Capacity Flashcards
What is the basic common law principle about contracts and minors?
Minors are not bound by contracts they have entered but the other adult party is bound and can be sued.
What types of contracts bind minors?
Contracts for ‘necessaries’ and contracts of service for a minor’s benefit (i.e. contracts of employment) both bind minors
What are ‘necessaries’?
‘Necessaries’ are defined under the SGA 1979 as goods ‘suitable to the condition in life of the
minor and to his actual requirements at the time of sale and delivery’. ‘Necessaries’ therefore
extend beyond the absolute essentials (such as food and clothing). What is ‘necessary’ for a
particular minor will depend to an extent on their social status and their actual requirements
at the time of purchase.
What are the rules for contracts made with someone who was suffering from mental impairment and those who are drunk when the contract is made?
Contracts made with someone in either state will be valid unless at the time the contract was made the person was incapable of understanding the nature of the transaction and the other party knew that to be the case. In such instances the contract will be ‘voidable’,
Can unincorporated associations form contracts?
They are not competent contracting parties. If a contract is made on its behalf no individual member can be sued on it except the person who actually made it and any other member who authorised them to do so.
Can registered companies enter into any contract?
s. 40(1) CA 2006 states that
the powers of the directors to bind a company (eg by entering a contract) are deemed to be free of any limitation under the company’s constitution in favour of a person dealing with the company in good faith.
In effect, registered companies have unlimited capacity to enter into contracts.
Can statutory corporations enter into any contract?
Any contract entered outside of the stated powers will be
declared ultra vires and therefore void.
