Online purchases are increasingly common sources of revenue for online retail stores and businesses that provide digital assets and services. For example, online games, streaming services and online tax return services will conduct the majority of their business through online transactions. If you run an online business, it is essential to consider which customers are purchasing your goods or services. In particular, you need to take extra steps if you might be dealing with minors (those under 18). In this article, we explain what you need to know if you sell goods or services to minors.
What is a Contract?
Firstly, understanding the basics of a contract is helpful in answering whether or not you can sell goods or services to minors. Essentially, a contract is an agreement that binds two or more people with three vital elements to consider:
- offer: You or your customer may offer to provide a specific good or service for a stated price;
- acceptance: You or your customer may agree to purchase a specific good or service; and
- consideration: The exchange in value from one party to another for the supply of the good or service. If you run an online business, this will typically be your acceptance of money in exchanging the good or service.
If you operate an online business, you usually form contracts with customers by setting out the terms for your service. But as you are operating online and creating contracts with a wide range of customers, you might unknowingly contract with minors
Why Does Age Matter?
The age of the people involved in a contract matters because of the legal concept known as ‘legal capacity’. For a contract to be binding, each party must have the legal capacity to enter into the contract. Different states and territories have different approaches when interpreting the legal capacity of minors.
However, most jurisdictions do follow similar principles and some states, such as Victoria, New South Wales and South Australia, have also passed legislation on this topic.
What is the Law on Minors Entering into Contracts?
The common law position on contracts involving minors is that they are not enforceable unless the contract is for a ‘necessity’ or a beneficial contract of service (such as contracts for employment). The contract will also need to be for the benefit of the minor.
The courts have determined that a contract for a necessity may include:
- accommodation; or
However, necessities may also include what is required for a minor to maintain their existing lifestyle.
Overall, the law aims to protect minors by not binding them to contracts which are not in their favour. If contracts are disadvantageous to minors, such as by including a significantly lengthy commitment, the contract may not be binding.
What Does it Mean to Avoid or Affirm Contracts?
For contracts where there are ongoing legal obligations for the minor (such as with the purchase of land or shares), the agreement will be enforceable unless the minor rejects the contract.
However, when the minor has the right to reject a contract, they can affirm the contract by taking positive steps. As discussed above, the contract will nevertheless have to be for the benefit of the minor.
Ensuring Your Contracts Are Enforceable
If you wish to sell goods or services to minors, you should ensure that the contracts you enter into with minors are enforceable. There are a couple of strategies that you can adopt, including:
- guarantee: Consider inserting the requirement for someone over the age of 18 to guarantee that the minor fulfills their obligations; and
- contractual terms: Your online terms and conditions should ensure they cover the provision of goods or services to minors. Consider including clauses that are subject to the relevant laws relating to minors in the state or territory where your goods and services are being provided.
Ensuring that you have terms and conditions which create enforceable contracts is essential. This is especially the case if you might be selling goods or services to minors. To ensure your contracts are enforceable, you can:
- require someone to guarantee a minor will fulfill their contractual obligations; and
- include a clause in your terms and conditions that relates to providing goods and services to minors.
If you think your contract terms and conditions may need a refresh, get in contact with LegalVision’s contract lawyers today on 1300 544 755 or fill out the form on this page.
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