§ 3.7 p.m.
§ The Lord Chancellor (Lord Hailsham of Saint Marylebone)
My Lords, I beg to move that this Bill be now read a second time.
Before I begin my speech, let me say how sorry I was to learn that we shall not be hearing the noble Lord, Lord Meston, whose name was on the list of speakers. He is detained in court. One of the prices we pay for having younger Peers is that they must pursue their professions. I am sure your Lordships wish him all the success that his case deserves.
The purpose of this Bill is to give effect to the recommendations of the Law Commission in its 134th Report on Minors' Contracts. The need for the report arose from a number of court decisions concerning the provisions of two rather dated nineteenth century statutes. Those statutes are respectively the Infants Relief Act 1874 and the Betting and Loans (Infants) Act 1892, both of which sought to place a gloss or glosses on the general principles of common law. To explain this, the House will of course know that under English law until very recently those under full age were called infants, owing to the influence of Franglais, which was invented by English lawyers. They are now referred to as minors—although, with respect to Mr. Scargill, I spell the word with an "o"!
The Law Commission considered the whole of the law relating to contracts made by minors, but eventually made recommendations only on those parts of the relevant law which caused injustice or difficulty.
The existing common law on minors' contracts is based on a principle which is known as qualified unenforceability; that is, with certain exceptions, a contract concluded by or with a minor may be enforced by the minor but not against him or her. The exceptions are contracts which are likely to be of benefit to the minor, such as contracts for what are called "necessaries" and contracts of employment. These are perhaps the most common but there is a further category of contract which is binding on a minor unless and until repudiated by him during his minority or shortly thereafter. These contracts, such as contracts for the sale or puchase of an interest in land, marriage settlements, or partnership agreements, all involve the acquisition of a lasting interest in property or the incurring of a continuing obligation attached to a property.
The basic principle of the common law—that a minor's contract is enforceable by but not against him or her—exists to protect the minor from unscrupulous 710 adults or from his own inexperience. In the last century, however, Parliament added further glosses to the existing common law principle. Unfortunately in practice these have brought obscurity and difficulty to this area of the law. In particular the Infants Relief Act 1874, of only two substantive sections, has caused problems quite incommensurate with its brevity.
Section 1 of the Infants Relief Act, if I may remind the House, renders "absolutely void" contracts entered into with minors except in the cases to which I have already referred. In practice, however, the courts have been reluctant to give the words "absolutely void" their literal meaning. Ordinarily a void contract and particularly an absolutely void contract (whatever the word "absolute" may add to the original adjective) has no legal effect at all.
Property cannot pass under that section and money paid under it can be recovered. Nevertheless, it has been held that where goods which are not "necessaries" are delivered to a minor, the property in them does pass to the minor, notwithstanding the 1874 Act, and that money paid by a minor under an absolutely void contract cannot be recovered unless there has been a total failure of consideration. On the other hand, a guarantee by an adult of an "absolutely void" loan is itself void and a minor cannot be made bankrupt in respect of debts arising out of the supply of non-necessary goods on credit since any contact for the supply of such goods is, to quote the Act once more, "absolutely void".
Section 2 of the 1874 Act prevents a former minor from ratifying any contract made during minority. This section has at least the merit of being clear in its operation. The same might be said of Section 5 of the second Act now under review in the Law Commission's report—the Betting and Loans (Infants) Act 1892—which invalidates a new contract to repay a loan contracted during minority. However, so long ago as 1967 the Latey Committee (whose principal recommendation was the reduction of the age of majority from 21 to 18, which has of course since taken place) recommended that both ratification and the making of a new contract should be fully effective. This view was wholly endorsed by those who commented on the Law Commission's working paper.
The Bill will remove all these uncertainties and restrictions introduced by the nineteenth century legislation I have referred to, and allow the common law rules of "qualified unenforceability" to prevail. Clause 1 of the Bill disapplies prospectively the 1874 and 1892 Acts in respect of any contract made by a minor. This will mean that Section 1 of the 1874 Act will cease for the future to render a minor's contract "absolutely void" and also that a minor will be able to ratify a contract on attaining his majority. The disapplication of the 1892 Act will enable the minor for the future to make a new contract to repay a loan obtained during minority.
The Law Commission recommended that a guarantee by an adult of full age—sui juris—of a minor's contract should be enforceable. Clause 2 of this Bill accordingly provides that such a guarantee shall not be unenforceable against a guarantor simply because the primary obligation was entered into by a minor. The Bill does not affect such rights as the guarantor may enjoy against the minor himself.
711 The Law Commission has also recommended and Clause 3 of the Bill provides that the court should be empowered to require, if it thinks it just and equitable, a minor who has made a contract to transfer to the plaintiff any property acquired under the contract or any property representing it. The clause would not, however, require the minor to pay the seller the purchase price or a sum equivalent to the value of the goods, since to do so would, in effect, make the contract enforceable against the minor. In this context I would remind your Lordships that the Bill is not intended to disturb the common law principle of "qualified unenforceability".
Lastly, Clause 4 repeals for the future the 1874 and 1892 Acts and makes a small amendment to the Consumer Credit Act 1974, so as to bring guarantees as well as indemnities within the provisions of that Act. The Bill will of course apply only to contracts made after the Act is in force.
The proposals in this Bill are confined to those relatively few areas of the law of contract which at present cause difficulty or injustice to minors and those dealing with them. Most of these difficulties have been caused by the statutory glosses which I have attempted to describe. On their repeal, the common law principles can be developed by the courts. These proposals have, I repeat, been greeted by a wide measure of support. I cannot pretend that this Bill will cause a revolutionary change, but as far as it goes I hope the House will agree that it is good. I ask the House therefore to give it a Second Reading.
Moved, That the Bill be now read a second time.—(The Lord Chancellor.)
§ 3.16 p.m.
§ Lord Elwyn-Jones
My Lords, the House will be grateful to the noble and learned Lord. He will reflect, I hope, that his explanations are not absolutely in vain. They bring clarity to a scene not notable for clarity. The Bill has the great merit of brevity. Its quality is assured by the fact that it is a replica of the Bill that was annexed by the Law Commission to its report upon this matter in 1984. The Bill is yet another example of the debt that Parliament owes to the Law Commission not only for producing reports of very high quality but for the additional facility of making a draft Bill readily available for us.
The Bill has its basis, I suppose, in the law reform of 1969 which gave effect to the recommendations of the Latey Committee report on the age of majority. I remember that reform well as it was my pleasure to take it through another place. My goodness, yes, it was 15, 16 or 17 years ago! The report recommended the lowering of the age of full legal capacity from 21 to 18, reflecting the social reality of our time. The age of 21, as I gathered at the time, was originally linked with the ability of a knight's son to sustain a heavy suit of armour or lift a lance or sword. It was also thought necessary in Victorian times to protect from the clutches of money lenders young men who were said by the law journal of the time to be,prone to horse flesh, dog fleshI do not quite follow that, but I see the point—cigars, sparkling drinks, swell attire, betting and making presents to ladies who are sometimes fair and often fragile.What a sweet Victorian note there is about all that!
712 I agree with the rejection by the Law Commission, and, by implication, of the noble and learned Lord the Lord Chancellor, of the alternative proposal to make 16 the critical age for contract purposes. I note from the report of the Law Commission that the majority of adults, teachers and others whose work brought them into close contact with this situation took a similar view. They stressed the vulnerability of 16 and 17-year olds to high powered advertising and such matters.
As the noble and learned Lord has explained, the report confined itself to amending the law on qualified unenforceability—the rule that a minor's contract is enforceable by him but unenforceable against him. The Bill does not try to reformulate the existing exceptions to the principle of qualified unenforceability under which a minor's contract is enforceable against him. The most important exceptions are in respect of contracts for necessaries, contracts for employment and contracts involving certain lasting property rights or obligations.
As the noble and learned Lord said, the Law Commission confined its recommendations for legislation to the aspects of the law regarding minors' contracts which in practice cause difficulty or lead to injustice. These have been explained by the noble and learned Lord. I agree with the amendments made in the Bill. So, as a matter of comfort, does the Law Society. I suspect, too, that there will be unanimous approval both in legal circles and among those who have to deal with the problem. I am grateful to the noble and learned Lord for his explanation and I support the Bill.
§ 3.20 p.m.
§ The Lord Chancellor
My Lords, the House is always indebted to the noble and learned Lord for his knowledgeable and very informative speeches—none the worse on this occasion for being short. I am particularly grateful for what he said about the Law Commission. We need to remind ourselves that without its work, and that of the two Law Reform Committees, law reform would be a virtual impossibility. It would become bogged down in the government programme year after year. As it is, the commission's process of consultation and, in this case—as in a number of other cases—the fact that it has been able to employ a professional draftsman to annex a draft Bill to its report, make it much easier for a Lord Chancellor to persuade his colleagues to give up valuable government time to it. The noble and learned Lord has probably had as much difficulty as I have in securing a niche for law reform, which seldom has much sex appeal about it, in the Government's programme and in the Queen's Speech.
That is all I have to say. I thank the noble and learned Lord very much. I agree with what he says about the rejection by the Law Commission of an even earlier age of majority at 16. Curiously enough, among the consultees there were the elder minors—those of 16 and upwards—who very much approved of the Law Commission's rejection. They found the existing protection of the common law a valuable possession and they did not want to lose it. Of course, the two Acts we are getting rid of, as the noble and learned Lord pointed out, were a reflection of, I will not say Victorian values, because that might get me into 713 trouble, but of the fact that they were designed to protect young and foolish men, with, as a rule, too much money, from those who wanted to remove that money from them. They do not, I believe, reflect modern values at all.
I am very much obliged to the noble and learned Lord and I will now proceed to do my minuet to the Woolsack.
On Question, Bill read a second time, and committed to a Committee of the Whole House.