Capacity

Question 1

Rule for minors?

Answer 1

Generally, a person is not bound by a contract until age 18
EXCEPTIONS
Contract for necessaries
Contracts of employment or education - Bound but only for benefit

Effect of entering into a contract with a minor
- Unless one of the exceptions apply – contract cannot be enforced against the minor, BUT THE MINOR CAN ENFORCE IT AGAINST THE OTHER PARY.
EXCEPTIONS
- If a minor ratifies a contract once they reach 18, then it is binding.

Question 2

Rule on mental incapacity and intoxication?

Answer 2

Effect of entering into a contract with a person lacking capacity
- Under s7 still remains liable to pay a reasonable price for necessaries
- In any other case – the position is contract is binding unless person claiming incapacity can establish it.
They need to show that the other party knew or ought to have reasonably known about the incapacity. IT WILL MAKE A CONTRACT VOIDABLE. Actual knowledge of the incapacity is not required.

Question 3

Duress to the person?

Answer 3

• Amounts to actual or threatened violence.
  NEED only be only ONE of the reasons entered into

Question 4

Duress to goods?

Answer 4

• Threat to seize owners’ property or damage it.
• Agreement would not have been entered into BUT FOR for this. Should be decisive factor.

Question 5

Economic duress?

Answer 5

1. Lack of practical choice - no practical alternative
2. Illegitimate pressure - unlawful threat - in BAD FAITH. did victim protest or affirm?
3. But for the duress the agreement would not have occurred - significant cause for inducing the claimant to enter the contract.

Question 6

Effect of duress?

Answer 6

Contract becomes voidable (contract is capable of being voided but remains in force until something occurs) – it remains in force unless some action is taken. So, party subject to duress may choose to void the contract – remedy is recission.

Question 7

What is undue influence?

Answer 7

• Undue influence exists where a person’s consent was produced it in a way that was not an expression of their free will.

Question 8

Types of undue influence?

Answer 8

1. Improper pressure – such as unlawful threats – OVERLAPS WITH DURESS
   - Simply need to establish it was a factor NOT THE DECISIVE ONE.
2. • Where on party has influence over other and takes advantage of that influence.
     2.1 Influence usually comes from a relationship of trust
3. Parent and child
4. Trustee and beneficiary
5. Solicitor and client
6. Doctor and patient
   - Proof of taking advantage of influence in a relationship
   - Burden or proof on party alleging it.
   - If a party shows a relationship of trust and confidence AND
   - A transaction which requires explanation.
   2.2. Suspicious type or high value transaction

Remedy is contract may be set aside.

Question 9

Rule on undue influence and third parties?

Answer 9

Contract entered into with a bank or some creditor but the undue influence came from third party like their spouse.
If contracting party like the bank has actual notice of undue influence the contract will be affected

Bank should take reasonable steps. Get legal advice and warn effects.