6. Contractual Capacity

cases

nash v inman

keays v great southern railway

ryder v wombwell

shears v mendeloff

White v McCooey

contractual capacity

all persons, natural, and legal can enter into contracts

though certain persons, render elements of the contract unenforceable

capacity to contract refers to whether a person is able to enter freely into contracts

minors

the most obvious case of limited capacity to contract is that of infants or minors

children have limited legal capacity, there are 3 categories of contracts with minors

1. contracts that are void (no legal effect)

   • includes contracts for repayment of money loaned to minor, or contracts for goods supplied (other than necessaries)

2. contracts that are voidable (valid but may be avoided) and

3. contracts with minors that are valid

contracts with minors which are not for the supply of necessaries

an infant can choose to avoid a contract whihc is not for the supply of necessaries - there are 2 categories

1. contracts which benefit the infant but also impose recurring obligations e.g contracts concerning land, company shares, partnerships, or family settlement

   • these can be avoided by an infant but require that the infant to repudiate the contract by some positive act before coming of age or within a reasonable time thereafter

2. all other contracts, these are enforceable by the infant, but not against him =, unless the infant positively affirms the contract within a reasonable time after coming of age

contracts for necessaries

necessaries are those items which the law considers essential for an infant, so that it is reasonable for an infant to be bound by a contract for their supply

section 2 of the sale of goods act 1893 defines “necessary” goods as: “goods suitable to the condition of life of such infant or minor or other person and to his actual requirements at the time of the sale and delivery”

contracts for necessaries which have been upheld by the courts include: food, clothes, books, vehicle (needed for work)

the decision as regards to what exactly constitutes necessary shall be decided on a case-by-case basis

nash v inman

an oxford student bought a supply of waist coats and his father successfully avoided the contract on the baiss that his son already had sufficient supply of waistcoats and therefore the purchase was no necessary. the seller could not have known that the student had many waistcoats

the court defended its position by saying that it was up to the tradesmen to find out the circumstances of the purchaser and, if they choose not to do so, they should refrain from extending lines of credit to minors

keays v great southern railway

12yo girl contracted with the railway company for transport to and from school. the contract contained an exemption clause denying any liability for any injuries caused to the minor passenger by virtue of the defendants negligence

held that she was entitled to sue the company as the contracted purported to deny her of every common law right she has against the railway company

ryder v wombwell

cufflinks decorated with jewels were held to be incapable of being classified as a necessary purchase

beneficial contracts of services

this category has origins in the case of apprenticeships and the like, who would of course be an infant. in these circumstances an injustice would be done if the infant were not able to enforce the contract, and conversely, it was considered to be fair to allow the master to also rely on the contract

shears v mendeloff

a contract between a boxer and manager was held to be voidable because it was to the benefit of the manager only. the boxer had to pay any expenses that arose, while the manager was entitled to a quarter of the boxers winning, even though he was not obliged to secure any fights for him

mental incapacity

the rule here is that a contract is valid unless

a. the mental illness was such as to prevent the sufferer from knowing the nature of his actions

b. the other party was aware of that mental illness

the requirement that the other party should be aware of the mental illness means that exploitative contracts made in this knowledge will be void, while if the other party is genuinely unaware of the mental illness then the equitable doctrine of unconscionable bargain may apply if the contract is so unfair as to justify the intervention

section 3 of the assisted decision making (capacity) Act 2015

if the person lacks the capacity to make a decision if they are unable to

a. understand the relevant information

b. to retain that information long enough to make a voluntary choice

c. to use or weight that information as part of the process of making the decision

d. to communication their decision (whether by talking, writing, using sign language, or other means) or if the decision requires the act of a third party to communication by any means with that third party

section 8 of the assisted decision making (capacity) Act 2015

provides for a general presumption that a person has capacity

part 3 and 4 of the assisted decision making (capacity) Act 2015

provides 3 types of decision-making support options

• assisted decision-making

  • a person may appoint a decision making assistant, through a formal decision making assistance agreement to support them with access to information or to understand, make and express decisions. decision making responsibilities remains with the person

• co- decison making

  • a person can appoint a trusted family member or friend as a co-decision maker to make decisions jointly with him or her under a co-decision-making agreement. decision making responsibilities are shared jointly between the person and the co-decision maker

• decision making representative

  • for the small minority of people who are not able to make a decision even with the help, the act provides for the circuit court to appoint a decision-making representative. a decision making representative will make decisions on behalf of the person but must abide by the guiding principles and must reflect the persons will and preferences where possible

intoxicated persons

position of intoxicated persons is similar to that of the mentally ill

the party must be so intoxicated as not to know the nature of his actions, mild inebriation will n ot suffice

once this is established, then if the contract concerns the necessaries, the party will be boind to pay a reasonable price therefore, even if the other party knew of his level of intoxication

in the case of non-necessaries, the party will be bound unless he can establish that the other party was aware of the intoxication at the time of the making of the contract

White v McCooey

McCooey agreed to sell a licensed premises to White for £6,000. McCooey later argued that he had been so drunk that he was incapable of contracting and that the agreement should therefore be set aside.

Held

Gannon J rejected the drunkenness defence. The evidence did not establish that McCooey was so intoxicated that he did not understand the nature of his actions. The agreement was therefore enforceable.