4.3 Effects of Entering Into a Contract with a Minor

What are the consequences of entering into a contract with a minor? For example, can property transferred be recovered if the contract is void? And, if the contract is for necessaries, is the minor obliged to pay the full contract price? The answers to these questions will be discussed as they operate in relation to void, voidable and enforceable contracts.

4.3.1 Void contracts

The first point to note is that, since the passage of the Minors’ Contracts Act (MCA) 1987, it is possible for a void contract to be ratified (expressly or impliedly) on the minor’s attaining majority. If this is done, then the contract will take effect as normal, with full enforceability on both sides.

If the contract remains void at the time when a dispute arises, the position is more complicated. The Infants Relief Act 1874 declared most such contracts ‘absolutely void’, but this was an inaccurate representation of reality, and has been repealed by the MCA 1987. The position now is that a contract which has been fully executed will be effective to transfer the ownership of any money or other property which has changed hands under it. A minor who purchases non-necessary goods for cash is not entitled to demand to be allowed to return them. If the minor has performed, it seems that he or she will be able to claim damages (though not specific performance) from the adult party. Money or property transferred will only be recoverable by the minor, however, if there has been a total failure of consideration. If the adult party has performed, in whole or in part, then, if it is services that have been provided, the adult is without a remedy. If property has been transferred, the common law said that it was irrecoverable, but the position has been altered by s 3 of the MCA 1987. This empowers the court, ‘if it is just and equitable to do so’, to require the minor to return to the adult any property transferred, or any property representing it. This is a broad discretion, and the court is given no guidance as to how it should be exercised, but it does provide the opportunity to prevent a minor taking advantage of the situation, and gaining unjust enrichment. Not all such cases are covered, however. As has been noted, the section has no application where it is non-necessary services that have been provided, nor will it provide a remedy where goods, or the proceeds of their sale, have been consumed by the minor.

4.3.2 Voidable contracts

Certain contracts are regarded as being valid, unless the minor repudiates them, either during minority or within a reasonable time of becoming 18. These are, in general, contracts which involve the minor obtaining an interest in property which involves continuous or recurring obligations. So, this rule applies, for example, to contracts involving obligations of shareholding, such as the duty to pay ‘calls’; partnership agreements; marriage settlements; and contracts relating to interests in land, such as leases. In relation to the last category, it should be noted that s 1(6) of the Law of property Act 1925 prevents a minor from holding a legal estate in land. The interests concerned will therefore always be equitable.

The repudiation of one of the above contracts during minority is always possible. What constitutes the period after reaching 18 for which this right subsists is not easy to determine. The House of Lords in Edwards v Carter simply felt that repudiation must occur within a ‘reasonable’ time, and that in the particular case, a period of four years and eight months was too long to be reasonable. It is likely to be regarded as a question of fact in each case as to what is acceptable, and it does not seem possible to lay down any clear rules on this point.

If a minor repudiates a voidable contract, this will not affect obligations which have already fallen due and have been performed. Money or property transferred by the minor will be irrecoverable, unless there has been a total failure of consideration. The position as regards liabilities which have fallen due, but have not been performed at the time of the repudiation is less clear. The point was considered, obiter, in North Western Rail Co v McMichael. Parke B took the view that a call on shares which had become due was of no effect once repudiation had taken place. In other words, the repudiation was, to that extent, retrospective.