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This article was prepared by Go To Court Lawyers, Australia's largest legal service. For legal advice specific to your situation, call 1300 636 846.
For a contract to be valid, all parties must have contractual capacity. Certain classes of people do not have the capacity to contract. For example, a person who has a mental disorder that means they are unable to understand the nature of the contract, lacks contractual capacity. Persons under the age of 18 have a limited capacity to contract. This means that contracts with minors are valid in some situations.
Under common law, a contract entered into by a minor is generally voidable. However, there are exceptions set out in the Supreme Court Act and the Goods Act.
Contracts with minors for items of necessity
A minor can enter a contract to buy or sell necessities and such a contract is binding on both parties. Under Section 7 of the Goods Act, ‘necessities’ means goods suitable to the life of the minor and his or her requirements at the time of the sale.
The purchase of items that are extravagant and beyond the needs of the minor may be found to be invalid on the basis of infancy should the contract come to be the subject of a legal challenge.
This occurred in the 1908 English case of Nash v Inman, where a minor had entered into a contract for the purchase of extravagant and expensive items of clothing. Inman was a university student whose parents provided him with adequate clothing for his needs. He sought to disaffirm the contract on the basis of infancy and the court ruled in his favour, finding the items were not necessities.
Employment contracts with minors
A minor can enter a contract for employment (whether oral or written) provided the terms of the contract are not unfair and oppressive. A minor bound by such a contract can repudiate the contract upon becoming an adult.
Contracts with minors at common law
In Victoria, contracts with minors that do not fall into either of the above exceptions are voidable. However, when a contract results in a minor permanently acquiring land or involves ongoing obligations, it is binding unless avoided by the minor. All other contracts involving a minor are not binding unless affirmed by the minor after he or she becomes an adult.
Supreme Court Act
The Supreme Court Act makes certain contracts with minors void. Section 49 of that act states that the following contracts are void where a party is a minor:
- Contracts for the repayment of money lent;
- Contracts for payment of goods supplied (other than necessities);
- Accounts stated.
This provision does not affect contracts for the sale of land, contracts of employment or contracts for essential goods and services.
Section 50 of the Supreme Court Act provides that where a minor affirms a contract upon attaining the age of majority, a new contract must be entered into.
Section 51 provides that where a person enters into a contract for a loan while a minor and agrees upon attaining adulthood to repay the amount owed under the contract (which is void), that agreement is also void.
Real estate
In Victoria, a child can validly purchase and own real estate. However, due to the restrictions on contracts with minors for the repayment of money, a mortgage entered into by a child is not binding on the child. This means that financiers are reluctant to enter into contracts with minors.
In Victoria, where a property is registered in the name of a minor, a court order must be obtained before the property can be sold. It can also be difficult to find a buyer who is prepared to contract with a child as such a buyer runs the risk of the child not seeing the transaction through.
To avoid these complications, a person wishing to gift a property to a child can do so via a trust, where an adult holds the property on trust for a minor. The adult trustee can then deal with the property by taking out loans over it but must hold it on behalf of the child.
Other Australian jurisdiction have different laws regarding the contractual capacity of minors.
If you require legal advice or representation in any legal matter, please contact Go To Court Lawyers.
faqs: - question: 'What happens when a minor turns 18 and has an existing employment contract?' answer: 'A minor bound by an employment contract can repudiate the contract upon becoming an adult at age 18. This means they have the legal right to cancel or void the employment agreement once they reach the age of majority. However, if the contract terms were fair and not oppressive, the minor may choose to continue with the existing employment arrangement without any legal obligation to do so.' - question: 'How does Victorian law determine if goods are considered necessities for a minor?' answer: 'Under Section 7 of the Victorian Goods Act, necessities are defined as goods suitable to the minor''s life and requirements at the time of sale. The law considers the minor''s actual circumstances and needs, not luxury items. Extravagant purchases beyond the minor''s reasonable needs can be challenged as invalid, as demonstrated in Nash v Inman where expensive clothing was deemed unnecessary for a well-provided university student.' - question: 'How much does it cost to get legal advice about a contract dispute involving a minor?' answer: 'Go To Court Lawyers offers a fixed consultation fee of $295 to discuss contract disputes involving minors in Victoria. During this consultation, you can get expert advice on whether the contract is valid, voidable, or binding. This includes assessment of necessity goods, employment contracts, or other contractual arrangements. The consultation helps determine your legal position and potential remedies before proceeding with any legal action.' - question: 'How can a lawyer help with contracts involving minors in Victoria?' answer: 'A lawyer can assess whether a contract with a minor is valid, voidable, or binding under Victorian law. They can determine if goods qualify as necessities under the Goods Act, review employment contract terms for fairness, and advise on common law provisions. Lawyers can also help adults or businesses understand their legal obligations when contracting with minors, draft appropriate agreements, and represent parties in disputes over contractual capacity.' - question: 'Are there time limits for challenging a contract made by a minor in Victoria?' answer: 'Minors can generally repudiate voidable contracts while still under 18 or within a reasonable time after reaching adulthood. However, some contracts may become binding if not challenged promptly after turning 18. Employment contracts specifically allow repudiation upon becoming an adult. The timing is crucial as delayed action may be interpreted as acceptance of the contract terms, potentially losing the right to void the agreement.' ---