12 March 2007
Contracts with minors have always fallen into a special category. The general rule is that such contracts can be avoided at the decision of the minor, even if the contract is beneficial. This can leave those who have invested time and money in the minor's career without any redress, either against the minor or any third party with whom they subsequently enter into a contract.
An exception to the general rule occurs where the contract is one for necessaries or employment, or is analogous to one, and is for the benefit of the minor. The High Court in Proform Sports Management Ltd v Proactive Sports Management Ltd and Paul Stretford (2007) has provided much-needed clarity on the scope of this important exception.
Proform brought proceedings against Proactive and Paul Stretford in late 2005, claiming that the representation contract into which Proform entered with Wayne Rooney when he was 15 was binding on him and that Proactive and Stretford were liable for having induced Rooney to breach the Proform contract.
The defendants raised a number of defences, including two points of law.
First, that as a matter of law a representation agreement between an agent and a player under 18 was not a "necessary" and was voidable, therefore the court did not have to go on to consider whether the contract was for the benefit of the minor.
Second, that as a matter of law a third party cannot be liable for inducing breach of a voidable contract.
The case law in this area is archaic, making it difficult to determine which contracts in the modern age are analogous to the contracts of necessaries or employment. This has been highlighted in reports over the past 100 years.
The precise limits of the exception to the general rule are of crucial importance. It is only if the contract is analogous to contracts for necessaries or employment that the court is then concerned with the further question of whether the contract is for the benefit of the minor.
If the contract is analogous and is for the benefit of the minor, then the minor remains liable even if they later change their mind.
The courts have always been prepared to recognise what a necessary change is, as society itself changes, an example being Chaplin v Leslie Frewin (Publishers) Limited (1966).
Charlie Chaplin's son wanted to make money by selling his life story. He later changed his mind, but it was held that the contract was analogous to employment contracts since it was a legitimate way of making a living: the contract was held to be for his benefit and therefore binding.
In the music industry case involving The Kinks, Denmark Productions Limited v Boscobel Productions Limited (1967), the musicians sought to argue that the agreement with their manager was voidable, but it was held that such a contract was analogous to a contract of employment because it enabled the young musicians to earn a living.
It has been much debated how far this analogy with a music manager can be taken in relation to intermediaries and others who facilitate commercial activity.
In Proform, His Honour Judge Hodge, sitting as a judge of the High Court, distinguished The Kinks' case and held that agreements with football agents are removed from that class of case that provide an exception to the general rule of voidability.
The judge decided that a contract with a football agent was not necessary to enable a player to earn a living. Rather, the contract with the agent was a 'trading contract' and therefore voidable. It was the contract with their football club that provided their employment and training.
The future challenge
There may be important implications following the Proform decision.
Contracts which, on the face of it, appear to add value or facilitate a minor's career may nevertheless be voidable irrespective of how beneficial they are.
Given the test of whether such contracts are necessary to enable the minor to earn a living, the issue must remain contextually sensitive, but the question of how appropriate the contract in question is to the livelihood will be an important factor.
Further court decisions will have to determine whether other contracts fall within the 'necessary' type or the 'non-necessary' type.
Club contracts, sponsorship deals and even book deals enable players to earn a living and may be regarded as contracts of the necessary type. On the basis of the Proform decision, it could be argued that, as well as representation agreements, contracts for the provision of services such as PR, wealth management and marketing are not necessary to enable the player to earn their living even though they may add value.
The challenge for those who genuinely wish to invest in the careers of young talent will be in protecting that investment over the duration of the contract. This may involve parental guarantees/indemnities, however unattractive that may be at the outset of a relationship.
Alternatively, it may be possible, through the careful structuring of the agreement, to bring the contract within the 'necessary' type as, for example, by the provision of some form of training. In the context of musicians, this may be in the form of music lessons or voice training. With football players such a solution is more difficult, as it will be the club that provides the football training. There may, however, be other skills, including dealing with the media and managing finances, that may be regarded as necessary for a young footballer of prodigious talent in the modern era.
If the courts approved this approach on the basis that there was a significant educational element in the agreement, it would then go on to consider whether the contract was in fact for the benefit of the minor.
What is clear to the authorities is that, if the contract in question is of the 'non-necessary' type, the player is free to terminate the agreement before they turn 18, and probably even shortly thereafter, providing they do not delay too long or affirm the contract after they become 18. It is also clear that, if they enter into an agreement with another party, that third party will not be liable for inducing breach of the earlier voidable contract.
•Julian Diaz-Rainey is a partner at Halliwells