Capacity Flashcards
Advising on contracts entered into by Minors, persons lacking mental capacity; and operations.
What is the basic common law principle of capcaity for minors?
Minors are not bound by contracts they have entered- the other party is bound and can be sued but not the minor.
What is the exception to the common law principle of capacity relating to minors
Contracts for ‘necessaries’ bind minors
What are ‘necessaries’ and what are they defined as under the SGA 1997
Not just supply of necessary good and services, but also contracts of a service for a minors benefit. Such as contracts of employment.
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.
Under the SGA 1997 ‘necessaries’ are defined as good ‘suitable to the condition in life of the minor and to his actual requirements at the time of sale and delivery’ therefore this extends beyond absolute essentials.
If someone has a mental impairmenent or is drunk at the time the contract is made, would this mean the contract is voidable?
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 circumstances the contract will be ‘voidable’, which means it is binding unless, and until, the person suffering from mental impairment or inebriaition terminates it.
Can a registered company lack capacity?
S39 Companies Act 2006 effectively abolishes the ‘ultra vires’ doctrine with regard to third parties dealing with the company.
In other words s39 provides that an act undertaken by the company with an outsider such as entering a contract, cannot be challenged if it is beyond the powers granted in the company’s consitution.
Therefore, in theory, even if the company breaches the restrictions on its powers contained in the old objects clauses that are now incorporated into its articles, the transaction should still be valid.
what are Statutory corporations?
Coperations created by statue, they include local authorities.
Can statutory corporations lack capacity?
The statute creating each corporation will set out the purposes for which the corporation may enter contracts. Any contracts entered outside of the stated powers will be declared ultra vires and therefore void.
Can Limited liability partnerships lack capacity
No such partnerships benefit from unlimited capacity.
