The law generally allows minors to take advantage of good contracts and back out of bad ones. A minor is an individual under the age of 18 who has never been married or had the disabilities of minority removed by a court.
In the eyes of the law, minors lack the capacity to enter into contracts. Obviously, a 6-year-old child is not able comprehend anything beyond the most basic of contract terms (e.g., I’ll trade your sandwich for a piece of candy).
Additionally, that child may not appreciate the ramifications of most contracts or understand the value being exchanged. The terms of “I’ll trade your college fund for my piece of candy” are pretty straightforward, but our 6-year-old is not likely to understand the consequences of that exchange (having to pay for college) or the value exchanged (he could buy a lot of candy with the money in his college fund).
Instead, the child knows he likes candy and does not like school, thus he enters into the agreement. Fortunately, there are laws in place to protect minors from such contracts. There are also laws in place to allow minors to contract in certain circumstances and laws that may bind minors to certain contracts.
The general rule in Texas is that contracts of a minor are voidable at the election of the minor. If a minor decides to set aside the contract, the entire contract is set aside; he cannot void some provisions and keep others. Likewise, if the minor backs out, he must return any property he received under the contract, if it is still in his control.
Either way, the minor is entitled to a refund of his money or the return of his property — even from an innocent third party who bought it from the other party to the minor’s contract. So, our 6-year-old can make me return his college fund, even if he ate my candy.
There are exceptions to the general rule. Contracts for real or personal property in which the minor’s interest is worth less than $100,000 may be submitted by the minor’s parent or guardian to a court for approval. If the court approves the contract, the minor is bound.
Courts may also approve arts and entertainment contracts involving minors — e.g., child stars. Contracts for necessaries are not voidable but may be modified to ensure the minor only pays reasonable value. Necessaries are not defined by Texas law but include items such as food, lodging, clothing, medicine, medical attention and, in some cases, attorney fees.
Other examples of contracts not voidable by the minor include contracts to enter into military service and contracts by minors acting in a fiduciary capacity.
Minors also will be bound by contracts they obtain through fraudulent representations if those representations reasonably cause the other party to believe that the minor is of legal age.
In such circumstances, the other party must show that he was actually misled and the fraud induced him to make the agreement. The minor must consciously deceive the other party. The mere belief that the minor was an adult will not suffice.
So, a contract made with a 17-year-old who has a full beard may be voidable by the minor, even though the other party had no reason to know that he contracted with a minor. However, if the minor also lied about his age to induce the other party into the contract, the minor will likely be bound.
On the other hand, if our 6-year-old claimed he’s over 18, the other party will have a hard time convincing anyone that he actually believed the misrepresentation.
Finally, a contract that is voidable because of minority may become binding if the minor ratifies it. Ratification occurs when a party reaches the age of majority and knows that the contract was not binding due to his minority status but nevertheless shows an intent to be bound by the contract, or he fails to disaffirm the contract within a reasonable time after reaching the age of majority.
The intent to be bound may be shown by the person’s conduct or words. If a minor buys a car, he may walk away from the contract for a short time after turning 18. However, if he keeps the car for several months after his 18th birthday, he likely has ratified the contract.
Although contracting with minors can be risky, each case is unique. This column is not comprehensive on the subject of contracting with minors and is not being offered as legal advice. Please consult with a qualified attorney if you have specific questions about this issue.