Capacity

When is contractual capacity generally presumed in contract law?

Contractual capacity is generally presumed where a person is over 18, of sound mind and not affected by any factor that removes their capacity.

What is the general effect of entering a contract with someone who lacks contractual capacity?

A contract made with someone lacking capacity is unlikely to be binding on that person.

Are minors generally bound by contracts they enter into?

No. Minors are generally not bound by their contracts, subject to limited exceptions.

Is a minor generally bound by a contract if they lied about their age?

No. A minor is generally not bound merely because they falsely represented themselves as being over 18.

What are the main exceptions under which a minor may be bound by a contract?

A minor may be bound by a contract for necessaries or by a beneficial contract of employment, apprenticeship or education.

What are “necessaries” in contract law concerning minors?

Necessaries are goods or services reasonably required by the particular minor, such as food, medicine, accommodation and clothing, rather than items supplied solely for comfort or pleasure.

Does an item automatically qualify as a necessary merely because it falls within a category such as food or clothing?

No. The item must actually be necessary for that particular minor in light of their existing circumstances and supplies.

What did Nash v Inman establish about necessaries supplied to minors?

Nash v Inman held that clothing was not necessary where the minor already had an adequate supply of suitable clothes.

Why was the minor not liable for the clothing in Nash v Inman?

The minor already possessed sufficient clothing, so the additional clothes did not qualify as necessaries.

What must a minor pay where a contract supplies them with necessaries?

The minor must pay a reasonable price for the necessaries rather than necessarily the actual contract price.

Is a minor required to pay the agreed contract price for necessaries?

No. The minor is liable only for a reasonable price.

Are goods supplied merely for a minor’s comfort or pleasure treated as necessaries?

No. Goods supplied only for comfort or pleasure do not qualify as necessaries.

What happens if a minor’s contract does not concern necessaries?

The court must consider whether it is a contract of employment, apprenticeship or education that benefits the minor; otherwise, the minor is not bound.

Can a contract of employment bind a minor?

Yes. A contract of employment may bind a minor if, considered as a whole, it is for the minor’s benefit.

Can a contract of apprenticeship bind a minor?

Yes. A contract of apprenticeship may bind a minor where its terms are beneficial to the minor.

Can an education contract bind a minor?

Yes. An education contract may bind a minor if it is for the minor’s benefit.

What is the key test for deciding whether an employment, apprenticeship or education contract binds a minor?

The court asks whether the contract, taken as a whole, is beneficial to the minor.

What is the effect of a beneficial employment, apprenticeship or education contract entered into by a minor?

The contract is binding on the minor.

What is the effect of an employment, apprenticeship or education contract that is not beneficial to the minor?

The minor is not bound by the contract.

What did Aylesbury Football Club v Watford Association Football Club establish about minors’ employment contracts?

Aylesbury Football Club v Watford Association Football Club held that a contract was not enforceable against a minor where its onerous terms meant that it was not beneficial to them.

Why was the contract not enforced in Aylesbury Football Club v Watford Association Football Club?

The contract contained onerous terms and did not provide sufficient overall benefit to the minor.

Is a minor bound by an ordinary contract that is neither for necessaries nor a beneficial contract of employment, apprenticeship or education?

No. The minor is generally not bound.

Can a minor enforce a contract against the adult or other contracting party?

Yes. A minor may still be able to enforce the contract against the other party even where the contract is not binding on the minor.

What happens if a person ratifies a contract after reaching the age of 18?

If the former minor ratifies the contract after turning 18, the contract becomes binding on them.

What is ratification of a minor’s contract after the age of 18?

Ratification occurs where the person confirms or adopts the contract after reaching adulthood, making it binding on them.

What is the general rule for contracts entered into by a person affected by mental incapacity or intoxication?

The contract is generally binding unless the person proves that they did not understand what they were doing and that the other party knew this.

What two requirements must a person establish to avoid a contract because of mental incapacity or intoxication?

They must show that they did not understand the nature of the transaction and that the other contracting party knew of that lack of understanding.

Who bears the burden of proving incapacity in a contract involving mental incapacity or intoxication?

The person seeking to avoid the contract bears the burden of proving their lack of understanding and the other party’s knowledge.

What did Imperial Loan Co v Stone establish about mental incapacity and contracts?

Imperial Loan Co v Stone established that a contract is generally binding unless the incapable person did not understand the transaction and the other party knew of that incapacity.

Is it sufficient for a person to prove only that they did not understand a contract due to mental incapacity?

No. They must also prove that the other party knew of their inability to understand the transaction.

Is mental capacity assessed generally or in relation to a particular decision?

Mental capacity is assessed in relation to the particular decision being made, rather than as a permanent status applying to all decisions.

What does section 2 of the Mental Capacity Act 2005 establish about contractual capacity?

Section 2 recognises that a person may lack capacity in relation to a particular decision rather than lacking capacity for all purposes.

What abilities are assessed when determining capacity under the Mental Capacity Act 2005?

The person must be able to understand, retain and use the relevant information and communicate their decision.

When is a person unable to understand information for the purposes of contractual capacity?

A person may lack capacity where they cannot understand the information relevant to the particular decision.

When is a person unable to retain information for the purposes of contractual capacity?

A person may lack capacity where they cannot retain the relevant information sufficiently to make the decision.

When is a person unable to use information for the purposes of contractual capacity?

A person may lack capacity where they cannot use or weigh the relevant information when deciding.

When is a person unable to communicate a decision for the purposes of contractual capacity?

A person may lack capacity where they cannot communicate their decision by any available means.

Can intoxication cause a person to lack contractual capacity?

Yes. Intoxication may prevent a person from understanding, retaining or using relevant information or communicating a decision.

Which cases recognise that intoxication may affect contractual capacity?

Matthews v Baxter and Aspinall’s Club Ltd v Hui recognise that intoxication may affect contractual capacity.

What did Matthews v Baxter establish about intoxicated contracting parties?

Matthews v Baxter recognised that severe intoxication may prevent a person from having the capacity required to enter a binding contract.

What is the relevance of Aspinall’s Club Ltd v Hui to contractual capacity?

Aspinall’s Club Ltd v Hui recognises that intoxication may be relevant when assessing whether a person had capacity to enter a particular contract.

What counts as relevant information under section 3(4) of the Mental Capacity Act 2005?

Relevant information includes the reasonably foreseeable consequences of deciding one way or another, or of failing to make a decision.

Why must a person understand the reasonably foreseeable consequences of a contractual decision?

Understanding those consequences is part of being able to understand and use the relevant information needed to make the decision.

What role does the Court of Protection have in relation to contractual capacity?

The Court of Protection may make declarations about a person’s capacity and ability to contract in specified circumstances.

Which provision allows the Court of Protection to make declarations concerning contractual capacity?

Section 15 of the Mental Capacity Act 2005 allows the Court of Protection to make declarations about capacity in specified situations.

Does a person lacking contractual capacity have to pay for necessaries?

Yes. A person without capacity remains liable to pay a reasonable price for necessaries supplied to them.

What price must a person lacking capacity pay for necessaries?

They must pay a reasonable price rather than necessarily the price stated in the contract.

What is the overall sequence for analysing a contract entered into by a minor?

Ask whether the contract concerns necessaries; if not, ask whether it is a beneficial contract of employment, apprenticeship or education; if neither applies, the minor is generally not bound.

What is the overall sequence for analysing mental incapacity or intoxication in contract law?

Ask whether the person understood the transaction and, if not, whether the other party knew of that lack of understanding; also assess capacity in relation to the particular decision under the Mental Capacity Act 2005.