Kids in the Boardroom - How to Approach a Contract with a Minor - Daniel Ross & Associates

There may come a time in the life of your business where you need to enter a contract with someone under the age of eighteen. In the eyes of the law, anyone under eighteen is deemed to be a “minor,” and special considerations arise that affect how you can (and whether or not you should) engage in such an agreement.

The Law Protects Minors

Certain prerequisites exist for an agreement to be legally binding, including the requirement that each person has the mental capacity to contract. Mental capacity is a pertinent question for minors, who may or may not be capable of understanding the legal duties and consequences of a contract. The law takes special care to protect minors, and so anyone under eighteen is said to lack capacity by default. As a result, contracts become voidable at the minor’s election.

Exceptions to the Rule

In most cases adults must contract with minors at their own peril. Yet, if that were the case across the board no one would be inclined to deal with a minor, even for necessities like housing and food. For this reason, there are exceptions built into the rule:

  • Necessaries – A minor cannot void a contract for things which are necessary to his or her health, subsistence, or education. “Necessaries” are things like food, lodging, shelter, clothing, and sometimes automobiles. Courts will consider a child or parent’s economic status when considering what is necessary.
  • Employment – Employment agreements are excepted from the general rule in order to allow minors to seek gainful work. In cases where there is an employment contract for term, many states have enacted legislation that limits minors’ rights to disaffirm. Some courts allow the employer to submit the application for court approval ahead of employment, which will prevent the minor from voiding it later.
  • Military Commitments – Minors enlisting for military service before the age of majority are still bound to serve when they come of age.
  • Banking Regulations – Private banking regulations, fees and penalties are unavoidable for minors setting up bank accounts.
  • Taxes – Tax laws apply equally regardless of age.
  • Contracting with a Guardian – In limited cases, entering an agreement with a guardian will bind the child into adulthood. However, this doesn’t work the other way around to bind the guardian if you contract with a minor.
  • Misrepresentation of Age – Courts will often prevent a minor from disaffirming a contract where the minor lied about his or her age, at least to the extent that the other party suffered injury in reliance on the contract.

Further Limits to Protection

When a contract with a minor extends past the minor’s eighteenth birthday, the question arises whether or not the minor-turned-adult can still void it. All states have adopted some form of ratification, which states that a minor can only void a contract while he or she is still under eighteen. If the minor has not voided it upon reaching majority, or within a “reasonable time” after reaching majority, they’re deemed to have ratified the contract and can no longer void it.

Finally, there are situations where a minor becomes independent while still underage. These minors can undergo the legal process of emancipation to be declared adults. Emancipation will require that minors pay their own bills, supply their own place of residence, and are no longer reliant on a parent or legal guardian in any way.

We appreciate your readership, and we’re happy to continue the discussion with you in the comments or through a scheduled consultation.

 


All the best,

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