SQE1: Capacity to Contract

This set covers legal capacity in contract law, focusing on minors, mental incapacity, and different types of corporations under the SQE1 syllabus.

Minors

Persons under the age of $18$ who generally have limited capacity to be bound by contracts.

Necessaries

Under the SGA $1979$, goods suitable to the condition in life of the minor and to their actual requirements at the time of sale and delivery.

Contracts of Service

Contracts of employment (such as apprenticeships) under which a minor gains training or experience, which are binding if they are on balance beneficial to the minor.

Mental Incapacity

A condition where a person is suffering from mental impairment or drunkenness; contracts made are valid unless the person was incapable of understanding the transaction and the other party knew it.

Voidable

A contract that is binding unless, and until, the person suffering from mental impairment or inebriation chooses to terminate it.

Corporation

An association regarded by law as an independent person with a separate legal identity from the person or persons who constitute it.

Unincorporated Association

A group (such as a club) that is not incorporated by the state and is not a competent contracting party; generally, no individual member is sued on its behalf except the person who made the contract.

Registered Companies

Bodies most commonly registered under the Companies Act $2006$ that have the power to carry on any lawful activity.

Section 39 Companies Act 2006

A statutory provision stating that an act undertaken by a company with an outsider cannot be challenged on the grounds that it is beyond the powers in the company’s constitution.

Section 40(1) Companies Act 2006

A provision stating that the powers of directors to bind a company are deemed free of constitutional limitations in favor of a person dealing with the company in good faith.

Statutory Corporations

Corporations created by statute, such as local authorities, whose contract-making powers are limited to the purposes set out in the enabling statute.

Ultra Vires

Legal acts or contracts that are beyond the stated powers of a statutory corporation, rendering such contracts void.

Limited Liability Partnership (LLP)

A type of corporation created by the Limited Liability Partnerships Act $2000$ which benefits from unlimited capacity.

Trading Contract

A contract for the supply or resale of goods for business purposes; such contracts generally do not bind a minor even if the earnings facilitate the purchase of necessaries.