Contracting with Minors – is it even possible?

In the innovation economy it is becoming more prevalent for individuals aged less than eighteen (18) years (Minors) to seek to build enterprises.  From time to time we are asked to consider whether a client can contract with a Minor.

The law in Australia^[1] and Queensland^[2] states that a Minor is someone who has yet to reach the age of majority, (being eighteen (18) years).  In Australia, at common law and in statute, the general rule is that a contract with a Minor is void except in limited circumstances.^[3]

The exceptions to this general rule are:

• contracts for necessities; and
• contracts for employment.

Contracts that are prejudicial to Minors are generally void,^[4] however they hold a privilege to be able to enforce the rights created by a contract against the other party.^[5]  Other contracts that are not for necessities will either need to be affirmed^[6] or avoided^[7] by the Minor within a reasonable time of reaching the age of majority, depending on the form of the contract^[8].

Contract for necessities

A contract for the sale and delivery of goods and services that are deemed necessities of life will bind the Minor in all Australian jurisdictions except New South Wales,^[9] confirming yet again, that New South Wales is different!

Necessities are defined as goods or services^[10] necessary for a Minor’s existing way of life, such as:

• accommodation;
• food;
• clothing;
• medicine;
• education; and
• instruction, (including music lessons and sports couching).^[11]

Necessities are not limited to bare essentials^[12] and are determined in the context of what would be normal for the Minor to maintain their existing lifestyle, at the time that the contract was entered into.^[13]

It is essential that the necessities are in fact necessary for the Minor and not merely capable of being necessities, which is where the expertise of a technology lawyer can provide valuable guidance. If the Minor is already in a position where they are adequately supplied with similar goods and services, it is unlikely that the goods and services will be considered necessary.^[14]

The precise meaning of what amounts to a necessity is peculiar to each case and has been the subject of judicial interpretation since the beginning of time!

Contracts of employment

A beneficial contract of employment with a Minor, (provided that it is fair and not oppressive), will be binding^[15] unless repudiated by the Minor when they reach the age of majority.

The contract with the Minor will be viewed as a whole, so that a contract that provides some benefit for the minor will not be upheld on that basis alone.  Likewise, a contract that contains clauses deemed not for the benefit of the Minor, (provided they are usual to that type of contract, (such as restraint of trade clauses)),^[17] will not deem the contract void.

If however the oppressive clauses would make the employment contract as a whole not for the benefit of the Minor, the contact will be void.

Minors avoiding contracts

Contracts in respect of the permanent acquisition of land or ongoing legal obligations will be enforceable unless avoided^[19] by the Minor during Minority or within a reasonable time after obtaining the age of majority.^[20]

This includes contracts for:

• the acquiring of interest in land or an estate;^[21]
• the purchasing of shares;^[22]
• contracts for marriage settlements;^[23]
• contracts for the purchase of the goodwill of a business;^[24] and
• the contracts of Minors to join a partnership.^[25]

In Hamilton v Lethbridge,^[26] the liberal view was taken that under any contract in which there are continuing rights and duties to which the Minor has taken a benefit, would remain enforceable unless repudiated by the former Minor.

Repudiation has been held to amount to unequivocal words or conduct which often takes the form of an assertion that there was a lack of capacity when steps are taken to enforce the contract.^[27]  If the Minor fails to do this, the contract is generally^[28] said to be confirmed and the former Minor is bound to the terms entered before they reached the age of majority.^[29]

Minors affirming contracts

All other contracts that are not for necessities, employment, the acquisition of land or ongoing legal obligations, will be voidable unless affirmed by the Minor either while still a Minor (by a fresh agreement), or after acquiring the age of majority.^[30]  Further, if the contract is deemed prejudicial to the Minor, in that they will obtain no benefit from it, steps taken by the Minor to affirm the contract will be ineffective.^[31]  In order to affirm the contract a positive step must be taken to do so.^[32]

Affirmation varies in different states from the requirement to be in writing and signed by the person once at the age of majority in the Australian Capital Territory, New South Wales and Queensland,^[33] or by a fresh promise to perform whilst still a Minority.^[34]  In South Australia the contract must be affirmed in writing.^[35]  In Victoria contracts of debt will be void regardless of whether the contract is affirmed in writing or not,^[36] and a fresh promise will need to be made for any other commercial contract made whilst still a Minor for it to be capable of enforcement.^[37]

 Enforcing Contracts with Minors

 If you are entering into a contract with a Minor that is commercial in nature and not a contract for necessities or beneficial services, the contract and your rights will generally not be enforceable if the Minor chooses to renege on the agreement.  To safe guard yourself in these circumstances you could consider obtaining the signature of a guarantor on behalf of the Minor when entering into the agreement.^[38]  If the Minor reneges on the contract, you may not have enforceable rights against them but you will have enforceable rights against the guarantor.^[39]

Minors and copyright

Ownership

When an author, (regardless of whether they are an adult or a child), produces original literary, dramatic, musical or artistic works it will be subject to copyright.^[40]  Copyright is in addition to the non-economic moral rights of authorship,^[41] attribution of authorship and the right to not have work falsely attributed.^[42] Copyrights are the exclusive economic rights to copy, publish, communicate and publicly perform the original work.^[43]

Moral rights

Copyright can be assigned,^[44] however the moral rights will always subsist with the original author of the works under most circumstances.^[45]

When a Minor assigns their copyright to another party, the contract will need to be affirmed upon reaching the age of majority to have legal weight.^[46]  When the assignor is a Minor, a guarantor will need to enter into the contract with them, so that if the Minor does not uphold their end of the bargain, there will be enforceable legal rights against the guarantor^[47].

Therefore particular care needs to be taken when contracting with Minors who are promoters of early stage ventures that involve the Minor creating works in which copyright subsists.

Links and further references

Legislation

Sale of Goods Act 1954 (ACT)

Sale of Goods Act 1972 (NT)

Sale of Goods Act 1896  (QLD)

Sale of Goods Act 1895 (SA)

Sale of Goods Act 1896 (TAS)

Goods Act 1958 (VIC)

Sale of Goods Act 1895 (WA)

Copyright Act 1968 (Cth)

Further information about contracting with minors

Note that Dundas Lawyers is a commercial law firm that only acts for businesses.   We do not act for individuals who have personal legal issues.

If you need advice on copyright or contracting with minors contact us for a confidential and obligation free and discussion:

Disclaimer

This article contains general commentary only.  You should not rely on the commentary as legal advice.  Specific legal advice should be obtained to ascertain how the law applies to your particular circumstances.

[1]  Age of Majority Act 1974 (ACT); Age of Majority Act 1974 (NT); Minors (Property and Contracts) Act 1970 (NSW); Law Reform Act 1995, (QLD), s 17; Age of Majority (Reduction) Act 1971(SA); Age of Majority Act 1973 (TAS); Age of Majority Act 1977 (VIC); & Age of Majority Act 1972 (WA).

[2]  Law Reform Act 1995 (Qld), s 17.

[3]  Life Insurance Act 1995 (Cth), s 199(2); & Property Law Act 1958 (VIC), s 28B.

[4]  De Garis v Dalgety & Co Ltd (1915) SALR 102.

[5]  Cockshott v Bennett (1788) 2 TR 763; 100 ER 411.

[6]  Rowe v Hopwood (1868) LR 4 QB 1; & Sultman v Bond [1956] St R Qd.

[7]  Norman Baker Pty Ltd (in liq) v Baker (1978) 3 ACLR 856.

[8]  Pearce v Kelly (1919) 20 SR (NSW) 88 at 92-3.

[9]    Minors (Property and Contracts) Act 1970 (NSW), s 6(1).

[10] Minister for Education v Oxwell [1966] WAR 39.

[11]  Sale of Goods Act 1954 (ACT), s 7; Sale of Goods Act 1972 (NT), s 7; Sale of Goods Act 1896 (QLD), s 5; Sale of Goods Act 1895 (SA), s 2; Sale of Goods Act 1896 (TAS), s 7; Goods Act 1958 (VIC), s 7; & Sale of Goods Act 1895 (WA), s 2.

[12]  Peters v Fleming (1840) 151 ER 314 at 315-16.

[13]  Scarborough v Sturzaker  (1905) 1 Tas LR 117

[14]  Nash v Inman [1908] 2 KB 1.

[15]  Gadd v Thompson [1911] 1  KB 304.

[16]  Re Mundy; Ex parte Mundy (1963) 19 ABC 165.

[17]  Hamilton v Lethbridge (1912) 14 CLR 236; 18 ALR 222.

[18]  Above, n 15.

[19]  Above, n 16.

[20]  Steinberg v Scala (Leeds) Ltd [1923] All ER Rep 239.

[21]  Davies v Beynon-Harris (1931) 47 TLR 424.

[22]  Vickery’s Motors Pty Ltd v Tarrant [1924] VLR 195.

[23]  Edwards v Carter [1893] AC 360.

[24]  Aroney v Christianus (1915) 15 SR (NSW) 118.

[25]  Lovell & Christmas v Beauchamp [1894] AC 607 at 611.

[26]  Above, n 17.

[27]  Slator v Trimble (1861) 14 IRCL 342 at 351–2.

[28]  Above, n 4.

[29]  Above, n 7.

[30]  Sultman v Bond [1956] St R Qd 180.

[31]  Above, n 4.

[32]  Above, n 30.

[33]  Mercantile Law Act 1962 (ACT), s 15; Minors (Property and Contracts) Act 1970 (NSW), Sch 1; Property Law Act 1974 (QLD), s 3(2)).

[34]  Ditcham v Worrall (1880) 5 CPD 410.

[35]  Minors Contracts (Miscellaneous Provisions) Act 1979 (SA), s 4.

[36]  Supreme Court Act 1986 (VIC), s 51.

[37]  Supreme Court Act 1986 (VIC),s 49; & Horvath v Commonwealth Bank of Australia [1999] 1 VR 643 at 662-8.

[38]  Andar Transport Pty Ltd v Brambles Ltd (2004) 217 CLR 424, at [23].

[39]  Esso Australia Resources Pty Ltd v Southern Pacific Petroleum NL [2005] VSCA 228.

[40]  Copyright Act 1986 (Cth), s 35.

[41]  Copyright Act 1986 (Cth), Pt IX.

[42]  Ibid.

[43]  Copyright Act 1986 (Cth), s 13; s 31.

[44]  Copyright Act 1986 (Cth), s 196.

[45]  Above, n 41.

[46]  Above, n 30.

[47]  Above, n 39.

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