There is a misunderstanding that minors cannot enter contracts - this is not true. If it were minors would not be allowed to by candy bars from the corner shop.
The common law in Australia is that contracts are not enforceable against minors but minors can enforce their contracts against the other party. However, there are two classes of contracts that are binding on minors:
- contracts for necessaries - this is particular to the minor's 'station in life' and therefore captures the candy bar for most minors.
- employment, education, apprenticeship and training contracts - your lemonade stand may fall into this category (but probably doesn't).
Contracts which involve acquiring an interest in property of a permanent nature (so, not the candy bar) or contracts which involve a continuing obligation are voidable - that is they are valid unless the minor repudiates them while still a minor or within a reasonable time after they become an adult. If the minor has received no benefit they are entitled to a full refund, if they have receives some benefit the refund is reduced by the value of the benefit received (possibly to nothing).
Contracts that are neither valid or voidable do not bind the minor but do bind adult parties. They become binding on the minor if ratified after turning 18. Ratification may be by word or deed. Adult guarantors for a minor are bound by the contract.
In NSW the Minors (Property and Contracts) Act 1970 provides that minors are contractually bound if they understand what they are doing and the contract is for their benefit. The courts are given wide powers to adjust the terms of such contracts to achieve a just outcome.
