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Chris The Lawyer
Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 19377
Experience:  34 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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Good Morning, I have a question regarding Home Based Business

Resolved Question:

Good Morning,


I have a question regarding Home Based Business and Direct selling Companies.

Normally a person whom is entering self-employment as an independent distributor for a Direct selling company would typically have to be at least 18 years of age.

I understand that each different company would have their own policies and procedures concerning age and joining criteria, and I know of one case where the following question/issue has been accepted by a global company.

As probably 99.9% of Direct Selling companies are unaware that such a thing is possible, my question of which I seek an answer is;


Under New Zealand law and even under British law, regardless of any terms and conditions provided by the company -- can a child enter into a contract of independent distributorship providing that child has signed up under a joint account with a parent or guardian?

If such an action is indeed legal, then would a company of whom denies such an action be enforcing a restriction of trade contrary to any business legislation?

Ken
Submitted: 1 year ago.
Category: New Zealand Law
Expert:  Chris The Lawyer replied 1 year ago.

christhelawyer :

Hi Welcome to JustAnswer. My first response will follow shortly. Please feel free to follow up if anything is not clear

christhelawyer :

Contracts with children are covered by the Minors Contracts Act in New Zealand.

christhelawyer :

To make such a contract enforceable the act says

christhelawyer :
9Minor may enter into contract with approval of District Court




  • (1)Every contract entered into by a minor shall have effect as if the minor were of full age if, before the contract is entered into by the minor, it is approved under this section by a District Court.




    (2)An application to a District Court under this section may be made—




    • (a)by the minor or any other person who will be a party to the proposed contract; or






    • (b)by a guardian of the minor (if the minor is under 18 years of age).






christhelawyer :

A minor is "minor means a person who has not attained the age of 18 years; and a person is of full age if he or she has attained the age of 18 years"

christhelawyer :

So if you want a minor to enter such a contract this is the procedure.

christhelawyer :

If the minor signs a contract without this authority, then the contract is not necessarily void. Section 6 then applies

christhelawyer :
6Contracts of minors




  • (1)Subject to the provisions of this section, every contract (other than a contract to which paragraph (b) or paragraph (c) of subsection 5(1) applies) entered into by a minor is unenforceable against the minor but otherwise has effect as if the minor were of full age.




    (2)The court may, in the course of any proceedings or on application made for the purpose, inquire into the fairness and reasonableness of any contract to which subsection (1) applies at the time the contract was entered into and—




    • (a)if it finds that any such contract was fair and reasonable at that time it shall not be obliged to make any order but it may in its discretion—




      • (i)enforce the contract against the minor:






      • (ii)declare that the contract is binding on the minor, whether in whole or in part:






      • (iii)make such order entitling the other parties to the contract, on such conditions as the court thinks just, to cancel the contract:






      • (iv)make such order as to compensation or restitution of property under section 7 as it thinks just; and








christhelawyer :

There is a supervisory jurisdiction of the court in otherwords. If the contract is fair, then it will be enforced.

Customer:

I already know all this as I have done business law, (although not passed). My question was, is their any restriction on joint business agreements of parent and child between them and a company in the business of franchising/selling business opportunity memberships?From the answer you gave me, it appears you are not familiar at all with Newtwork Marketing Companies and Direct Selling companies.

christhelawyer : I know how those work. They have contracts and whether this is a partnership or a company the Minors Contracts Act applies. There is apart from this no restriction. I would not suggest a minor becoming involved because the obligations which do affect such companies under the Fair Trading Act would carry a serious burden on a child. But that is your choice.
christhelawyer : If the object is to share the tax burden there are better ways.
Customer:

At present I feel that you haven't given me the answer that I am looking for. I am aware that every contract made regardless of what it is, the legality of that contract will always come into question when minors are involved. In this scenario, what I am trying to seek is confirmation that it is possible that a minor can be signed up with and adult in a Network Marketing company. In effect, it will mean that the adult has two business centers. Normally in 99% of cases a person would be phrohibited by the MLM company from running two business centres under their own name. (I know there are pay plans that allow such a thing to happen.) of which usually is phrohibited

Customer:

. In my scenario, I am seeking confirmation that a joint membership would be deemed as a separate business entity allowing a person then to have two business centers. However, the second business center being a joint business. The adult in this case would have full responsibility of the business and the child being named as part of the business for naming purpose only. The intention of this joint business is so that when the child reaches the required age can then take full ownership of the business.

Customer:

The whole purpose of having a joint business center is so that the child does not have to wait X amount of years to be able to sign up with a company.

Customer:

As I said, I know of one company that allows this to happen. It seems that they are introducing new concepts and ideas into an already old business model, and even traditional technology companies are copying their online technology innovations in order to stay ahead of their own game with the products and services that they deliver. When I saw that I would have to submit my credit card details, I was very apprehensive. However, because the answer that I am looking for can make a huge difference for many families in New Zealand and around the world, I felt it was in everyone's interest for me to submit this question. I am not looking for an answer that it cannot be done, I am looking for the answer that it can be done. That a child can be signed up with an adult and the new membership is separate from any other. The child does not need to be accountable for any tax etc. as it is the adult of whom is taking the responsibility and it is the adult's banking and tax details that get submitted. The child is there by name only and as I mentioned, the business then becomes the child's when the child reaches the minimum required age by the company. I hope all this makes it more clearer in what I seek. After all this it would still be up to the company, however what I ask is that this is still ethical and legal for a business point of view and so that any company could be encouraged to follow through with this concept. Ultimately everyone would win with this concept.

christhelawyer : The structures you describe are going to be governed by the rules and the contracts of the company you want to contract with. While I have emphasised the need to comply with the Minors Contracts Act virtually all the rest of your issues are not restricted by contract or other laws. This is because these are all negotiated between the parties. In New Zealand we have an open and fairly unregulated business system. If you comply with the core elements such as the acts I have referred to, the rest are only restricted by what you and the other party agree.
christhelawyer : however you do need to decide if the minor is a partner, a contractor or an employee. These carry different duties and responsibilities.
christhelawyer : That is the issue you need to decide on, because the description you provide is somewhat vague as to the status of the minor, and you do need to have some form of legal relationship which will determine how the minor works in this business.
Customer:

Thank you very much for your answers, and for your time and effort. I guess at the end of the day, because this concept is appears to be so new to the MLM industry, it will be faced with mixed feelings. However, as I can only see win/win benefits for all involved, this is why I feel I must find any legal restrictions of which could deter any company from entering into such contracts.

Customer:

On a negative note, it opens the door for distributors to create many alias business centers and of which could be deemed as fraudulent, obviously any technical details would have to be carefully ratified to ensure that members do not abuse the concept.

Customer:

Yes, I feel you have been able to answer my question to the extent that it is possible within the limitations of business law. It shows that there is opportunity for a company to structure their policies and to allow such a business contract providing all necessary proof of identity of person (child) exist. (This of course could be as simple as providing IRD numbers.)

Customer:

I you able to let me know where you reside in New Zealand?

Chris The Lawyer, Lawyer
Category: New Zealand Law
Satisfied Customers: 19377
Experience: 34 years qualified as a lawyer; LLB, MMgt and FAMINZ.
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