Our Guide for Retailers and Other Businesses on Contracting with Children
Law stated as at 1st July 2013
- Contracts and capacity
The age of capacity is 18. Consequently, minors can only enter into the following contracts:
- Contracts for “necessaries”.
- Contracts of apprenticeship, education and service.
If a contract does not fit into one of the two categories above, the child can opt to void the contract. In other words, it is not binding on the child but it is binding on the other party. That said, if the child does not fulfil their side of the bargain, they are unlikely to be able to insist that the other side does.
If a child does choose formally to reject a contract, the court can, at its discretion, order the child to return any goods to which the contract relates. The position in relation to services is unclear as it would be difficult to return them. In this case a court may decide that as the child has had the benefit of the services he must pay the agreed amount for them.
- Contracts for necessaries
A child is bound by promises, contracts and deeds relating to “necessaries” and must pay for them. Necessaries mean life’s absolute essentials such as food, drink, clothing, lodging and medicine. Necessaries can also mean articles purchased for “real use” (as long as such items are not purely ornamental or to be used for comfort or convenience) and should be considered in relation to a child’s age and station in life. Services may also be necessaries. For example, contracts for legal and medical services can be enforced.
The supplier must show that the goods supplied are necessary. For example, in relation to mobile phone downloads, especially ring tones, teenagers may protest that they are necessary, their parents may not always agree and it seems unlikely that a court would consider them so.
If a child already has an item (and it is therefore not necessary) then the child will not be liable even if the supplier did not know that the child already had the item.
Credit agreements are not included in contracts for necessaries. Children may not take out loans. Therefore, if a child leaves home at 16, they must purchase gas and electricity for their home using a prepayment meter and use mobile phones on a “pay as you go” basis.
Goods must be necessary both at the time of sale and at the time of delivery. Where necessaries are sold and delivered to a child they must pay a reasonable price for them. This could be different from the contractual price.
Contracts for necessaries must not contain harsh or oppressive terms. Where a contract includes both beneficial and unfair terms, the contract must be considered as a whole as to whether it is generally to the child’s advantage. If it is, the contract is binding.
- Contracts for education
As well as contracts for necessaries, minors can be bound by a contract for apprenticeship, education or service, and can be bound by obligations such as a restrictive covenant preventing the child from competing with his employer after he had completed his service. In a 100-year old case, a child who had entered into a contract to go on tour with a professional billiard player and then failed to go on tour was liable in damages. A more recent case involved the premiership footballer Wayne Rooney when he was only 15.
In practice, traders contract with children all the time. For example, children buy sweets, sports kit, CDs. The economy is not collapsing under the weight of millions of potentially void contracts. Indeed, many industries would suffer if they stopped accepting money from children. As a result, it is not a major issue for most traders but they should guard against complacency and consider taking the following simple precautions:
- Include a provision in their terms of sale stating that children may not purchase goods or services from their website. Many mail order firms stipulate that respondents must be over 18.
- “Bricks and mortar” stores should train their staff to ensure that they only sell comparatively low-value items to children and young teenagers.
Most UK websites accept payment by debit or credit card which in practice means users must be over 16 or 18 respectively. If a child uses a credit or debit card it is likely to be their parents’ card. If it is used with the parent’s consent there is no issue. If it is being used without the parent’s consent a fraud has been committed. The age of criminal responsibility is ten (potentially higher in some circumstances) and therefore lower than the age of contractual capacity. If a trader threatens to go the police, a parent is likely to agree to the transaction going ahead.
- Company directorships
The Companies Act 2006 provides that any person who has reached the age of 16 may act as a company director. This came into effect on 1 October 2008. Until then, there were no legal provisions governing whether a child could be a company director.
No person under 18 can serve as a trustee of a charitable trust or Friendly Society.
- Can children hold assets?
Children are able to hold assets in certain circumstances.
- Ownership of land
A child may not acquire or hold any legal estate in land.
A conveyance or lease to a child takes effect only as contract to enter into the transaction when they become 18 and in the meantime for the seller or landlord to hold the land on trust for them.
Children are allowed to be successors to secured or statutory tenancies.
- Ownership of intellectual property
Children can own patents and copyrights and can pass the copyright in a written work to a publisher through a contract. Consequently, companies such as record companies or book publishers which have under-age artists or authors should treat such artists the same as their adult artists.
- Ownership of shares
Adults can hold shares on a child’s behalf. An effective way to hold shares for children is to register the shareholding in the adult’s name using the child’s initial as a designation.
- Advertising to children
Advertising to children is governed by the same legislation and codes of practice which relate to advertising generally in the UK. However, there are special rules for children which, rather unhelpfully, can vary, particularly in relation to the age at which a person is considered to be a child. The most practical way of dealing with these discrepancies would seem to be to structure advertising promotions in order to comply with the strictest requirements in order to ensure that the promotion does not fall foul of one code while complying with another. For example, if you are aiming promotion at 16 year olds, it would be wise to treat them as children as some codes consider children to be under 18, while others use younger ages.
In particular, there are special and largely uniform rules contained in the:
- Code of Practice of the Direct Marketing Association.
- British Code on Advertising, Sales Promotion and Direct Marketing (CAP Code).
The DMA Code applies to all organisations which are members of the Direct Marketing Association. Members include retailers, web businesses, marketing agencies etc. Most well-known businesses are members. The CAP Code applies to all forms of non-broadcast advertising. Its rules on advertising to children are similar to those set out in the DMA Code. Similar codes apply to radio and television advertising and both have special sections on advertising to children.
Advertisements and promotions addressed to or likely to appeal to children should contain nothing that is likely to result in their physical, mental or moral harm. For example, advertisements should not include the following:
- Children entering into strange places or talking to strangers.
- Children being shown in hazardous situations or behaving dangerously or using or in close proximity to dangerous substances or equipment without direct adult supervision.
- Encouragement to children to copy any practice that might be unsafe for a child.
Advertisements addressed to or likely to appeal to children should not exploit their credulity, loyalty, vulnerability or lack of experience. Parental permission should be obtained before children are committed to purchasing complex and costly goods and services.
Advertisements should not:
- Actively encourage children to make a nuisance of themselves to parents, teachers or others.
- Make a direct appeal to purchase unless the product is one that would be likely to interest children and that they could reasonably afford.
- Exaggerate what is attainable by an ordinary child using the product being advertised or promoted.
- Exploit their susceptibility to charitable appeals.
- Make children feel that they are lacking in courage, duty or loyalty of they do not buy or do not encourage others to buy a particular product.
- Make children feel inferior or unpopular for not buying the advertised product.
- Make it difficult for children to judge the size, characteristics and performance of any product advertised and to distinguish between real-life situations and fantasy.
Advertisers should take care not to send to children, or target children with, material which is suitable only for adults. They must not make offers of credit to those under 18.
If prizes such as holidays, pet animals or cash are offered that could cause problems between parent or teacher and child, parental consent is required.
- E-mail marketing
Unsolicited commercial e-mail communications must not be addressed to children without the prior verifiable and explicit consent of a parent or teacher. Data should not be collected from those under 16 for offline communications and those under 14 for online communications without the consent of a parent or guardian.
Orders must not be accepted from children under 16 without the prior verifiable or explicit consent of a parent or teacher.
- Both codes state that promotions addressed to children should:
- Not encourage excessive purchases in order to participate.
- Make clear that adult permission is required if prizes and incentives might cause conflict.
- Clearly explain the number and type of any additional proofs of purchase needed to participate (for example, tickets for outings, concerts and holidays).
- Contain a prominent closing date.
- Not exaggerate the value of prizes or the chances of winning them.
For mobile telephone, marketing advertisers should obtain verifiable and explicit parental consent before they contact a child via this medium.
- Special rules on advertising food and soft drinks to children
There have been special rules advertising food and soft drinks to children on the radio and in other media since 2007.
- PhonePayPlus code of practice
In its Code of Practice, PhonePayPlus (which was formerly known as the Independent Committee for the Supervision of Standards of Telephone Information Services or ICSTIS) considers children to be those aged under 16.
- Direct Marketing Association code requirements for data protection
Under the Direct Marketing Association (DMA) Code, advertisers and website operators must take special care with children’s personal data. For the purposes of data protection, a child is considered to be a person under the age of 14.
- Advertisers and website operators should not collect personal information from children under 14 without the prior, verifiable and explicit consent of the parent/teacher.
- Children must be informed of the need for parental consent.
- Personal information relating to other people, for example, parents, must not be collected from children.
- Websites must not make prizes or access to the website contingent on a child disclosing their personal data.
- Requirements relating to privacy statements must be met and data must be accurate and kept secure.
- Guidance of the Information Commissioner on websites
The Information Commissioner (ICO) has issued guidance that websites that collect information from children should put in place more rigorous safeguards to ensure that the processing of children’s information is fair. Website operators should recognise that children generally have a lower level of understanding than adults and notices explaining the way their data will be used should be appropriate to this level of understanding. In particular, website operators should not attempt to exploit any lack of understanding.
A website operator will need to obtain parental consent where it asks a child to provide personal information unless it is reasonable to believe that the child clearly understands what is involved and is capable of making an informed decision.
The ICO makes the point that the Data Protection Act 1998 does not set out a precise age at which a child can act in their own right and the ICO does not consider that it is valid to try to do so. Much depends on the capacity of the child and the complexity of the proposition that is being put to them. The Irish Data Protection Commissioner has issued guidance on the age at which consent can be legitimately be obtained from children and considers that 16 is an appropriate age. In contrast, the ICO has stated in the past that it considers the standard adopted by the now defunct Trust UK in its accreditation criteria to be a reasonable one:
“Personal data must only be collected from children with the explicit and verifiable consent of the child’s parent/guardian unless that child is aged 12 years or over, the information collected is restricted to that necessary to enable the child to be sent further but limited online communications and it is clear that the child understands what is involved.”
The ICO goes on to state that there are certain practices which are likely to breach the Data Protection Act 1998:
- Collecting personal data from children about other people such as parents.
- Enticing children to divulge personal data with the prospect of game prizes and similar inducements.
- “Prior and verifiable consent”
If organisations wish to collect personal information from children and then disclose or transfer that personal data to third parties, they must not do so without first obtaining the explicit and verifiable consent of the child’s parent or guardian. The only exception to this is if the organisation can demonstrate that the child really appreciates both what is going on and the possible consequences of their actions.
Similarly, if a website operator wishes to publish personal data on the internet, it should first obtain the verifiable consent of the child’s parent or guardian.
This can lead to practical problems such as what is verifiable and how parents can give their consent. It is not sufficient to ask a child to confirm parental consent by means of a mouse click. Ideally, a web trader should telephone the parents or write to them. According to the ICO, if a website operator considers that this is too burdensome, they should not carry out the activity concerned.
- Employment of children
According to the Employment of Children Act 1973 and subsequent legislation, it is unlawful to employ a child under 13 and employing 13 to 16 year olds is subject to many restrictions.
Nothing in this guide constitutes specific legal advice on a particular matter and should be used for general reference only. It is no substitute for legal advice from a qualified professional.
For more information on Contracting with children or any other child employment please contact our expert solicitors.