status quo ante212 may not be appropriate in every case. In some cases, restoration may not be sufficient; in others it may not go far enough. The restitutionary principle more adequately responds to these variations of circumstances.
The solution of total absence of liability of a minor for fraudulent misrepresentation as to age seems to us to be manifestly overbroad. In allowing a minor with a high degree of premeditation and intelligence to trap an adult, it would in our view go too far in protecting minors generally against unduly oppressive consequences for their youthful indiscretion.
The present law’s solution based on quasi-contract213 seems to us a genuine, but somewhat crude, attempt to come to terms with the problem. We do not consider that the extent of the minor’s liability should depend on contingencies as to the disposal of the property by the minor before the legal proceedings have taken place.
We are satisfied that the best proposal is to let the restitutionary principle resolve the problem of
211
It could be argued that application of contributory negligence principles would be an adequate solution. We do not agree. There are some cases where, without any “fault” on the part of the adult, it may be appropriate for the Court to provide only partial compensation to the adult.
212
Cf. McMahon & Binchy, 12, 558.
213
Cf. supra, pp. 31–34.
misrepresentation as to age. Its simplicity and flexibility make it preferable to any other possible solutions that have been given effect or canvassed elsewhere.
Guarantees and Indemnities
Under present law,214 a guarantee of a loan made to a minor is void, because the contract of loan is itself void under the Infants Relief Act 1874 and there cannot be a valid guarantee of a void contract. In contrast, an indemnity given in respect of such a loan is valid and enforceable, since an indemnity constitutes an independent primary obligation, rather than the secondary and conditional obligation that a guarantee involves.
This distinction commands virtually no support today. It has been abolished by legislation in New Zealand215 and New South Wales216 and proposals for reform on these lines have been made in England,217 Alberta,218 British Columbia,219
214
Cf. supra, pp. 34–35.
215
Minors’ Contracts Act 1969, section 10.
216
Minors (Property and Contracts) 1970, section 47.
217
Cf. the Report of the Committee on the Age of Majority (the “Latey Committee”), para. 362 (Cmnd. 3342, 1967) the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 11.13 (1982) and their subsequent Report, Law of Contract: Minors’ Contracts, para. 4.14 (Law Com. No. 134, 1984).
218
Alberta Institute of Law Research and Reform, Report on Minors’ Contracts, p. 42 (1975).
219
Law Reform Commission of British Columbia, Report on Minors Contracts, p. 76 (LRC 26–1976).
South Australia220 and Western Australia.221
The main objection to the present law is that it works against the interests of minors, since:
“one who might be prepared to advance money to a minor upon the additional security of a guarantee from an adult will not be able to do so: the guarantee will be worthless.”222
Another objection is that the distinction between guarantees and indemnities is a technical one, which may require the party contracting with the minor to seek expert legal advice.223
We consider that these objections have force. We take the view that a guarantor should not be relieved of liability in respect of a guarantee by reason only of the fact that the person in respect of whom the guarantee is given is a minor. We do not consider it necessary for the legislation to provide that this fact should be made clear to the guarantor in specific terms in the contract (as the Latey Committee proposed in England):224 we believe that generally a person who enters a guarantee for a minor would expect that the guarantee would bind him.
A separate point requires consideration. This concerns the question whether the guarantor should be entitled to
220
Forty-First Report of the Law Reform Committee of South Australia Relating to the Contractual Capacity of Infants, p. 8 (1978.
221
Law Reform Commission of Western Australia, Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 3.51 (1978).
222
English Law Commission Working Paper No. 81, Minors’ Contract, para. 11.10 (1982).
223
Cf. the English Law Commission’s Working Paper No. 81, Minors’ Contracts, para. 11.12 (1982).
224
Latey Committee Report, supra, para. 362.
seek an indemnity from the minor on whose behalf he made the guarantee where the guarantor is obliged to pay the creditor on foot of the guarantee. A variety of solutions may be considered. They range from a virtual exclusion of the right to seek an indemnity,225 through application of a discretionary principle of restitution226 to placing the guarantor of a minor’s contract in the same position as guarantors of contracts generally.
We take the view that the best approach is for the legislation to enable the restitutionary principle to apply in these circumstances. Manifestly, it would be unjust to deprive the guarantor of any possibility of recourse against the minor; equally it would appear oppressive on the minor to enable the guarantor obtain a full indemnity from him or her in every case. We consider that the discretionary restitutionary principle would best be able to deal with the wide variety of circumstances where a guarantee has been obtained, including such factors as whether the guarantor was pressurised into giving the guarantee, the relationship between the guarantor and the minor, and the role of the adult party in the transaction.
We consider that the restitutionary principle should apply to all cases, including cases where the minor enters a binding contract. It would be possible to put the guarantor in the same position as if the minor were an adult, so far as indemnity is concerned, but we take the view that, even in these cases, the restitutionary principle would operate more equitably.
225
As in New South Wales: cf. Harland, 71–72.
226
Cf. the Alberta Institute of Law Research and Reform’s Report on Minors’ Contracts. pp. 41–42 (1975), the Law Reform Commission of British Columbia’s Report on Minors’ Contracts, pp. 75–76 (LRC 26–1976).
CHAPTER 5 SUMMARY OF RECOMMENDATIONS
1.
The legislation should introduce a general principle of restitution whereby a contract made by a minor with an adult party would be enforceable by the minor against the adult but unenforceable by the adult against him; the adult would, however, be entitled to apply to the court for compensation from the minor based on restitutionary rather than contractual principles: p. 108.
2.
The legislation should be drafted so as to enable the Court in proceedings for restitution to grant to any party such relief by way of compensation or restitution of property or both as is proper, and, upon doing so, to discharge the parties from further obligations specified by the contract if it considers it proper to do so: p. 109.
3.
In making any order under these powers the Court should have regard to:
(a)
the subject-matter and nature of the contract;
(b)
where the contract relates (in part or entirely) to property, the nature and value of the property;
(c)
the age, mental capacity and general experience of the minor at the time of making the contract, and at the time of the hearing, respectively;
(d)
the specific experience and knowledge of the minor relative to the particular circumstances of the contract;
(e)
the respective economic circumstances of the parties, at the time of the making of the contract and at the time of the hearing, respectively;
(f)
the circumstances surrounding the making of the contract and, in particular, the reasonableness and fairness, or otherwise, of the conduct of each party relative thereto;
(g)
the extent and value of any actual benefit obtained by each party as a result of making the contract;
(h)
the amount, if any, of any benefit still retained by each party at the time of the hearing;
(i)
the expenses or losses sustained and likely to be sustained by each party in the making and discharge of the contract;
(j)
all other circumstances that appear to the Court to be relevant: pp. 109–110.
4.
The legislation should not give any one of these factors greater weight than the others: p. 110.
5.
The restitutionary principle should apply to both concluded transactions and to those that have not yet been concluded: p. 113.
6.
The legislation should include a provision that, in exercising its discretion when applying the restitutionary principle in cases where the contract has been concluded, the Court should have regard to the extent of the difficulties likely to result for the party who contracted with the minor from re-opening the contract: p. 113.
7.
The legislation should provide that property passes in an unenforceable contract; a person who receives any property should not have to concern himself or herself as to whether the donor, grantor, vendor or lessor, as the case may be, derived the article from a minor; this should apply whether or not bona fide purchasers for value are involved. However, so far as the parties to the contract – the minor and adult (or other minor, as the case may be) – are concerned, the Court should be free to make any order affecting title to the property (to the extent that either of them retains title) as it may consider proper, in its application of the restitutionary principle: p. 115.
8.
The legislation should include specific provisions enabling the Court, in applying the restitutionary principle, to have regard to whether the goods or services which were the subject matter of the contract were suitable to the condition in life of the minor and to his actual requirements at the time of the making of the contract, so far as the other party was, or could reasonably be, aware, having regard to the circumstances, including any information given by the
minor on this question: pp. 122–123.
9.
Subject to recommendation 10, a contract of employment or for personal services should bind a minor if, taken as a whole, it is for his or her benefit: pp. 123–125.
10.
Where the Court finds that a contract, taken as a whole, is not for the minor’s benefit, because it contains a particular term or terms, then, rather than being obliged to declare the contract unenforceable against the minor, the Court should have power to strike out the term or terms in question, if severable from the rest of the contract. In exercising this power, the Court should not be entitled to re-draft the contract, and the contract as enforced should be substantially the same as the original contract. The Court should, moreover, take into account the interests of the employer before deciding to enforce the contract without the unduly onerous term or terms: p. 124.
11.
For the avoidance of doubt, the legislation should specifically provide that minority may be relevant in determining whether a covenant in restraint of trade is reasonable: pp. 124–125.
12.
Minors’ trading contracts should be governed by the restitutionary principle rather than treated in the same manner as employment contracts and contracts for personal services: p. 126.
13.
Contracts of loans to minors should continue to be void: p. 127.
14.
No action should be capable of being brought on a promise made after full age to pay any debt contracted during infancy: p. 127.
15.
A fresh promise after majority to pay a loan that is void in law, and any negotiable instrument given in respect of such a loan should be void and incapable of enforcement against a former minor: p. 127.
16.
Recommendations 13 to 15 should apply to all contracts of loans, including loans for necessaries: p. 127.
17.
Minors, once they come of age, should be free, if they wish, to ratify undertakings made during minority as well as to make new contracts with a fresh consideration with respect to such undertakings: p. 135.
18.
After a 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: p. 135.
19.
The legislation should 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: p. 144.
20.
Parents should not be given powers in respect of the validation procedure proposed in recommendation 19: pp. 144–145.
21.
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; the High Court would have jurisdiction without monetary limit: p. 145.
22.
Any party to the contract should be permitted to apply to the Court for an order for validation; but 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: pp. 145–146.
23.
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 general or subject to limitations) 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;
(e)
the financial resources of the minor;
(f)
the wishes, where they can reasonably be ascertained, of the guardian or guardians of the minor: pp. 146–147.
24.
Where a contract is made between minors, the law should not treat the minors as adults: the restitutionary principle should apply: p. 147.
25.
The legislation should 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 contract: pp. 152–153.
26.
The restitutionary principle should apply to cases of misrepresentation as to age: p. 153.
27.
A guarantor should not be relieved of liability in respect of a guarantee by reason only of the fact that the person in respect of whom the guarantee is given is a minor: p. 156.
28.
So far as the minor’s relationship with the guarantor is concerned, the restitutionary principle should apply, whether or not the minor has entered into a binding contract: p. 157.
BIBLIOGRAPHY
CHESHIRE & FIFOOT Cheshire & Fifoot’s Law of Contract (10th ed., 1981).
CHITTY Chitty on Contracts (25th ed., 1983).
CLARK R. Clark, Contract (Irish Law Texts, 1982).
FINLAY H. Finlay, Family Law in Australia (3rd ed., 1983).
HARLAND F. Harland, The Law of Minors in Relation to Contracts and Property (1974).
KNAPP C.L. Knapp, Problems in Contract Law, Cases and Materials (1976).
McMAHON & BINCHY B. McMahon & W. Binchy, Irish Law of Torts (1981).
MUELLER W. Mueller, Contracts (1980).
SHATTER A. Shatter, Family Law in the Republic of Ireland (2nd ed., 1981).
TREITEL G. Treitel, The Law of Contract (4th ed., 1975).