It doesn’t pay to kid around

when contracting with minors

Ron Hay is a media and entertainment lawyer and a member of the KNOWlaw Group of the Toronto law firm of McMillan Binch. This article was prepared with the assistance of lauralee bielert.

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Kids – tv cameras love them. Anyone contracting with a minor under the ‘age of majority’ (which is 18 or 19, depending on the province), whether for acting services, life story rights/releases or obtaining a grant or waiver of rights, needs to realize that there are risks in doing so. Why? Because a minor does not have a legal capacity to make a binding contract until he or she reaches the age of majority.

While there is nothing preventing you from contracting with a minor, a minor may be able to claim that a signed contract is invalid and choose to renounce or ‘repudiate’ it, and may do so anytime after signing until a reasonable time after reaching the age of majority. If you are negotiating with someone who has not reached the age of majority and the success of your project relies on your contract with this non-legal entity, read on.

Child protection

Society has traditionally offered protection to children by way of child labor laws and other child protection legislation. We have decided that a minor should be protected against his or her lack of experience or maturity, and don’t wish a young person to be saddled with permanent or irrevocable liability prior to attaining adulthood.

‘Necessaries of life’

An important exception to the general rule that a minor has no capacity to contract involves situations where the contract secures the ‘necessaries of life.’ Courts have upheld contracts for food, shelter, or any other things necessary for the reasonable comfort of the young person.

Courts have also included contracts of apprenticeship and of service under this category.

If a minor wishes to repudiate a contract, the other party can ask a court to enforce the agreement. If the court determines that the contract for necessaries is for the minor’s benefit, it may determine that the contract is valid.

What does this mean for someone engaging the services of a minor? As usual, it depends on the situation, as a contract for ‘necessaries’ will not be enforced unless it is found to be ‘beneficial’ to the minor.

‘Beneficial’ test

Canadian courts look at all aspects of a contract to determine whether or not it is beneficial to the minor. The test used by the courts was established in a case involving John Tonelli, a talented young hockey player. Tonelli grudgingly signed a contract with the Toronto Marlboro Hockey Club at the age of 17 – refusal to sign the club’s standard form contract would result in being barred from play. Tonelli repudiated the contract on his eighteenth birthday and the club sued.

The court examined the contract and found a number of the terms to be particularly onerous. For instance, Tonelli was required to pay the Marlboros 30% of his gross pay for the first three years of his professional hockey career, and was forbidden from playing for any other team while the contract was in force.

The court concluded that the burdens imposed on Tonelli outweighed the benefits. Even though Tonelli’s father had signed the contract and Tonelli had received independent legal advice, the court held that the contract was unenforceable and Tonelli was free to play for the then emerging World Hockey Association league.

The American way

In response to situations similar to Tonelli, California established a pre-approval court process for minors’ contracts. Although specifically reserved for children in the entertainment business, any party to the contract may make a presentation to a court as to why a contract should or should not be approved.

The court may require that up to one-half of the minor’s earnings be held in trust for the child. Once a contract receives court approval, the minor has no right to repudiate it simply because of age. While this pre-approved process is optional, it is regularly done in Hollywood.

British Columbia

British Columbia has also established a pre-approval process – under the Infants Act, a court may make an order giving a minor the legal capacity to enter into a binding contract. If the court determines that the contract is beneficial to the minor, the minor will be granted the ability to contract.

The procedure takes several weeks, as notice must be given to the Public Trustee and to the minor’s guardian. While the process is not often used by Canadian producers, American producers regularly take advantage of it.

Does parent = guardian?

Normally when contracting with a minor the parent or guardian cosigns the agreement. In fact, actra requires the actor’s parent to sign if the actor is under the age of 16. Contrary to popular belief, a parent is not automatically a guardian – he or she must be appointed by a court, and once appointed, is considered the ‘guardian’ of a minor’s property.

In determining whether or not to appoint a guardian, a court will examine the ability of the applicant (typically a parent) to manage the child’s property, any plans proposed by the applicant and the views and preferences of the child.

The public representative of the minor also plays a role. Once appointed, the guardian has the authority to receive money on behalf of the minor. An application for guardianship can take several months and cost several thousand dollars.

Why worry?

There are two initial risks. The first is that the grant of rights (including use of voice, name and likeness) and any waiver of injunctive relief may not be valid and may limit the ability to exploit a production.

The second risk involves payment. If you pay a minor’s salary to his or her parent (who are not guardians), the minor could later claim that the parent wasn’t entitled to receive money and demand that you pay again. You also risk the possibility of a fallout between a parent and the minor – the California statute arose as a result of a child suing his parents over this very issue.

Nobody wants to pay twice. In addition to having a guardian appointed, at least two other options are available to you:

1. Pay money owing to a minor ‘into’ court and let the court release the money – once paid, you will be relieved of your obligation to pay.

2. Invest the money in the minor’s name – purchasing a low-risk investment with a reasonable yield that matures close to the minor attaining the age of majority.

Note, however, that this option does carry some risk and should not be chosen without prior consultation with your legal advisors.

The Canadian reality

As a practical matter, the parent of a minor handles and administers the property of his or her offspring absent judicial sanction as a guardian. Life goes on without pre-approved contracts, and there doesn’t appear to be a rash of minors repudiating their contracts. Given the size of the industry in Canada, an actor who regularly repudiates contracts may soon lack contracts to repudiate.

However, as our industry grows and greater sums of money rest on small heads, the risks will increase. If your contract with a minor involves large sums of money, or you are relying on the contract for a series of projects, series’ options, or chain of title for life story options, carefully consider having a guardian appointed. If you are a b.c. producer, consider taking advantage of the Infants Act.

At all times, remember that you are not dealing with adults. They may act grown up, but in the eyes of the law, it’s just for show.

(This article contains general comments only. It is not intended to be exhaustive and should not be considered as advice on any particular situation.)