Richard Wolfe: Entering into Contracts with Minors can be a Minefield

The Florida Law Journal

Richard Wolfe

BY RICHARD C. WOLFE, ESQ – The fields of entertainment and sports are dominated by the young. Many athletes and entertainers have earned tremendous amounts of money prior to reaching legal age. This article will focus on three contracting issues apropos to minors: where the contract is judicially approved; where the contract is guaranteed by the minor’s parents; and where consideration is given to the minor, but no judicial approval is obtained.

Background on Judicial Approval

Florida is one of 38 states that has adopted a version of the so-called Jackie Coogan” Law, named after the child actor whose riches were taken by greedy parents (and who regained his fame in middle age as Uncle Fester in the Addams Family TV show) [See Florida Statutes 743.08, 09, and 095 (1995).] Under the common law, the parents possessed the results of a child’s work in return for their legal obligation to provide support to the child. However, a contract entered into by a child was voidable (not void) at the option of the child, either before or after the child reached the age of majority (18 years old), so long as the child acted within the statute of limitation period following his 18th birthday.

This created a twofold problem. First, the contracting entity had no guarantee the contract was enforceable against the child. Second, the parents, not the child, reaped the monetary benefits of the child’s services. For this reason, California became the first state to allow a court to remove the disability of minority, making the contract enforceable and providing that the proceeds of the contract belonged to the child, with a portion being retained in a restricted depository until the child reached the age of majority.

How to Obtain Judicial Approval

A contract (even one already in existence) may be submitted to the probate court for approval. The procedure requires the appointment of a guardian to act for the child, the establishment of a savings account, and usually the appointment of an attorney ad litem to represent the interests of the child and to give advice to the court that the contract is in the best interests of the child. The court’s overriding goal is the protection of the child.

This can often be tricky because many contracts in these fields have no guarantees of compensation. The contracting party usually is making an investment in the career of the child with the hope of creating a marketable artist, such as in the case of a young musician where a producer will invest in the recording process in hopes the record can be distributed and sold, resulting in future royalties; or in the creation of a TV pilot that will hopefully be picked up by a network for episodic production, with salaries then being paid to the actors.

The petition must be verified, and it can be filed in Florida even for a non-resident child, so long as the employment is to occur in Florida. The parents must express their consent, the details of the arrangements, the contractual terms, and the benefits to the minor must be provided to the court.

For this reason, this author often extolls the track record of success of the contracting party, especially where there is no guarantee of compensation. If the contract was negotiated by an experienced lawyer (in the contracting field), that should also be included in the petition, and it is wise to obtain a letter from that lawyer as to his or her opinion that the contract is in the best interests of the child.

This does not prevent the court from also seeking the opinion of an attorney ad litem. Thus, the contracting party needs to be advised upfront that the negotiation with the child’s counsel may still lead to further negotiation, if the ad litem is not satisfied that the contract is in the child’s best interests. If the court approves the contract, the disability of minority is removed and the child’s right to void the contract is taken away, making the contract binding and enforceable with injunctive relief.

When drafting the contract, the contracting party will usually require the parents to agree to participate in the approval process, and usually the child will insist that the contracting party pay, the cost of obtaining the approval, including the costs of the ad litem. However, judicial approval is not required pursuant to Florida Statute §743.08(1), which states:

“A contract made by a minor or made by a parent or guardian of a minor, or a contract proposed to be so made, may be approved by the probate division of the circuit court or any other division of the circuit court that has guardianship jurisdiction, where the minor is a resident of this state or the services of the minor are to be performed or rendered in this state” Fla. Stat. §743.08(1) (emphasis added).

The key language in this statute is the use of the word “may,” which indicates there is no obligation or requirement for Plaintiff to obtain judicial approval for a contract with a minor in order for the contract to be considered effective and enforceable. [See Garcia Granados Quinones v. Swiss Bank Corp. (Overseas), S.A., 509 So. 2d 273 (Fla.1987); also see Stephen M. Carlisle and Richard C. Wolfe, Entertainment, Art & Sports Law: Florida's New Child Performer and Athlete Protection Act; or, What to do When Your Client is a Child, Not Just Acting Like One, 93 Fla. Bar. J. 93, (1995).]

Parental Guarantees

Due to the expense and uncertainty of judicial approval, some contracting parties opt to proceed with the contract by obtaining a parental guarantee or through the exchange of consideration.

Often a contracting party will require the child’s parents to guarantee the obligations of the child and give assurances that the child will not disavow the contract. This author could not find any case law where a contracting party sought to enforce such clauses. However, it is clear that such clauses cannot form the basis of a suit for injunctive relief against the child.

Exchange of Consideration

Sometimes a contracting party may incur substantial consideration in the performance of the contract prior to the time that the child seeks to disaffirm. Florida law is clear that a child must return the consideration in order to disavow the contract if he is able to. Although there are no cases in Florida in the entertainment arena, there are numerous cases where children received consideration in the form of a car and then have sought to disavow it, in order to avoid their obligation to pay for the car. [See Putnal v. Walker, 61 Fla. 720, 725 (Fla. 1911).]

However, where the minor has disposed of, lost, or wasted the consideration during his infancy, his right to disaffirm is in no way dependent upon the minor returning the consideration if he is not able to. The policy argument behind this rule is essentially to protect the indiscretion that minors tend to show. Other cases have held that a child cannot disaffirm or void a contract, and retain the benefits of that same contract.

The US Supreme Court has on two occasions recognized this rule of law holding that if the child disaffirms an executed contract, and the specific consideration can be restored in whole or in part, the child is treated as a trustee of the other party and must give it up.

Conclusion

Before taking the risky venture of contracting with a child, contracting parties must consider the cost, time and risks of obtaining court approval. Without obtaining court approval the contracting party may seek parental guarantees and provide consideration, which at a minimum must be returned if the child seeks to disavow, but the contracting party always faces the risks that the child may disavow.

The author, Richard C. Wolfe, is a partner in Wolfe Law Miami P.A., a firm that specializes in representation in the sports and entertainment industries. Richard was a co-draftsman of the Florida Jackie Coogan Law (FS 743.08-095) and is a frequent lecturer on the subject. The firm’s website is located at www.wolfelawmiami.com.

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The Florida Law Journal