MINORS' CONTRACT BILL [Lords]

Second Reading Committee

MINORS' CONTRACTS BILL [LORDS] 17 February 1987

PARLIAMENTARY DEBATES

HOUSE OF COMMONS

OFFICIAL REPORT

Second Reading Committee

MINORS' CONTRACTS BILL [LORDS]

Tuesday 17 February 1987

CONTENTS

RESOLVED, That the Chairman do now report to the House that the Committee recommends that the Minors' Contracts Bill [Lords] ought to be read a second time.

COMMITTEE rose at twenty minutes to Eleven o'clock.

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1

The Committee consisted of the following Members:

Chairman: Mr. DONALD COLEMAN

Adley, Mr. Robert (Christchurch)

Ashton, Mr. Joseph (Bassetlaw)

Bidwell, Mr. Sydney (Ealing, Southall)

Blackburn, Dr. John G. (Dudley West)

Brown, Mr. Nicholas (Newcastle upon Tyne, East)

Caborn, Mr. Richard (Sheffield, Central)

Carlile, Mr. Alex (Montgomery)

Clay, Mr. Bob (Sunderland, North)

Conway, Mr. Derek (Shrewsbury and Atcham)

Evennett, Mr. David (Erith and Crayford)

Kellett-Bowman, Mrs. Elaine (Lancaster)

Maude, Mr. Francis (Warwickshire, North)

Norris, Mr. Steve (Oxford, East)

Patchett, Mr. Terry (Barnsley, East)

Shepherd, Mr. Richard (Aldridge, Brownhills)

Sims, Mr. Roger (Chislehurst)

Solicitor General, The (Sir Patrick Mayhew)

Sumberg, Mr. David (Bury, South)

Mr. D. R. Lloyd, Committee Clerk

2
3 SECOND READING COMMITTEE Tuesday 17 February 1987

[MR. DONALD COLEMAN in the Chair]

MINORS' CONTRACTS BILL [LORDS]

10.30 am

The Solicitor-General (Sir Patrick Mayhew): I beg to move, That the Chairman do now report to the House that the Committee recommends that the Minor's Contracts Bill [Lords] ought to be read a Second time. Year in and year out the Law Commission works away, sometimes addressing broad swathes of the law where reform is needed and sometimes dealing with more intimate corners, but always with beneficial results which, if law reform were left to the initiative of Parliament and of the excellent law reform committees, could seldom be achieved. The law relating to contracts made by minors is perhaps nearer to the category of the more intimate corner. Minors are not what they were in Victorian times, when they acquired the statutory protection of the Infants Relief Act 1874: they now become time expired at 18 instead of 21 and they find it much harder to get credit. The Law Commission, after careful consultation, has found that the law of contract should continue to provide protection for the inexperienced young person both against unscrupulous adults and against his own impetuosity, but it has criticised certain defects in the present law—first, the obscurity of section 1 of the Infants Relief Act 1874 and of the Betting and Loans (Infants) Act 1892, much beloved of law examiners and hated by their victims; secondly, the inability of a minor, on attaining majority, to ratify a contract entered into by him during his minority; thirdly, the rule that guarantor of a minor's void debt is not liable under his guarantee because the guaranteed contract is, and always has been, void; and fourthly, the ability of a minor to hang on to goods which he cannot be made to pay for and which he has not paid for, unless he obtained them by fraud. Those criticisms, which have long been voiced, are widely shared, as the consultation process has shown, and the Bill responds to them. The notorious section 1 of the 1874 Act will be repealed; minors' contracts will be capable of being effectively ratified; a guarantor of a minors' contract will not be able to escape from his guarantee on the ground alone that the contract is unenforceable against the person whose obligation is guaranteed, because he was a minor at the time— that seems only right and just—and, lastly, unjust enrichment of a minor of the kind that I have men- 4 tioned will be caught by the court's new jurisdiction under the Bill to order him to hand back the property in question to his supplier, where it would be just and equitable to do so, or to hand back any property representing it. The protection of minors in contractual matters derived originally from the common law. The law Commision considered the whole of the law relating to contracts made by minors, but wisely decided to limit its recommendations for reform to those parts of the law which were causing injustice or difficulty. By tidying up some defects deriving from law super imposed by Parliament in the 19th century, the Bill will create greater clarity and fairness and will give greater scope for the application and perhaps the development of well-approved common law principles.

10.34 am

Mr. Nicholas Brown (Newcastle upon Tyne, East): The Bill is to be welcomed, and I shall not detain the Committee long in doing so. I wish to associate myself with the Solicitor-General's remarks about the Law Commission's work It is right to reassert the thanks of the House to the Law Commission for the valuable work that it does in exploring—I was about to call them minor matters, but this is perhaps not the occasion for puns—these subsidiary matters of the law which the House under its own steam might not get round to. The Law Commission's aim to uphold and balance the two fundamental principles in this area of the law is right. It has sought to protect the minor against his own inexperience and the exploitation of unscrupulous adults and at the same time to avoid causing unnecessary hardship to adults who deal fairly with minors. This aim has been carried into the Bill well, with the continued application of the principle of qualified unenforceability. By disapplying the Infants Relief Act 1874, the Bill removes an unsatisfactory and badly drafted Act from the statute book and, as a result, enables a minor, upon attaining his majority, to ratify a contract or a loan made to him whilst he was still a minor. This measure is long overdue and is to be welcomed. In addition, clause 2, by rendering enforceable as against an adult guarantor his guarantee supporting the loan of money or the advance of credit to a minor, redresses the imbalance which previously existed to the detriment of a person dealing with minors who sought to protect his position through the creation of a guarantee. The power granted to the courts by clause 3 to require a person, where it is just and equitable to do so, to return any property, or any property representing property, obtained under a contract which is unenforceable as a result of his incapacity as a minor is also to be warmly welcomed. It reduces the present opportunities for unjust enrichment whereby a minor who, without fraud, obtains property under an unenforceable agreement cannot be compelled to return it. 5 However—and this is my only slight quibble with the Bill—clause 3 may not go far enough. It only gives the court power to order the person to transfer the property acquired under the contract or "any property representing it". That does not cover the situation where a minor acquires property and either dissipates it to an untraceable source, which will defeat the tracing remedy, or otherwise consumes or destroys it. Perhaps we shall explore this in Committee. I wonder why suppliers in these circumstances are less deserving of restitution or why persons who have so acted are any more worthy of protection. Why has clause 3 not been extended to cover such a situation? As I said earlier, the Bill is to be welcomed as far as it goes. The Law Commission undertook a careful and comprehensive review of this area of the law and indentified many more problems than are resolved in the Bill. It is a shame that this opportunity has not been taken for a broader rationalisation of this area of the law and a number of additional matters dealt with. I took careful note of what the Solicitor-General said about the Law Commission choosing its priorities. It is a fair point. Nevertheless, perhaps the opportunity could have been taken to explore these matters more extensively. In particular, it seems unnecessarily archaic to continue the distinction of necessaries and non-necessaries and even more ridiculous to preserve the nonsensical rule that a minor is not liable to pay for necessaries if he already has an adequate supply, a factor of 6 which the supplier can have no knowledge. In addition, it is perhaps a pity that a procedure for the judicial validiation of certain large minor contracts could not have received further consideration. The Law Commission itself decided not to pursue a wider approach because it felt that the diversion of resources from more important areas and the cost of a complete rationalisation could not be justified. However, a piecemeal approach such as this to the resolution of problems is not satisfactory, and I wonder whether more consideration should have been given to a more thorough-going legislative approach.

The Solicitor-General: With the leave of the Committee, may I correct one understandable misconception? The hon. Gentleman referred to tracing being excluded, but the equitable remedy of tracing is unaffected by clause 3, which merely sets out an additional remedy. I mention that to save time in Committee. Otherwise, I am most grateful for what the hon. Gentleman said.

Question put and agreed to .

Resolved, That the Chairman do now report to the House that Committee recommends that the Minors' Contracts Bill [Lords] ought to be read a Second time.

Committee rose at twenty minutes to Eleven o'clock.

THE FOLLOWING MEMBERS ATTENDED THE COMMITTEE:

Coleman, Mr. Donald (Chairman)

Blackburn, Dr.

Brown, Mr. Nicholas

Conway, Mr.

Maude, Mr.

Norris, Mr.

Shepherd, Mr. Richard

Solicitor-General, The

Sumberg, Mr.