Thursday, June 5, 2014

Contracts With Minors: Protecting Your Child's Talent Assets

If your son or daughter is an aspiring entertainer, computer code writer, app designer or video game whiz kid, this article might be of interest. With media giants like Disney and Viacom/Nickelodeon creating shows featuring younger and younger performers for the adolescent and ‘tween demographic, and YouTube, Spotify and other online companies hosting content by eager young creators, child stars and teenage creators are in ever-increasing demand. Moreover, technology companies often employ young teenage whiz kids to write code and develop video games and mobile apps. All of this raises the predicament of dealing with a contract which involves a contracting party under the age of eighteen.

The dilemma for these companies is that a minor may disaffirm a contract at any time during minority or upon reaching contractual majority (at the age of 18). The mere exercise of having the parent of the minor co-sign, approve or “guarantee” the contract does not resolve the problem. The minor may still repudiate the contract on the ground of infancy, asserting that the parent or guardian lacked authority to make the contract. Although many tech companies may rely on the fact that they believe the minor is an employee creating intellectual property for the company, this may not be sufficient to transfer rights to the company as a “work made for hire” under U.S. Copyright law, or otherwise.

For this reason, the people and companies that your children deal with may seek court approval of the employment arrangement. States such as California, New York and Tennessee have laws which establish procedures regarding the judicial approval of contracts with minors. Companies working with minors will probably seek to employ this process at some point because once the Court judicially approves the contract the minor will be held to a standard of adult responsibility for its contractual obligations – and this procedure assures the company that it will get what it bargained for.

The legal procedure is nothing to be afraid of for parents although in most cases you will want to retain a lawyer to guide you through the process – probably the same lawyer that you use to negotiate the contract itself. A proceeding for judicial approval of a minor's contract is usually commenced by the company or employer filing a petition with the Court. Along with the petition there will be affidavits or statements from the parents of the minor consenting to the arrangement.

An order granting judicial approval of a contract for the services of a minor will not usually be granted on the papers alone. A hearing will be commenced in which the minor, the parents and the various other interested parties may appear before the assigned Judge. In the course of the proceeding, the court will decide what portion of the net earnings of the minor, if any, are to be set aside in a trust. In fixing the amount to be set aside, the court will take into consideration the financial circumstances of the parents entitled to the minor's earnings, the needs of the parents' other children and the needs of the minor's spouse, if married. Such amounts as are set aside are to be saved for the minor under guardianship until the minor becomes 18 years old.

Once the court does grant approval, an order will be issued which will, in effect, declare the minor an adult for purposes of fulfilling his or her contractual obligations. This will assure that the company gets what it bargained for and that your child is adequately and fairly compensated for his work.

One final warning: some companies try to avoid the cost of the court proceeding and, instead, seek to have the parent or guardian of the child sign a guaranty. Parents are well-advised to be very careful about what they sign. As mentioned earlier, the parent cannot bind the child to the contract no matter what they sign. The child, as a minor, can legally walk away from the contractual arrangement. However, if the parent has signed some document that states that the parent is liable for amounts due to the company from the child or for damages if they child disavows the contract, that contract may be enforceable against the parent and the parent could be on the hook for much more than they anticipated. A parent can sign something that consents to the child working with the company but should be wary of signing any document that goes any further.
WALLACE E.J. COLLINS III, ESQ. is a leading industry authority on contracts with minors practicing primarily in the areas of entertainment, technology and intellectual property law.; Direct Tel: 212-661-3656