Minors_Contract_Nz

New Zealand contract law is distinctive from other jurisdictions. This came as a result of the enactment of a series of Acts of Parliament. This process began with the Minors Contracts Act 1969. Then came the Illegal Contracts Act 1970, followed by the Contractual Mistakes Act 1979 and the Contracts Act 1982. One of the main points of these Acts was the wide discretionary powers given to the courts when granting relief. ‘This wide discretion is evident in the type of order that can be made under these statutes. This gives courts more flexibility; they are no longer bound by previous technical and artificial rules’ (Chetwin, Graw. 2001). Initial fears arose when it was thought that predictability, and firmness of the common law would vanish, and that litigation would rise as a result. This has proved not to be the case and judges have been able to do justice between the parties involved. New Zealand law recognises that people belonging to certain categories (a-Minors, b-persons of unsound mind; and c-drunken persons) have neither the maturity nor the capacity to understand the extent and nature of agreements that they make with other people. These people are considered incapable of giving their true consent and therefore need to be protected from their more predatory fellows. ‘The law provides such protection by simply refusing to enforce certain contracts against them. They are not regarded as being ‘sui junis’ (that is, of full legal capacity) and thus, are considered legally incapable of incurring contractual obligations except in certain, very clearly defined circumstances’ (Chetwin, Graw. 2001). Resulting from a 2005 amendment to the Minors Contract Act 1969, there are now two distinct categories of the Act: a) contracts of minors under the age of 18 (s6) b) contracts concerning life insurance entered into by a minor aged 16 or over and contracts of service (s5) Section 6(1) states that every contract (unless the contract is for life insurance or a contract of service) entered into by a minor is unenforceable against the minor but otherwise has full effect as if the minor was of full age. This means that if a valid contract is made between an adult and a minor; a minor can enforce the contract against the adult but the minor cannot be sued. This rule is qualified in s6(2). The court may enquire into the reasonableness and fairness of a contract at the time it was entered into. This type of action would have to be bought by the adult. If it is fair and reasonable, the court has discretion. Under S6 (3), in exercising its discretion, the court may take into account a list of criteria: • The subject matter and nature of the contract • The circumstances surrounding the making of the contract • Age of the minor • Nature and value of the property • Means of the minor • All other relevant circumstances The case example is Morrow & Benjamin Ltd v Whittington (1989). A brief summary of facts begins with a 15 year old male buying and selling shares through a stock broking firm (Morrow and Benjamin Ltd). The firm was aware of his age and allowed him to buy shares on credit. The balance outstanding was $30,250.55. Held: Judgement was entered for Whittington. The word reasonable should be given the ordinary meaning, being reasonable between consenting and informed adults. There was nothing unfair in the way the contracts were entered into, but they were not reasonable when failing to implement normal credit controls. ‘Under s5(1) of the Minors Contracts Act 1969, contracts entered into under s66B of the life insurance Act 1908 by a minor who has attained the age 16 years, and contracts of service entered into by a minor, shall have effect as if the minor was of full age’ (Chetwin, Graw. 2001). By s5(2) the court can intervene when: a) the consideration for a minors promise or act was so inadequate as to be unconscionable, or b) Any provision imposing an obligation on any party thereto who was a minor was harsh or oppressive. The court has a broad discretion as to the type of order. The court can cancel or decline to enforce the contract in whole or in part. It may also order compensation or restitution. An application under s9 of the Minors Contracts Act 1969 may be made to a District Court seeking approval of a contract before a minor enters into it. If approval is given then the contract is fully binding. Effect: as if the minor was of full age. In summary the Minors Contracts Act does prevent persons taking advantage of youthful inexperience without unduly interfering with the ordinary course of commerce and the rights of innocent adults. Reference List Chetwin, M. and Graw, S. (2001). Introduction to the Law of Contract in New Zealand. Wellington, New Zealand: Brookers Ltd