The majority considered that this proposal was fair to both the adult and the minor. So far as the adult was concerned:
“It is true that he must take a decision as to whether the contract is fair and that he must consider the possibility that a court may disagree with him, but in most cases the difficulty will be more apparent than real. A contract for food, clothing or shelter at the going price would usually appear to be fair and reasonable in the interest of the minor and the circumstances would not usually suggest the need for inquiry. However, if the contract is for an expensive fur coat or automobile, the adult party would have a heavy burden of inquiry. Even if the adult party is mistaken as to the fairness of the contract he can expect the court to exercise its discretionary powers to do justice between himself and the minor. Nor will he suffer if the minor is allowed to escape from a contract which is apparently fair and reasonable but actually improvident if the minor must restore him to his original position or to an equivalent position.”30
The majority considered the proposal to be fair to minors because, in their view it was:
29
Id., pp. 32–33.
30
Id., p. 31.
“in the interests of minors that they be allowed to make fair and reasonable contracts. If the contract is fair and reasonable a minor should not be heard to complain about carrying it out. While there may be some cases in which a minor is bound by a contract which, because of circumstances unknown to the adult party, is not fair and reasonable in the interest of the minor, such cases should be rare. Their importance (particularly since the minor will not be bound unless the contract is fair and reasonable in itself) is outweighed by the importance to minors of enabling adult parties to deal with them in the much more common cases in which the appearance of fairness corresponds with the facts.”31
The approach favoured by the majority was rejected by the minority of the Alberta Institute on the basis that paragraph (1) “would increase uncertainty and complexity without commensurate advantage”,32 and that paragraph (2) “would add to the complication of the law while giving little relief to the minor.”33
The Law Reform Commission of British Columbia agreed with the minority of the Alberta Institute. They said:
“While we are entirely sympathetic to the aim of the Alberta majority, which is to encourage adults to contract with minors, we are in some doubt that the proposal will in fact do this. For the adult party to be secure, the contract must not only be fair and reasonable in itself, but must also be fair and reasonable in the circumstances of the individual minor. In making his assessment the adult must have regard not only to the facts known to him, but also to facts which should have been known to him. This places on the adult a burden of inquiry which it will be difficult for him to know that he has discharged. But even if the adult does discharge the burden to his and a court’s satisfaction, the contract is still subject to upset by virtue of the second part of the proposal. It seems to us, therefore, that the net
31
Id., pp. 31–32.
32
Id., p. 33.
33
Id.
result of the proposals will be to create around the law of minors’ contracts an atmosphere of uneasiness that will lead adult parties to the general belief that it is better not to contract with minors at all, unless there is some more certain means of assessing the consequences.”34
We must now look briefly at the solution adopted by the New Zealand legislation, since it combines elements of the qualified enforceability approach with those of the restitutionary approach, which we will discuss in greater detail below.35
Under New Zealand law a contract made by a minor of eighteen or over, or a contract of service36 or for life insurance made by a minor of any age, will have effect as if the minor were of full age.37 Where, however, the court is of the opinion that the consideration for the minor’s promise to act is unconscionable or that a provision of the contract imposes an obligation on the minor which is, at the time, harsh or oppressive, it has a wide discretion to cancel the contract or declare it unenforceable in whole or in part.38
Some aspects of these provisions have been criticised. It has been suggested, on the one hand, that the grounds on
34
Law Reform Commission of British Columbia’s Report on Minors’ Contracts, p. 47 (1976).
35
Infra, pp. 103ff.
36
The scope of a “contract of service” as defined in the Act may be different from a contract of service that binds a minor at common law; most significantly, it would extend to contracts of service that are not beneficial for the minor: cf. the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.82 (1978).
37
Minors’ Contracts Act 1969, section 5(1).
38
Id, section 5(2). The precise scope of the Court’s powers is not clear: see Burrows, The Minors’ Contracts Act 1969 (New Zealand), 47 Aust. L. J. 657, at 659–660 (1973), the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, paras. 1.81, 1.83 (1978).
which a court may upset a contract are too narrow.39 For example, it is not clear whether a contract with a harsh or oppressive exemption clause would be included, since an exemption clause does not impose an obligation on the minor.40
On the other hand it has been pointed out that the court’s power to order compensation or restitution extends to making orders for the transfer of property and there would appear to be nothing to prevent the title of an innocent party being upset.41
We have already indicated42 that in New Zealand a contract made by a minor under eighteen, other than for life insurance or a contract of service, is unenforceable against a minor.43 In all other respects the contract has full effect as if the minor were an adult.44 Where, however, a court, on application to it, finds that the contract was
39
Cf. Burrows, The Minors’ Contracts Act 1969 (New Zealand), 49 Austr. L. J. 657, at 658 (1973).
40
Cf. the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.83 (1978).
41
Cf. the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.86 (1978). It has been suggested by one commentator that:
“Presumably such a disruption of security of title would be resorted to only in an exceptional case.” Burrows, The Minors’ Contracts Act 1969 (New Zealand), 47 Austr. L. J. 657, at 659 (1973).
The Law Reform Commission of Western Australia (W.P. No. 2, para. 1.86) note that it:
“Would also appear unlikely that an order would be made unless the third party could otherwise be compensated.”
42
Supra, p. 58.
43
Minors’ Contracts Ac 1969, section 6(1).
44
Id.
fair and reasonable when it was entered into, it may enforce it or declare it to be binding in whole or part.45 If the court finds that the contract was not fair and reasonable, it may cancel the contract, make an order entitling the minor on conditions to cancel the contract or, at its discretion, make no order.46
In exercising its discretion the court may take into account the circumstances surrounding the making of the contract, the subject matter and nature of the contract, the nature and value of the property, the age and means of the minor, the question whether the contract was procured by a fraudulent misrepresentation by the minor, and all other relevent circumstances.47
The court may also grant an order for compensation or restitution, and in contrast to cases where it is dealing with a contract that is prima facie binding, such orders do not depend on any order being made as to the enforcement of the contract.48
The Law Reform Commission of Western Australia observes that:
“it is interesting to note that as a result of these provisions minors under eighteen years of age in New Zealand have greater protection than they had at common law. They are no longer bound by contracts even for necessaries unless the court so orders. The common law right of the minor to bind the adult party to the contract, however, is retained. This must give rise to considerable uncertainty as to such contracts from an adult’s point of view, although the court’s wide
45
Id., section 6(2).
46
Id., section 6(2)(f).
47
Id., section 6(3), 15(4).
48
Id., section 7(1). See also the Law Reform Commission of Western Australia’s Working Paper No. 2, Project No. 25: Legal Capacity of Minors, para. 1.90 (1978).
powers to grant relief will hopefully prevent him from being out of pocket ….49
Our Conclusions
We support the policy goal of the principle of qualified enforceability, which seeks to impose contractual responsibility on minors to the extent that it would be fair to do so, but no further. We share with some other law reform agencies and commentators, however, the apprehension that in its practical operation the principle of qualified enforceability involves such uncertainties as to render nugatory much of its theoretical attraction. We have considerable sympathy with the Law Reform Commission of British Columbia who came, reluctantly, to the conclusion, after analysis of earlier schemes of qualified enforceability in other jurisdictions, that:
“any attempt to compromise based on the adult’s ability to prejudge the inherent fairness or benefit of contract, and the probability of a court’s reinforcing that judgment, will have no more encouraging effect on the adult than if the law simply provided that contracts against minors are unenforceable against him.50”
In our view, a general principle of qualified enforceability would not improve the law to such a degree that we should recommend its introduction. A party contracting with a minor could have no certainty as to whether the contract would be fully enforceable, or whether restitution would be ordered. It is true, of course, that nothing is certain in this world and that even contracts between adults have a degree of uncertainty – they may be void, voidable or unenforceable on account of mistake, misrepresentation or illegality, for example – yet no one would suggest on this account that the general principle of enforceability of contracts should be set aside. In the case of minors’
49
Law Reform Commission of Western Australia’s Working Paper NO. 2, Project No. 25: Legal Capacity of Minors, para. 1.91 (1978).
50
Law Reform Commission of British Columbia’s Report on Minors’ Contracts, p. 48 (1976).
contracts, however, a principle of qualified enforceability would involve a greater degree of uncertainty. It is reasonable to predict that, after a period of time in operation, with the establishment of a body of judicial precedents, the qualified enforceability principle would acquire some elements of predictability; but it would be unwise to place too much reliance on this development. We have seen how, more than a century since the enactment of the Infants Relief Act 1874, many questions concerning its central provisions have not yet been resolved by the courts.
Although we do not recommend the introduction of a general principle of qualified enforceability, this does not mean that we also reject the possibility that, as a qualification to a general principle of unenforceability, certain specific categories of contract may be enforceable in at least some circumstances. We will be examining this possibility below.51
Option 6: Reduction of the Age for Contractual Capacity
We must now consider the argument that the age for contractual capacity should be reduced. As we have noted already,52 the Age of Majority Act 1985, which came into operation on 1 March 1985 provides, in section 2(1) that the age of majority is reduced from twenty-one years to eighteen years or the age of marriage, whichever is the lower. Contractual capacity is reduced accordingly. We do not wish to reopen consideration of the question whether the age of majority, and of contractual capacity should have been reduced from twenty-one or whether a person should attain full age on marrying. It may be argued however, that the minimum age for contractual capacity should be reduced still further – to fourteen, fifteen, sixteen or seventeen years, perhaps, or to an unspecified age, contingent on the particular circumstances and degree of maturity of the particular minor. We must give this argument serious consideration. The English Law Commission, in its Working
51
Infra, pp. 115ff.
52
Supra, p. 2.
Paper on Minors’ Contracts, published in 1982, proposed53 that the age of full contractual capacity be reduced to sixteen. They made this proposal as an alternative to their proposals to reform the law within the existing age framework.
The English Law Commission argued in favour of the proposal as follows:
“It seems to us that minors of 16 and over do not necessarily need the same degree of protection as those below that age. Secondly, protection for the minor may be provided by the law in general and not necessarily by special rules relating to minors. Indeed, the very concept of a law of minors’ contracts to some extent begs the question: special rules are needed only insofar as the required degree of protection is not provided by the general law. We think it arguable that the protection afforded to consumers by the general law is adequate to meet the needs of minors aged 16 and over. Finally, none of these issues can be judged in a vacuum. The needs of minors, and the level at which the law must supply them, depend on the social and economic circumstances under which minors must live. We think it arguable that looked at in this light the present law of minors’ contracts protects older minors to a degree greater than they really require.”54
The English Law Commission favoured the age of sixteen as the time at which full contractual capacity should arise because “society, as a practical matter, already recognises
53
English Law Commission’s Working Paper No. 81, Minors’ Contracts, Part XII (1982). The Commission noted (in para. 1.12) that its proposal to reduce the age of contractual capacity to sixteen raised “issues which go beyond detailed law reform” and were primarily social rather than legal. They therefore made no formal recommendation concerning the proposal but stated that they would welcome readers’ views. The Scottish Law Commission, in its Consultative Memorandum No. 65, Legal Capacity and Responsibility of Minors and Pupils, para. 5.15 (1985) has provisionally proposed that a person should have full contractual capacity on reaching sixteen.
54
Id., para. 12.2.
to some extent”55 this age as the dividing line for several important matters: in England at sixteen, compulsory schooling ends; a minor may enter the labour market; the parental obligation to maintain the minor comes to an end; the minor becomes eligible to claim social security benefits; he or she may marry (with parental consent) and may legally consent to sexual relations; he or she may independently acquire a domicile of choice.
While there are other dividing lines both above and below the age of sixteen, the English Law Commission considered that distinctions based on the age of sixteen correspond to “an important social reality”,56 namely that at that age a minor
“is probably in practice making many of his own decisions and the decision he makes may to a considerable extent determine the future course of his life. He may need advice and assistance, and will no doubt continue to receive it after 16 as before, but at this age he, and not his parents or his teachers, or, if he is at work, his employers, or his adult acquaintances, will be deciding what he is to do and to become. At this age most minors do in fact leave school and begin to make their own way in the world. We think that it is arguable that among the decisions which a 16-year-old minor is fully capable of taking are on what he shall spend his money and what obligations he shall incur. These considerations give some support to the argument that young people of 16 should be given full contractual capacity.”57
In its Report58 on the subject, published in June 1984, the English Law Commission abandoned their provisional proposal that the age of contractual capacity should be reduced to sixteen years. They did so in the light of the mixed reception it had been given by those whom they had consulted. They concluded:
55
Id., para. 12.5.
56
Id.
57
Id.
58
Id.
“It is plain that [this p]roposal would be controversial and would arouse considerable opposition. It is also plain that there is not sufficient support for it to justify its adoption in the face of the objections that have been, and would again be, raised. Although, therefore, we still see merit in the proposal and although we still doubt whether it would, in practice, have the harmful consequences that some fear, we do not propose to take it any further.”59
We have quoted in some detail from the English Law Commission’s argument on this matter so as to indicate the full force of the proposal to reduce the age of contractual capacity to sixteen years. Having closely examined the proposal, however, we are not convinced by it. Of course there are some minors of sixteen – and, indeed, of fifteen or younger – who have a high degree of maturity and sophistication. But we do not consider that it can be said with complete confidence that minors of sixteen and seventeen, as a group, have sufficient maturity and experience to justify the removal of an important legal protection, especially when the removal of that protection would confer no substantial benefit in practice on either the minor or the party with whom he or she is contracting. We do not consider that the reduction of the age of contractual capacity to sixteen would lead to widespread injustice, since the general principles of contract law could be called in aid in many cases of inequitable conduct,60 but we simply are not convinced that such a change would generally improve the law for either party to a contract in which a minor participates.
Option 7: The Restitutionary Approach
Under the restitutionary approach, a contract made by a minor would be enforceable by him against the adult party but would be unenforceable by the adult against the minor.
59
Id.
60
We have recognised this already, supra, pp. 87–88, when considering the more radical, but not dissimilar, proposal that there should be no specific minimum age for contractual capacity. See also the Scottish Law Commission’s Consultative Memorandum No. 65, Legal Capacity and Responsibility of Minors and Pupils, paras. 5.13–5.14 (1985).
The adult in such a case would not necessarily be deprived of all rights of recovery against the minor: the adult would be entitled to apply to the court for compensation from the minor based on restitutionary rather than contractual principles. It will be recalled that in England the Latey Committee in 1967 proposed:
(a)
that where [a minor] receives money, property or services under a contract which he fails to perform he should be liable to account to the other party for the benefits he has received; and
(b)
“that the court should be empowered to relieve the [minor] from this liability to account to such extent as it thinks fit.”61
The Latey Committee also recommended62 that where a minor had transferred money or property to an adult he should be entitled to repudiate the contract and recover the money or property, but that, in such circumstances, the minor should be liable to account to the adult for any benefit he had received under the contract up to the time of repudiation.
On the same general lines, the Law Reform Commission of British Columbia recommended in 1976 that legislation be enacted along the following lines:
3.
If a contract is unenforceable against a minor because of his minority an action for relief ought to be able to be brought:
(a)
by the minor; and
(b)
after the minor has repudiated the contract by an adult party.
4.
In any action brought as a result of any enactment of the preceding recommendation the Court ought to be able to:
61
Report on the Committee on the Age of Majority, para. 309 (Cmnd. 3342, 1967).
62
Id., para. 310.
(a)
grant to any party such relief by way of compensation or restitution of property or both as is just; and
(b)
upon doing so ought to be able to discharge the parties from further obligation under the contract?
provided that no grant of relief should enable the party contracting with a minor to recover more than is necessary to restore him to the position in which he found himself before entering the contract.
5.
In making any order under an enactment of the preceding recommendation, the Court ought to 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 the property, the nature and value of the property;
(d)
the age and the means (if any) of the minor; and
(e)
all other relevant circumstances.”63
The restitutionary approach has been perceived by some lawyers as having several advantages. First, it will provide some degree of encouragement for adults to provide goods or services for minors. Although the adult will lose the chance of a profit in a case where the minor repudiates the contract, he will have a reasonable prospect of being restored (in part or in full) to the position he would have been in had he not made the contract.64 It may be argued that, for responsible adults contemplating a contract with a minor, the prospect of a fair system of restitution will be a sufficient incentive to them to enter the contract,