Very briefly, the Act provides that a contract is binding109 on a minor if it is for his benefit, unless at the time he made it he lacked, by reason of his youth, the understanding necessary for participating in it.110. Otherwise the contract will not bind the minor unless he affirms it after majority111 or does not repudiate it before he reaches the age of nineteen years.112 The Court may, however, affirm a contract113 whereupon it will bind the minor, or approve of a particular contract,114 or grant him capacity to enter into a particular contract, certain types of contract, or all contracts.115 Before taking such a step, the Court must consider that to do so would be for the benefit of the minor.
A disposition of property to a minor is binding unless consideration is manifestly excessive116 and a disposition by a minor is binding unless the consideration is manifestly inadequate.117 If an independent solicitor or the Public Trustee certifies that a minor makes a disposition of property, understanding its effect and doing so “freely and voluntarily”, the consideration not being manifestly inadequate, the disposition will bind the minor.118
109
The expression “presumptively binding” is used in the Act but it is clear from section 6(3) that what this means is that the Act will bind the minor to the full extent that it would if he were an adult; i.e., such defences as fraud, illegality or mental incapacity remain available in appropriate cases: see Harland, 32.
110
Sections 18, 19.
111
Section 30(1).
112
Section 31.
113
Section 30(2).
114
Section 27.
115
Section 26.
116
Section 20(2).
117
Section 20(1).
118
Sections 28, 29.
A minor may appoint an agent by power of attorney or otherwise.119 A guarantor of an obligation of a minor is bound by the guarantee to the extent to which he would be bound if the minor were not a minor.120 A minor is liable for a tort whether or not it is connected with a contract or the cause of action for the tort is in substance a cause of action in contract.121
The Act has provoked differing responses from those commenting on it. Professor Harland, in his treatise on the Act, stated that he considered it represented “an imaginative and workable approach towards the problems arising in respect of contracts and other civil acts entered into by minors”,122 although he criticised123 a few aspects of the Act.
The Institute of Law Research and Reform of Alberta in its Report, entitled Minors’ Contracts,124 in 1975, said of the New South Wales legislation that it:
“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 the contract is for the benefit of the minor so as to be binding, a
119
Section 46(1) (a).
120
Section 47.
121
Section 48.
122
Harland, 212.
123
The power given to a solicitor or the Public Trustee to certify that the minor gives his consent to a disposition “freely and voluntarily” was criticised by Professor Harland (id., 210) on the basis that, in cases of doubt, the matter should be determined by a court. The provisions regarding “presumptively binding” dispositions, especially their operation when the contract on which a disposition is based has been repudiated, were considered unclear by Professor Harland (id., 147–149, 209–210).
124
Report No. 14.
problem comparable to that of determining whether or not goods are necessaries. The court will face the same problem.”125
The Law Reform Commission of British Columbia, in its Working Paper on Minors’ Contracts126 in 1976, stated that it agreed with this analysis of the New South Wales legislation. It continued:
“The principal object of the 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.”127
VICTORIA
The Chief Justice’s Law Reform Committee of Victoria published a short Report on Infancy in Relation to Contracts and Property in 1970. Having recommended that the age of majority be reduced from 21 to 18, the Committee discussed the Latey Report and the New South Wales Law Reform Commission’s proposals for reform.
The Committee preferred the New South Wales approach, “drastic and novel though no doubt it is”.128 The only criticism it made of this approach was that it might “enable an infant to run into debt in acquiring luxury
125
Id., at 26–27.
126
Working Paper No. 16.
127
Id., at 38.
128
Para. 17 of the Report.
commodities”.129 The Committee considered130 that this could be rectified by amending section 21(2) of the draft Bill contained in the New South Wales Law Reform Commission’s Report so that it would apply only where the consideration had been fully paid by the minor.
SOUTH AUSTRALIA
The subject of the contractual capacity of minors was examined by the Law Reform Committee of South Australia in a report131 published in 1977. The Committee was unanimously of the view132 that the general principle should be that contracts should not be enforceable against minors, and that the laws should continue to protect minors against exploitation by others and their own immaturity. It unanimously rejected the proposal that there should be different age groups with different rules applying to them, on the basis that this “would simply produce further and undesirable complexity in the law”.133 It equally rejected the proposal that full contractual capacity should be given to married minors, since this “might work as an incentive to hasty and early marriage”.134 Finally, the Committee unanimously rejected the New Zealand 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”.135
At this point in the Report the Committee’s recommendations ceased to be unanimous. A majority of the Committee considered that there should be no change in the general approach to the law. The majority was:
129
Id., para. 21.
130
Id.
131
Forty-First Report of the Law Reform Committee of South Australia Relating to the Contractual Capacity of Infants (1977).
132
Id., p. 6.
133
Id.
134
Id.
135
Id.
“impressed by the fact that for all its seeming complexity the law has caused little difficulty in practice for many years, and such difficulties as did arise …. as well as most of those that may have arisen in the case of youthful traders, have been adequately dealt with by the reduction in the age of majority to eighteen. Consultations with the senior personnel of the Supreme Court, the Local Court, the Industrial Court, the Credit Tribunal and the Prices and Consumer Affairs Branch revealed that none have encountered problems in this area for many years.”136
The majority also noted that the English Law Commission had encountered “grave difficulties”137 in proceeding to practical methods of implementing the Latey proposals.
The minority of the Committee, on the other hand, would have preferred to recommend the adoption of a scheme based on the proposals of the Latey Committee. The combination of the reduction in the age of majority and the fact that it was “doubtful whether the existence of categories as ill devised as those of necessaries and beneficial contracts of service does in fact encourage adults to enter into contracts within them with infants”138 led the minority to believe that they had become “a useless complexity in the law”.139
Returning to a position of unanimity, the Committee recommended the abolition of the distinction between contracts that may be affirmed on attaining majority and contracts that are binding unless repudiated within a reasonable time after the attainment of majority.
The Committee could “see no good reason”140 for the retention of the distinction, and proposed141 that all
136
Id.
137
Id.
138
Id.
139
Id.
140
Id.
141
Id.
contracts other than those for necessaries or of service should require subsequent ratification in writing.
On the question of guarantees, the Committee recommended142 that the fact that the principal contracting party was a minor should not of itself protect an adult guarantor; the Committee considered it “unsatisfactory that the conjoint effect of the technicalities of the common law of infancy and of guarantee renders the undertaking of the adult guarantor nugatory”.143
The Committee also recommended144 the establishment of machinery (similar to that in New South Wales and New Zealand) by which a minor might enter into binding contracts and dispositions with the prior sanction of the Court. The Committee commented:
“It is unlikely that recourse to such a provision [will be] frequent, but there may be circumstances in which such a power in the Court would be useful.”145
The final recommendation of the Committee was inspired by their distaste for the rule denying the restoration of property transferred to a minor who may have obtained only “trivial benefits from a very partial performance of the contract by the adult party”146 when the minor avoids the contract. The majority of the Committee recommended that a discretion be granted to the Court to enable it to order restitution of some or all of the property provided by the infant when a contract is properly avoided.
ONTARIO
The Ontario Law Reform Commission considered the law
142
Id., p. 8
143
Id.
144
Id.
145
Id.
146
Id.
relating to minors’ contracts in its Report on the Age of Majority and Related Matters,147 published in 1969. The Report made no recommendations as to changes in the law, confining itself to a criticial analysis of the proposals of the Latey Committee in its Report148 and to a general discussion of social and legal policy on the subject. The Report stated that
“[t]he studies of the Commission should continue and a further report [should be] made at a future date. There are a number of reasons for not making recommendations now. If the age of majority is lowered,149 it would be salutary to observe how the law of infants’ contracts works in respect of those under the reduced age. In particular, a study should be made of credit granting practices and collection procedures if meaningful proposals for change are to be made. If American commercial experience is followed here, as seems likely, then there will be an expansion of credit granting in the next few years to those in their mid-teens.”150
The Commission, having set out151 in detail the recommendations of the Latey Committee regarding minors’ contracts, proceeded to discuss a “number of problems”152 arising out of these proposals.
The first question was whether the proposals went too far in attempting to be fair to an adult dealing with a minor since, in the Commission’s view, the introduction of a
147
Ontario Law Reform Commission, Report on the Age of Majority and Related Matters (1969).
148
Report of the Committee on the Age of Majority (the “Latey Committee”) (Cmn. 3342, 1967).
149
Cf. the Age of Majority Act 1971 (Ont.) c. 98, which reduced the age of majority to 18 years.
150
Supra, fn. 147, p. 53.
151
Id., pp. 47–50.
152
Id., p. 50.
discretionary judicial restitutionary system would cause “the whole emphasis on protection [to] shift.”153
The Report stated:
“The present law is largely based on the assumption that an infant does not have the maturity and experience which would enable him to enter into contracts with the judgment of an older person. The law protects the infant by saying that (with exceptions) he is incapable of entering into a contract that will bind him. Persons who deal with him do so at their own risk.
What is the justification for a change from this position? Simply to protect persons dealing with infants. If the age of contractual capacity is reduced to eighteen, should those who contract with children under that age receive the protection the Latey Report contemplates?”154
The Commission considered that it would be “an entirely different matter”155 to require a minor to account for a benefit he retained, but not in cases where he had disposed of the article in question and had spent the proceeds or where it had been destroyed. Whilst appearing to view this distinction with some favour, the Commission admitted that it would involve “other problems”:156 it stated:
“Firstly, the extent to which tracing should operate would have to be considered …. Tracing can be a very complicated matter. Secondly, if the minor knows that he is only going to be responsible for any benefit he retains, then he may be tempted to dissipate it if he learns the other party is about to make him account for it. Thirdly, it would become essential to revive
153
Id.
154
Id.
155
Id., p. 51.
156
Id.
the classification of necessaries and perhaps that of contracts that are valid until repudiated.”157
The second problem regarding the Latey Committee’s proposals was that of the wide discretion involved in its recommendations.
In the Commission’s view,
“[t]his may cause uncertainty in a number of ways. Firstly, there will be uncertainty as to when it will be exercised and this is likely to lead to litigation in situations where there is doubt and the expense seems justified. Secondly, because subjective values will be significant, different judges will have varying views on where the discretion should be exercised. One judge may feel that the age of an infant, say 14, should of itself be sufficient to relieve him from lilability. Another judge may think not. Much may depend on their philosophy as to whether or not an infant should be accountable.
Furthermore, as many infant contract situations involve amounts that are not worth litigating, the parties should be able to settle their disputes on the basis of a few definite and easily understood rules without having to take court proceedings.
Finally, if there is to be an exercise of judicial discretion, would there not be some standards as to how it should be exercised?”158
The third problem concerning the Latey Committee Report that the Commission perceived was in regard to the Committee’s opposition to allowing a minor to resile from a fully executed contract.
The Commission stated:
“[T]he Report gives no reason why an infant should not
157
Id.
158
Id., 51–52.
be able to avoid a contract and obtain the return of the consideration he has parted with (assuming that he will restore the consideration he received). This raises the question of why an infant should lose protection merely because the contract is performed. The law seeks to protect him from his lack of judgment. Why should the law make an exception because he, for example, paid cash and received the goods purchased?”159
As a general comment on the Latey Committee’s Report, the Commission admitted to being
“not convinced that the main thrust of [its] proposals, to impose on infants a liability to account for benefits received, is the best solution. Nor would the imposition of liabililty to account only where a benefit is retained be likely to achieve practical results.”160
The Commission stated that its “primary concern”161 had been to consider what would be suitable law for persons aged seventeen or less. It commented that,
“[g]enerally-speaking, the present law gives satisfactory protection to this group.”162
The Commission expressed its general philosophy on the subject as follows:
“It would, of course, be possible to prohibit altogether transactions with minors but such a law would be totally unrealistic. Rules as to minors’ contracts must take into account the economic realities of modern life. Vast numbers of contracts are entered into every day by the young. Nearly all of these
159
Id., p. 52.
160
Id., p. 53.
161
Id.
162
Id.
involve purchases, ranging from bubble gum to motor cars. Purchasing power in the hands of the young will continue to increase as our society becomes more affluent. On the other hand, it might well be advisable to consider whether certain kinds of transactions should be permitted or regulated, such as the granting of credit or sales of motor cars163.”164
The final comment of substance on the subject made by the Commission was as follows:
“Where it now gives protection to minors, the present law puts the person dealing with them to some extent in a position of risk. If proper protection is to be given to minors such a result is inevitable. Nearly all infants’ contracts are with commercial concerns, who are well aware of the risk involved. The risk does not, of course, now arise with cash transactions. Practically speaking, it only arises in credit situations where significant amounts are involved. The person dealing with the infant can protect himself, if he wises to, by selling under a conditional sales contract where durable goods are being purchased, or by insisting that an adult co-sign the contract or sign an indemnification agreement.”165
The Commission stated that it would continue to keep the law relating to minors’ contracts under review, adding that its final recommendations would best be made
“in the light of any legislation that may be passed following this Report and the commercial experience resulting therefrom.”166
163
In this context, the Commission referred to the Report of the Ontario Legislature’s Select Committee on Youth (1967), which (at p. 283) had recommended that no person under sixteen years should be allowed to purchase a motor vehicle.
164
Supra, fn. 147, p. 53.
165
Id., p. 54.
166
Id.