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Is Your Contract With A Young Person Enforceable?

Incorporated Societies Act 2022: Information Hub

Have you ever considered the implications of selling something on credit to someone under the age of 18?

In one case involving the Wine Country Credit Union (WCCU), the courts refused to allow WCCU to enforce a credit contract because the borrowers were both under 18 at the time the contract was made.

According to the presiding Judge, during May 2003 R saw a car he liked and he “just had to have that car.” So R and T borrowed $15,612 from WCCU, and bought the car.  Within weeks R was apprehended whilst driving without a licence and the Police impounded the car. It was subsequently repossessed by WCCU and resold, leaving a balance owing of $12,000.

When WCCU sued R and T for the balance, the District Court Judge held that R and T did not have to pay any of the $12,000. WCCU appealed, but the High Court agreed with the District Court that R and T did not have to repay their debt. This was essentially because they were minors when they borrowed the money; R was 17 years, 9 months and T was 17 years, 6 months.

The Law
The Minors Contract Act 1969 provides that a contract with someone under 18 years of age is presumed to be unenforceable against that person.

There are several important qualifications to that rule. Firstly, certain contracts are excluded, such as some contracts for life insurance and some employment contracts. Secondly, a Court may enforce the contract against the minor in whole or in part if it concludes that the contract was fair and reasonable in all the circumstances.

In the present case, the Court found WCCU could not enforce the loan contract and recover any of its money because R and T had not deliberately misled WCCU about their ages. They had correctly recorded their dates of birth on the application form but an employee of WCCU had miscalculated their ages to be 18.  If WCCU had made reasonable inquiries of R and T it would, in addition to establishing their ages, have also easily discovered that R and T:

  • had only known each other for three weeks
  • were employed in seasonal part-time work
  • had overstated their income, and
  • couldn’t afford the repayments.

Both Judges concluded that WCCU was careless and ought to have made more inquiries. In all the circumstances the contract was not fair and reasonable and, accordingly, the contract was unenforceable against R and T.

Conclusion 
Generally contracts with minors under 18 are presumed to be unenforceable against the minor unless the other party can satisfy a Court that in all the circumstances the contract is fair and reasonable and ought to be enforced.

The WCCU case highlights the need to check the age of a young person you are contracting with and to be aware that if they are under 18 the contract may not be enforceable against them.

Should you need any assistance with this, or with any other Commercial matters, Parry Field can give legal help.  Please contact Paul Cowey or Kris Morrison (348-8480).

Tags: contract
https://www.parryfield.com/wp-content/uploads/2019/07/Parry-Field-Lawyers-Logo.png 0 0 Leigh Gray https://www.parryfield.com/wp-content/uploads/2019/07/Parry-Field-Lawyers-Logo.png Leigh Gray2011-12-07 20:55:462019-10-21 13:13:27Is Your Contract With A Young Person Enforceable?

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