ELEMENTS OF A VALID CONTRACT- CAPACITY
Capacity to Contract
`Capacity' may be described as the legally
recognized right of a person to enter into a legally binding agreement. The law of contract limits in varying degrees
the contractual capacity of the following persons:
i.
Infants or minors,
ii.
Drunken persons and persons of unsound mind,
iii.
Corporations,
iv.
Undischarged bankrupts.
Contractual capacity of Infants or minors
An
infant or a minor is any person who has not attained the age of eighteen years:
An agreement entered into by an infant may constitute a binding, voidable or
void contract - depending on the object of the agreement.
Binding Contracts
Contracts which are binding on an infant are contracts for:
(i)
Necessaries,
(ii)
Education, and
(iii)
Beneficial
service.
(a) Necessaries
'Necessaries'
are defined as "goods suitable to the condition in life of such infant or
minor...
and to his actual requirements at the time of sale and
delivery".
To constitute necessaries, the goods:
(i)
Must be suitable to the condition in life of the
infant, and
(ii)
Must be suitable to the infant's actual
requirement at the time of sale and delivery, i.e. the existing stock of goods
(if any) was not adequate for the infant's needs.
Other necessaries include things like lodging, transport to
the place of work, legal advice, etc.
Liability for Necessaries
the infant is liable to pay "a
reasonable price" for necessaries supplied to him. He is not liable for the agreed price. This provision raises the question whether the
infant's liability is contractual or quasi-contractual.
(b) Education
An infant may legally enter into a
contract for educational instruction.
Some textbooks regard education as part of 'necessaries'.
(c) Beneficial Service
A contract of service or apprenticeship is
binding on an infant - provided it is substantially for his benefit.
Voidable Contracts
The following contracts are valid and
binding upon an infant unless he repudiates them during infancy or within a
reasonable time after attaining the age of eighteen:
- A
lease,
- A
partnership agreement,
- A
contract to purchase a company's shares.
(a) Leases
A lease granted to an infant is binding on
him unless he repudiates it within a reasonable time after attaining the age of
eighteen
(b) Partnership Agreement
An infant is bound at common law by a
partnership agreement but he is free to repudiate it at any time during infancy
or within a reasonable time after attaining his majority.
(c) Purchase of Shares
An
infant who applies for, and is allotted, a company's shares becomes a member of
the company from the moment that his name is entered in the register of
members. He then acquires membership
rights and becomes subject to membership obligations like any other
member. However, he has a legal right to
rescind the contract if there has been a total failure of consideration for
which he paid the money (i.e. the shares have become worthless).
Void Contracts
The following contracts are void if entered into by an
infant in Kenya:
-
'Contracts’ for repayment of money lent or to be
lent;
-
'Contracts’ for goods supplied or to be supplied
(other than contracts for necessaries), - All
"accounts stated" with infants.
Contractual Capacity of Drunken Persons
If a person purported to enter into a
contract at a time when he was too drunk to understand what he was doing and
the other party was aware of his mental condition, the contract will be voidable at his option.
The basis of the decision is not the defendant's intoxication
but the plaintiff's inequitable attempt to take advantage of a person in a
weaker position. It would therefore appear
that if both parties were materially intoxicated at the time of contracting
they would be bound by the contract since none of them could take advantage of
the other.
The following points should be noted:
(a) Ratification
A drunken man who enters into a voidable contract may affirm or ratify
it when he is sober:
(b) Necessaries
A drunken person is liable to pay for
necessaries supplied to him pursuant to a contract which he entered into when
too drunk to know what he was doing.
(c) The drunken person is liable to pay "a reasonable price" under
S.4 of the Sale of Goods Act. He is not
liable for the agreed price - apparently because, being drunk, he could not
know the correct or fair price of the goods.
Contractual Capacity of Persons of Unsound Mind
A contract entered into by a person of
unsound mind is voidable at his option if
it is proved that the other party was aware of his mental condition.
(a) Ratification
A contract entered into by a person when
he is insane can be ratified by him when he becomes of sound mind.
(b) Necessaries
A person of unsound mind, like a drunken
person, is liable to pay for necessaries supplied to him. However, he is only liable to pay reasonable
prices for the necessaries under S. 4 of the Sale of Goods Act.
Contractual Capacity of Corporations
The courts have developed what is known as
the doctrine of "ultra vires" in order to determine the contractual
capacity of legal persons or corporations.
The gist of the doctrine is that a body
corporate's contractual capacity is limited to the attainment of objects or
purposes for which it was created. If
the corporation purports to enter into a contract to undertake a transaction
which is neither expressly nor impliedly within its objects. The contract is
"ultra vires" (i.e. "beyond the powers of") the corporation
and is void, illegal and incapable of ratification.
Married Women
At
common law, married women have no contractual capacity because they are
presumed to be non-existent (i.e. they are "part" of their
husbands—the two constituting one person who is the husband.)
Contractual capacity of Undischarged
bankrupts.
See Chapter on BANKRUTCY
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