What Is The Legal Age To Sign A Contract?

Contracts are used in all sorts of different business relationships. Once signed, and it is found to be valid, the contract binds both parties. But what if one party is a minor? Can they validly enter into a contract? Can it be properly enforced against that party? 

Though it may seem hard to imagine a minor entering into a business relationship with an established company, these sorts of circumstances can appear more often than you might think.

To take a basic example, gym memberships aren’t uncommon for minors. To properly enforce the membership, the contract between the gym and the minor must be valid. 

Another example might be a contract between the seller and buyer of a car. These sorts of situations occur everyday, and understanding the intricacies of them is important for all sorts of business owners. 

What Is The Statutory Legal Age To Sign A Contract?

An important question to ask when it comes to the validity of a contract is, ‘What exactly is the legal age to sign a contract in New Zealand?’.

In New Zealand, a ‘minor’ is someone under the age of 18. Under the Contract and Commercial Law Act 2017, contracts entered into by minors are generally not enforceable against them unless they are for ‘necessaries’ or if the minor misrepresented their age and the other party reasonably relied on that misrepresentation. Additionally, certain types of contracts, like those for employment or for the benefit of the minor, can be enforceable.

So, why might a contract not be binding? The main reason is because the minor might lack the understanding necessary for their participation in the contract. So essentially, unless the contract is for necessaries, beneficial employment, or the minor misrepresented their age, contracts with minors will not be legally binding in New Zealand. 

It is important to note that while minors can still enforce a contract against the other party, they cannot have a contract enforced against them unless it falls within the exceptions mentioned above. 

So, if you are entering into a contract with a minor or trying to enforce a contract with a minor in New Zealand, you need to understand the limited circumstances in which these contracts with minors are considered binding. The following sections will delve into the intricacies of this question. 

When Is A Contract With A Minor Valid?

Necessity And Benefit

Contracts for necessaries are those that provide the minor with goods or services that are suitable for someone of their age and condition in life and are necessary for their reasonable subsistence, health, comfort, or education. These contracts are binding on the minor as long as the goods or services are sold at a reasonable price.

Contracts of employment or service that are beneficial to the minor are also generally enforceable. This means that if the contract is for the minor’s benefit, such as providing them with training or work experience that is advantageous to them, it is likely to be binding.

However, if a minor misrepresents their age and enters into a contract, and the other party reasonably relies on this misrepresentation, the contract may be enforceable against the minor.

Contracts Of Employment 

Contracts of employment with minors will be enforceable in New Zealand if they are beneficial to the minor. This typically means that the employment provides the minor with an income and potentially other benefits such as training or work experience.

Example
Consider a minor working at a café for a wage of $18 an hour. The contract is likely to be enforceable because it provides the minor with income and work experience. However, if the contract includes unfair terms that significantly disadvantage the minor, it may not be enforceable.

How Can A Minor Avoid A Contract?

In New Zealand, the law allows minors to avoid certain contracts to protect them from being unfairly bound by agreements they may not fully understand.

However, it’s important to understand the circumstances under which a minor can avoid a contract. 

Repudiation 

A minor can repudiate or cancel a contract before they turn 18 or within a reasonable time afterwards, provided the contract is not for necessaries, beneficial employment, or based on the minor’s misrepresentation of age.

If a minor wishes to repudiate a contract, they must communicate their intention to the other party. If the minor has received any property under the contract, they may be required to return it if possible.

Involvement Of Third Parties

Agency Relationships

Agency relationships can be complex, and it’s important to understand the legal implications. In New Zealand, if a minor appoints an agent to enter into a contract on their behalf, the enforceability of the contract will still depend on whether it falls within the categories of contracts that are binding on minors.

Guarantor Relationships 

Having a guarantor can provide a level of security when entering into a contract with a minor. If a minor enters into a contract that is guaranteed by an adult, and the minor repudiates the contract or fails to fulfil their obligations, the guarantor may be held liable.

It is advisable to seek legal advice from a knowledgeable contract lawyer when dealing with contracts involving minors and guarantors to ensure that the terms are fair and enforceable.

Key Takeaways

Signing a contract with a minor in New Zealand is not straightforward. While you may be bound by the terms of the contract, the minor is protected by legislation that limits the enforceability of contracts against them. It is crucial to understand these legal protections before entering into or attempting to enforce a contract with a minor. 

If you have any questions about this area, reach out to us at [email protected] or contact us on 0800 002 184 for an obligation-free chat.

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