Capacity - Infants - Question 8 April 2009

Question 8 April 2009

“Children have limited contractual capacity. Unfortunately, the law has developed in a piecemeal fashion, with the result that the rules of law are unnecessarily complex.” Discuss.

The courts have always been mindful of the need to protect those who are incapable of exercising a full and free consent in the formation of a contract by virtue of their age; this now has legislative expression. In law anyone under the age of 18 is considered to be a minor and thus contracts with minors are subject to certain protections afforded by both the common law and the Infants Relief Act 1874.

The general rule is that a contract made with a minor is voidable at the minor’s option. There are however exceptions to this rule and it is these exceptions that make the law on this issue so complex because as the quote states “the law has developed in a piecemeal fashion...”

One exception to the rule is if the subject matter of the contract, with the minor, is considered necessaries. The Sale of Goods Act 1979 S.3 defines necessaries as goods that are suitable to the condition in life of the minor and to his actual requirement at the time of sale and delivery. Also, that the minor need only pay a reasonable price for the necessaries; which may not be the same as the contract price. Necessaries can include services such as education. In the English case of Nash v Inman the defendant, a tailor, supplied eleven fancy waistcoats and other items of clothing to a Cambridge undergraduate at a cost of £123. It was held that the tailor could not recover the money as the clothes were not “necessaries”, the minor had a sufficient amount of his own clothes.

Another exception to the rule is where a minor is bound by a service contract which is for their benefit. This does not mean that a minor is bound by any contract which is beneficial but only those which relate to an employment or similar contract. A good example of this exception can be found in the case of Chaplin v Leslie Frewin (Publishers) Ltd. The defendant agreed to publish a minor’s autobiography which was to be written by journalists from the information they received from the minor and his adult wife. The minor approved the final proofs and received advanced royalties from the defendants. Before the publication of the book the plaintiffs claimed that the book was inaccurate and he applied for an injunction to prevent the books publication. It was held that the contract enabled the minor to become an author and so was on the whole for his benefit. The court decided that an injunction would not be granted.

Under the Infant Relief Act 1847, Sect. 1 all contracts other than those for necessities are void where the minor enters into a contract to receive goods or a loan. The Act does not work in reverse. Thus, where the minor gives a loan or supplies goods, the Act does not apply. It appears that the title to goods will pass under such an arrangement even though it falls out of the Act, unless there is a complete failure of consideration. In the case of Bateman v. Kingston the minor represented himself to be of age, and the money was advanced for necessaries, but the plaintiff failed to recover, as the notes he sued on bore interest. On a bill not carrying interest and for necessaries, the Court thought it might be different.

In almost all contracts with minors, the minor does not have to deny the contract to escape liability. However a number of contracts result in a permanent benefit bestowed upon the minor subject to recurring obligations. These have received special treatment, although (as Treitel points out) there is no logical reason why this should be so. However, the case law establishes that contracts concerning land, company shares, partnerships, family settlements and insurance are all voidable by the minor only if he denies the contract.

Where a minor agrees to buy shares in a company then the contract is voidable at the minor’s option. In Steinberg v Scala (Leeds) Ltd. a minor applied and partly paid for shares in the defendant company. However 18 months after the defendant company had allotted the minor the shares she decided to rescind the contract and also sued to recover the money she had initially paid to the defendant company. The court held that the plaintiff was entitled to rescind the contract and would not be liable to make any further payments. However she was not entitled to recover the money she had initially paid the defendant company because there was a sufficient amount of consideration as she had been allotted the shares.

This area of contract law may need to be rethought and areas within it cleared up as there is no need for a lot of the confusion that it can lead to.