Contract Law - Contractual Capacity
Contracts considered valid unless repudiated
Taking a lease on property, offering to buy shares, entering into a partnership agreement, taking out an insurance policy, a marriage settlement or an agreement for a marriage settlement.
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2. Contracts for goods supplied or to be supplied to a minor other than goods for necessaries. 3. All accounts stated with minors ( e.g.bills or invoices) which state an amount owed.
Contractual capacity of a company
A company although it is not an individual is considered a legal personality and has the capacity to enter into a written or oral contract. Usually a person acting under the express or implied authority of the company enters into the contract on the company's behalf.
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By the aforementioned legislation a minor must only pay a reasonable price for goods actually delivered - which need not be the same as the agreed price.
Mental incapacity
Contracts entered into by a person with a mental disorder are valid unless the person suffering from the mental illness can show that : he/she was unable to understand the nature of the transaction.
Drunkard
Contracts entered into by a person intoxicated are valid unless the intoxicated person can show that : he/she was so drunk at the time of entering into the contract that he/she was prevented from understanding the transaction.
Contracts for Necessaries
In relation to contracts entered into under the Sale of Goods Act 1979 minors will be bound by the terms. The act broadly defines necessaries as "goods suitable for the condition in life of such minor or infant ... and to his actual requirement at the time of sale and delivery."
Beneficial Contracts of Service, Training or Education
Minors may also enter into contracts of service if they are beneficial to them. A beneficial contract is a contract that would enable a minor to gain an education or necessary training, or a contract that enabled a minor to earn a living.
Claim
Prior to publication the minor decided he did not want them published as his reputation may be damaged. He sought to have the contract ruled unenforceable, as it was not to his benefit.
Minors
The law considers a person to have the capacity to enter into a contract if they have attained the age of 18.
Chaplin v Leslie Frewin 1966
The contract as a whole must be beneficial and must not be oppressive in any way to the minor.For example, in this case a minor, the son of Charlie Chaplin, entered into a contract with a publishing house to have his memoirs published.
Outcome
The court held that the contract was valid as it did benefit the boy. The minor had been paid a substantial advance for the book and would receive significant royalties.
Contracts void and unenforceable against minors
The following contracts that are entered into by a minor are always considered void : 1. Contracts for the repayment of money lent or to be lent to a minor.
Contractual Capacity
The law requires persons entering a contract to have the necessary capacity.
Nash v Inman 1908
The legislation and case law does allow judges to distinguish necessaries and luxuries by the words "actual requirements". In this case the purchase of 11 waistcoats by a minor was considered a luxury because the boy already had a sufficient amount of clothes.
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The other party knew of his drunken incapacity.
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The other party to the contract knew of his incapacity and lack of understanding.
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The reason the law prevents minors is to protect them from their own in experience and to protect those who enter into contracts unknowingly with minors.
Exception to the rule.
There are some contracts that will bind a minor as it is considered that the minor is not being disadvantaged or taken advantage of when entering into contracts of this nature. These contracts include :
Categories
There are three main categories of persons the law states do not have the full contractual capacity to enter into a contract
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and thereby require the protection of the law if they do enter into contracts to which they may be bound : minors, mentally incompetents and drunkards.