The Commission took the view59 that there was no need for any procedure for the judicial or other validation of contracts made by minors which might be otherwise unenforceable against them. It also rejected60 the argument that minors should acquire full contractual capacity automatically on marriage.
The Commission considered61 that a minor should not forfeit his protection under the law of contract if he induced the making of a contract by fraud, whether by misrepresenting his age or otherwise. But it recommended62 that a minor who induced the making of a contract by fraud should be liable in tort for deceit, so that the adult party should be so liable even if a judgment against him would amount in effect to a full or partial indirect enforcement of the contract. In addition, the Commission recommended that the minor’s fraud should be available to the adult as a defence in any action brought to enforce the contract, or as a ground for rescinding the contract. As to other torts, the Commission considered63 that a minor should incur no liability in tort if such liability would amount to an indirect enforcement of the contract.
The Commission recommended64 that a dispute arising out of a contract between two minors should be decided according to the same principles of law as apply between a minor and an adult.
Finally, the Commission proposed65 that a guarantee by an
59
Id., paras. 10.1–10.15.
60
Id., paras. 10.17–10.20.
61
Id., para. 11.1.
62
Id., paras. 11.3–11.4.
64
Id., paras. 11.5–11.9.
65
Id., paras. 11.10–11.13.
adult of a minor’s obligation under a contract should not fail by reason of the fact that the contract is unenforceable against the minor. Neither a guarantor nor an indemnifier should be entitled to recover from the minor anything which they may have been called upon to pay under the guarantee or indemnity.
The Commission’s alternative proposal, as we have mentioned,66 was of a far more radical nature. Under it, the following rules would apply. All contracts of whatever nature would be fully binding on minors aged 16 years and over;67 a minor below the age of 16 would have no liability under or by reason of any contract.68
Under this proposal, the Commission also recommended69 that a minor below the age of 16 should be able to enforce his contracts against the adult party, notwithstanding that these contracts were not enforceable against the minor. In any action brought by a minor below the age of 16 to enforce a contract, the adult party should be entitled to put forward any defence which he might make if the action had been brought against the adult by another adult, and to plead any set-off or counterclaim up to, but not exceeding, the value of the minor’s claim against the adult.
The Commission recommended70 that, where a minor below the age of 16 was in breach of a contract and had in his possession property which had passed to him under the contract the adult party should be entitled to the return of that property in specie, but not to any other remedy. The Court should have power to make any adjustment of rights as between the minor and the adult, as it might think appropriate. This remedy should not apply to the proceeds of sale of the property if the minor has sold it, or to any other property acquired by the minor wholly or partly in
66
Supra, p. 47.
67
Law Commission Working Paper No. 81, Minors’ Contracts, paras. 12.1–1218 (1982).
68
Id., para. 12.19.
69
Id., paras. 12.20–12.22.
70
Id., para. 22.22.
exchange for that property. Nor should the remedy apply to money lent to the minor.
Finally, the Commission recommended71 that a minor below the age of 16 should not ordinarily be civilly liable in tort for fraud if the effect of such liability would be indirectly to enforce against him an unenforceable contract. But, where such a minor has induced a contract by misrepresenting himself to be 16 or over, he should be liable in tort for deceit whether or not rendering him so liable may amount to an indirect enforcement of the contract.
The English Law Commission’s Report, Law of Contract: Minors’ Contracts
In June 1984 the English Law Commission’s Report72 on the subject was published. The Report contained a number of important changes in its recommendations from those put forward in the Working Paper. Most notably, as a result of consultation with interested parties, the Commission abandoned73 its alternative proposal, that all minors of 16 years and over, should be liable on their contracts and that minors under the age of 16 should have no liability in contract.
The Commission reiterated74 its view that the law governing minors’ contracts should continue to be based on the principle of “qualified unenforceability” but it now favours a less wide-ranging approach to reform than one which would amount to a codification of the law. Comprehensive legislation would involve diversion of the resources necessary to prepare it from other projects of greater practical importance:
71
Id., paras. 11.1–11.4, 12.23.
72
Law of Contract: Minors’ Contracts (Law Com. No. 134, 1984).
73
Para. 2.3 of the Report.
74
Id., para. 1.12.
“By restricting our proposals for legislation to reform of specific defects we will be able to submit a short Bill of which the effect should be clear and certain. If the Bill is enacted, the law will be improved and the working of the law, as amended, will be apparent from decisions of the courts.”75
The Commission reiterated76 its recommendation for the repeal of the Infants Relief Act 1874. The Commission dropped77 the proviso provisionally recommended78 in the Working Paper that, where an erstwhile minor entered a new contract reproducing the effect of an earlier, unenforceable agreement, it should be a defence to the erstwhile minor that the terms of the new contract were unfair to him. It also recommended79 the repeal of section 5 of the Betting and Loans (Infants) Act 1892.
The Commission repeated80 its recommendation that, where a guarantee is given in respect of an obligation of a party to a contract and the obligation is unenforceable against him (or he repudiates the contract) because he was a minor when entering the contract, the guarantee should not for that reason alone be unenforceable against the guarantor.
The Commission proposed changes in its recommendations on the position where property has passed to a minor under an unenforceable contract and the minor refuses to pay. Although the somewhat restrictive proposals in the Working Paper on this question had received general support among
75
Id., para. 3.4.
76
Id., paras. 4.2, 4.8.
77
Id., para. 4.8.
78
Paras. 9.8 and 9.9 of the Working Paper.
79
Para. 4.11 of the Report.
80
Id., para. 4.14. The Commission noted (id., para. 4.15) that although the proposed repeal of section 1 of the 1874 Act might have been enough to achieve its objective in respect of guarantees, it was safer, in the absence of clear authority at common law, to include a specific recommendation on the point.
those consulted, the Commission in the Report recommended81 that the Court might, if it was equitable and just to do so, require the minor to transfer to the supplier any of the property so passing or any property representing it. This recommendation would not prejudice any other remedy available to the supplier. The Commission’s revised proposal contained82 an important limitation: where the minor having sold the property, dissipated the proceeds of sale, the Court should have no power to make any order, as, for example, to pay to the seller a sum equivalent to the purchase price or the value of the property.
The Commission’s recommendations for legislation contained in its Report were designed not to apply to any contract entered into before they had been given legislative effect.83
The Commission in its Report abandoned several recommendations84 made in its Working Paper concerned with clarifications of doubtful parts and with minor improvements in the law. Having rejected a codification approach, it did not seem to the Commission that “in the absence of any need for these measures, and of any evidence that such an
81
Id., para. 4.23.
82
Id.
83
Id., para. 4.24.
84
Relating to:
(a)
the general rules of unenforceability or its effect;
(b)
the rules governing contracts of employment;
(c)
the rules applicable in restraint of trade;
(d)
the rules governing the reopening of executed contracts;
(e)
a rule which would abolish those contracts which are, at common law, binding until repudiated.
enactment would resolve any practical difficulties”,85 the case for legislation had not been made out.
The Commission in its Report also abandoned86 several proposals87 of a substantive nature made in the Working Paper. Although these proposals could have been proceeded with independently of codification and although the Commission remained of the opinion that the arguments put forward in the Working Paper were sound, it noted that the defects in the law which these proposals were designed to remedy “do not in practice give rise to the difficulties of which they might, in theory be the sources.”88
In the light of consultation, the Commission concluded89 that the best course would be to leave the existing law on necessaries unaltered. The concept of “necessities”, advanced in the Working Paper, had not found favour:
“It was argued that the introduction of a new concept so similar to the existing one would serve only to cause confusion. Few commentators saw any advantage in making the change; most thought it would do more harm than good.”90
The Commission expressed91 itself satisfied with its rejection, in the Working Paper, of a validation procedure
85
Para. 5.2 of the Report.
86
Id., para. 5.3.
87
Including proposals for a new exception to the general rule to meet the case where a minor seeks to enforce a contract; to enable a minor to obtain specific performance; to extend a lender’s right to repayment of a loan made for the purchase of necessaries; and to make a minor liable in tort for deceit in certain circumstances where he is not liable under existing law.
88
Para. 5.3 of the Report.
89
Id., para. 5.6.
90
Id.
91
Id., para. 5.8.
for minors’ contracts. On the specific question of validation of large transactions, which would be of particular economic significance, the Commission, after considered analysis, favoured92 no change in its earlier recommendations.
SCOTLAND
In June 1985, the Scottish Law Commission published its Consultative Memorandum No. 65, Legal Capacity and Reponsibility of Minors and Pupils. The Consultative Memorandum is a wide-ranging document, extending beyond the question of the contractual capacity of persons under age.
The preferred, provisional, option of the Commission is that the present two-tier law on the legal capacity of pupils and minors, with its divisions at the ages of 12 or 14 and 18, should be replaced by a single tier system based on the age of 16. Above that age, a person would have full contractual capacity without any special protections beyond those afforded by the general law applying to all persons. The Commission also consider that the doctrine of foris-familiation should be abolished, and that the rule of incapacity should not be subject to any exception entitling a person under 16 to act with the consent of a parent or guardian or, except possibly in relation to the making of a will, with the consent of a court.
So far as contracts made by persons under 16 are concerned, the Commission provisionally proposes that these should generally be void save for transactions commonly entered into by a child of the transacting child’s age. Where a transaction is void on the ground of minority, the Commission provisionally propose that the rights of parties to the transaction should be determined according to common law principles of unjust enrichment but that the court should be empowered to modify the obligation of the person under 16 to make restitution or recompense in a manner considered equitable in the circumstances.
The second option of the Commission, should the one-tier system based on the age of 16 not prove acceptable, is
92
Id.
a two-tier system, comprising age bands of 0–16 years and 16–18 years with the upper age group enjoying only limited protection. The Commission also mentions, but does not specifically endorse, even provisionally, the possibility of giving effect to other options, such as a one-tier system based on some age other than 16, or a revised two-tier system with the same age divisions for boys and girls, or even a three- or four-age band system.
NEW ZEALAND
In New Zealand, the age of majority is 20. On marrying below that age, a person acquires full contractual capacity. The law relating to minors’ contracts was codified and reformed by legislation in 1969,93 and has been the subject of minor revision on three occasions since then.94
Minors are divided into two classes: those under the age of eighteen years and those who have reached that age. Contracts made by a minor who has reached the age of eighteen years, as well as contracts of service and of insurance made by a minor of any age, have effect as if the minor were of full age.95 The Court has wide powers, however, to declare the contract unenforceable against the minor in whole or in part, making such order as to compensation or restitution of property as appears to it to be just, in cases where either the consideration for the minor’s promise “was so inadequate as to be unconscionable”
93
The Minors’ Contracts Act 1969, (1969, No. 41) analysed by Burrows, The Minors’ Contracts Act 1969, (N.Z.), 47 Austr. L. J. 657 (1973); see also the analysis provided by the Law Reform Commission of Western Australia in its Working Paper No. 2, Project No. 25: Legal Capacity of Minors, paras. 1.80–1.97 (1978). The earlier law in New Zealand was analysed by Adams, Contracts by Infants, [1952] N.Z.L.J. 92, 107.
94
The Minors’ Contracts Amendment Act 1970, (1970, No. 88), The Minors’ Contracts Amendment Act 1971, (1971, No. 111), and the Minors’ Contracts Amendment Act 1974, (1974, No. 107).
95
Section 5(1) of the 1969 Act.
or any provision in the contract imposing an obligation on a minor as “harsh or oppressive”.96
Contracts made by minors who have not reached the age of eighteen years are unenforceable against the minor but otherwise have effect as if he were of full age.97 The Court may, however, in its discretion, enforce such a contract against the minor either in whole or in part, making such order as to compensation or restitution of property as it thinks just, in a case where it finds that the contract was “fair and reasonable” at the time it was entered into.98 In exercising its discretion, the Court must have regard to –
(a)
The circumstances surrounding the making of the contract,
(b)
The subject-matter and nature of the contract,
(c)
In the case of a contract relating to property, the nature and value of the property,
(d)
The age and the means (if any) of the minor,
(e)
All other relevant circumstances.”99
Where the Court makes an order in respect of any contract by a minor, it may grant relief by way of compensation or restitution of property not only to any party to the contract, but also to a guarantor or indemnifier of the contract100 or any person claiming through, under or on behalf of that party, guarantor or indemnifier.101 A guarantee or indemnity is enforceable by the creditor
96
Id., section 5(2).
97
Id., section 6(1).
98
Id, section 6(2) (as amended by the Minors’ Contracts Amendment Act 1971).
99
Section 6(3) of the 1969 Act.
100
Id., section 7(1)(b).
101
Id., section 7(1)(c).
against the surety.102 A minor may enter a binding contract with the approval of the Magistrate’s Court.103 Although the rule of law that a minor is not liable in tort for procuring a contract by fraudulent misrepresentation as to his age is not affected by legislation,104 the Court may take any such representation into account in deciding whether to exercise any of its powers with respect to compensation and restitution.105
NEW SOUTH WALES
In 1970, following the publication by the Law Reform Commission of New South Wales in 1969 of its Report on Infancy in Relation to Contracts and Property,106 the Parliament of New South Wales enacted the Minors (Property and Contracts) Act 1970.107 The Act is a complex and comprehensive codification of the law relating to the civil capacity of minors. It assimilates the concept of contract into the larger concept of the “civil act”, defined so as to include all types of contracts and other dispositions of property other than those of a testamentary nature.108
102
Id., section 101.
103
Id., section 9, as amended by the Minors’ Contracts Amendment Act 1970, section 2 (1970, No. 88).
104
Supra, fn. 93, section 15(4).
105
Id.
106
L.R.C. 9 (1969), analysed by Pearce, Reform of the Law of Infancy, 44 Australia L.J. 269 (1970).
107
The Act is comprehensively analysed in Harland, passim, and by Harland, The Contractual Capacity of Minors – A New Approach, Sydney L. Rev. 41 (1970). See also Harris and Zuckermann, Contract, in H. Wade ed., Annual Survey of Commonwealth Law, 1971, ch. 20, at 632–633 (1972). A useful critical analysis is provided in the Law Reform Commission of Western Australia, Working Paper No. 2, Project No. 25: Legal Capacity of Minors, paras 1.51–1.79 (1978).
108
Section 6(1) and (2). The concept of “civil act” is inspired by that of the “acte juridique” of French law and that of “Rechtsgeschaft” of German law: see Harland, 28.