Capacity to Contract
- General rule - all persons (natural and legal) can enter into contracts
- on the groups of public policy (whilst also repsecting individual autonomy) the state provies extra protections for those who are deemed ‘vulnerable’ n the eyes of the law for some ‘legal defect’
Broad categories - 1. minors, 2. menatlly ill, 3. intoxicated persons
Minors
- Contracts with minor generally void (under 18)
- minors incapacity in conclusively preumed - minors dont need to show he/she lacked contractual capacity
3 Categories:
- contracts that are void (no legal effect) - for repayment of money loaned to minors/contarcts for goods supplied
- Contracts that are voidable (valid but may be avoided) - contracts taht dont benefit the minor or a contract with recurring obligations
- Contracts that are valid - contracts for necessaries or contracst of service that beneft the minor.
McDermott - ‘protect a minor agains his/her immatuity in his/her dealings’
Law does attameot to strike balance between protecting minors from their inexperience but then also protect contractimng parties who contract with minor unknowingly (particularly if age has been misrepresented)
If contract not for necessity/ serve to benefot minor - minor may choose o avoid it
o 1) contracts which are beneficial and have recurring obligations – infant must avoid by some positive act before coming of age or reasonable time thereafter.
o 2) all other contracts – enforceable by infant but not against – unless infant positively confirms contract within reasonable time of coming of age
Contracts for necessaries
- Neccessaries - items law considers essential for minors
- Binding on the minor
- Sale of Goods Act 1983 - minor bound to only pay ‘reasonable price’ for them
- Act defines necessaries as ‘goods suitable to the condition in life .. and to his ctual requiremnts and the time of sale and delivery.
LRC 1985 REPORT - very vague, should be abolished
Neccessaries are
- food, clothes, books - **Soon v Wilson **
- Vehicles for work - First Charter Financial Bank v Musclow
NOT - Cufflinks, hunting horse, expensive shorts
Nash v Inman – student bought supply of waistcoats which father avoided on basis he had enough. Court held up to tradesman to find out circumstances of purchaser and if didn’t do so – restrain selling to miners.
o Nash test
§ 1) are goods/ services necessaries
§ 2) are they necessaries to particular circumstances of minor
Beneficial Contracts of Services
Clark – generally if minor receives some form of tuition or is ‘incidental to the means whereby an infant earns his living, it may be enforceable.’
Doyle v White City Stadium – minor agreed to box under boxing control rules – therefore had to forfeit purse when punched below the belt
- If minor enters into management agreement I will be upheld if fair to the infant
- It will not be enforced and will be voidable at the minor’s behest if the terms are unfair to the minor:
o Francesco v Barnum – infant agreed to sing but other party took no commitments to provide work/ teach her – yet restrained her actions. Contract not enforceable.
o Shears v Mendeloff- contract -boxer and management – voidable as benefit manager only – manager got ¼ of boxer’s winnings and boxer paid expenses.
o Keays v Great Southern Railway – exclusion clause on railway ticket which deprived minor girl of statutory rights against railway company was unenforceable.
LRC Report on Minors Contracts in 1985
*Reccomendations: *
- contracts with minors and adults enforceable gainst latter bt not vice versa
- both parties can seek restitutionary relief from courts
- court has overarching. power to conisder all circumstances in the case
- Abolish concept of necessaries
Criticism:
ˇ**Porter v Wilson **–‘stranger must think it strange that a minor may be liable for his crimes and yet is not bound by his contracts.’
· Doctrine of minor incapacity undermines the ‘social purpose of contract’ – keeping promises
Enright – it does not make commercial sense. Restrains ambitious young people, e.g., if they have a contract in sport is considered beneficial but if it is in trading this is considered business. This distinction is no longer justifiable in the modern world - Distinction is illogical.
Mental Incapacity
Contract is valid unless
1) mental illness was such as to prevent the sufferer from knowing nature of actions
2) other party was aware of this
The Assisted Decision-Making (Capacity) Act 2015 - capacity is assessed only in relation to the matter in question and only at the time in question. If a person is found to lack decision-making capacity in one matter, this will not necessarily mean that s/he also lacks capacity in another matter. The Act recognises that capacity can fluctuate in certain cases.
Intoxicated Persons
Party must be so intoxicated not to know nature of actions.
If contract for necessaries – party bound to pay reasonable price even if other party knows of intoxication
If not necessaries -party bound unless can prove other party knew of intoxication. If established – party may repudiate / affirm contract.
Kurt v McGavin – contract still stood even though vender was so drunk to have no business sense as purchaser was unaware of this
