The Risks and Dangers of Entering a Contract with a Minor

If John were an adult, he would be bound by his contract. Once an adult and a merchant enter a contract, they both are bound by it. Neither party can rescind a contract simply because of a change of mind. The difference in this example is that John is a minor. Most states give minors the right to disaffirm such contracts so long as they do while they are still minors or within a reasonable time after they have reached the age of majority. In John's case, this would mean that his is not bound by the contract to buy the truck. He can take it back and perhaps even force the company to return whatever money he paid on it. In some states, however, the merchant can keep all or part of the purchase price paid thus far to cover depreciation resulting from the minor's use of the item.

Minors are allowed to disaffirm and, in effect, to walk away from most of the contracts they enter. This, of course, is one of the reasons merchants usually refuse to enter contracts with minors unless a parent or other financially responsible adult co-signs. Contracts that a minor can disaffirm are voidable, meaning they can be invalidated by choice. A voidable contract, however, is valid and enforceable unless and until it is canceled.

This does not mean that every contract of a minor is invalid. If the minor does not disaffirm, the contract is valid and can be enforced against the minor. Also, if a minor tries to disaffirm too late, the contract will be enforced. Suppose that John tried to disaffirm the truck contract when he was twenty years old in a state where the age of majority is eighteen. It just won't work. He must disaffirm before he reaches majority or within a reasonable time after, usually implying months not years.

What if a minor commits fraud to induce the merchant to enter a contract? He or she may lie about his or her age through forged identification. Some courts take the position that such fraud should keep him or her from being able to disaffirm. Other courts, however, say that to protect the minor, his or her fraud should not affect the ability to disaffirm the contract.

Special statutes have also been passed in many states to limit the minor's rights to disaffirm. These statutes often apply to employment contracts in the entertainment industry. Contractual arrangements with banks and other lending institutions also cannot be disaffirmed in many states. Another special statute says that when a minor makes a contract with a merchant for necessaries such as food or clothing, the contract cannot be fully disaffirmed. Necessaries are considered to be the basic items needed by family members to maintain a standard of living. If the minor disaffirms a contract for necessaries, he or she may still be liable for the reasonable value of the goods or services provided but not for the amount of the purchase price the minor initially agreed to pay.

So why are minors given this right to disaffirm? The purpose of the law is to protect young people from their immaturity. Merchants are on notice that if they deal with minors, they do so at their own risk. Non-merchants also need to read their state's statutes before selling anything to a minor such as a motor vehicle. So always remember…sell to minors at your own risk.