The rules protecting young people under 18 years of age making contracts, including which contracts are enforceable.

Minors' contracts and your rights

The Contract and Commercial Law Act sets out special rules to protect young people making contracts.

A minor is a person under 18 years of age and any contract entered into with a minor is not enforceable, unless the other party can show it was fair and reasonable.

Except for life insurance and employment contracts, which are enforceable against minors.

If you’re under 18 years old you can apply to borrow money or buy goods on credit as long as you meet the creditor’s conditions, which may include providing a co-borrower or guarantor.

Parents are not liable for contracts or debts incurred by their children unless they specifically agreed in writing to act as a guarantor.

Read Loan guarantors to find out more.

What you need to know

Contracts not enforceable against minors

Most contracts are not enforceable against minors. The contract can only be enforced if a Court or Disputes Tribunal says that it is fair and reasonable. When deciding whether a contract is fair and reasonable, the Court will look at:

  • the circumstances around how the contract was made
  • the type of contract it is, eg if it is a loan or a cell phone contract which has less responsibilities
  • the nature and value of the property, eg an expensive car will have more consequences for the minor than buying an MP3 player
  • the age and means (if any) of the minor
  • all other relevant circumstances.

Exceptions – life insurance and employment contracts

Life insurance and employment contracts are enforceable against minors. However the court may intervene if:

  • the benefits they receive under the contract are so inadequate as to be unjust
  • any provision is harsh or oppressive.

In such circumstances the court may:

  • cancel the contract
  • decline to enforce the contract (or make a declaration of unenforceability)
  • make any order for compensation or to return property it considers just.

Approval for a minor to enter into contract

A minor or person who will be a party to a contract, or the minor’s guardian, can apply to court for approval for a minor to enter into a contract. The court can refer an application to a guardian of the minor, to a lawyer nominated by the court or to any other person. However a court cannot approve a minor entering a contract which is about property held on trust. 

Example situation

Two minors aged 17, borrowed $15,000 from a credit union to buy a car. They put their age on their credit application form but the credit union staff mistakenly thought they were 18 years. The loan was approved, but the couple did not make any payments on the car. The credit union eventually repossessed and resold the car.

They were left owing almost $12,000 plus interest. In court, one of them admitted he had lied to the credit union about having a driver’s license. The other one was only working part time when the loan was taken out and had lied about her weekly income. The Judge decided that although the contract was fair, it was not reasonable under the circumstances to enforce it.

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