CAPACITY

Question 1

classes of people are deemed to lack contractual capacity (3)

Answer 1

minors
mentally impaired
intoxicated

Question 2

general rule

Answer 2

• Contracts made with a person lacking capacity are generally voidable at the option of the person lacking capacity

Question 3

• Age of majority is…

Answer 3

18: Age of Majority Act 1977 (Vic) s 3(1)

Question 4

4 options for a contract with a minor

Answer 4

• necessities
• binding unless repudiated
• binding if ratified
• always void

Question 5

Contracts for necessities:

Answer 5

absolutely binding on a minor

Question 6

s.7 Goods Act (Vic) 1958

Answer 6

only has to pay reasonable price

Question 7

what is a necessity?

Answer 7

goods suitable to the condition in life of such minor or other person and to his actual requirements at the time of the sale and delivery”
food and drink
services of a lawyer
medical series
education/apprenticeship
transportation
If the minor already has adequate supply there is no necessity

Question 8

Binding unless repudiated

Answer 8

voidable at the option of the minor - binding unless repudiated by the minor during minority or within a reasonable time after turning 18

Question 9

means of repudiation

Answer 9

may be by words or conduct

Question 10

what contracts are binding unless repudiated

Answer 10

contracts with continuous obligations (eg where a minor acquires a leasehold interest in land)
○ Uncertain whether contracts for the sale and purchase of land will be binding unless repudiated

Question 11

Effect of the repudiation

Answer 11

the minor will not be liable for future obligations, but bound by obligations accrued before ratification

Question 12

Supreme Court Act 1986 (Vic) s.50

Answer 12

○ No proceeding to be brought on ratification of minor’s contract

	1.   Noproceedingcanbe brought to charge a person—
				a) on apromisemadeafter fullage to pay a debt contracted during minority; or
				b) on a ratification made afterfullage of a promise or contract made during minority.
	2.   This section applies whether or not there wasanynew considerationfor thepromise or ratification.

Question 13

Can minor rely on contract not ratified/void?

Answer 13

• Note that the contract may (even if not ratified) still be relied on and enforced by the minor by way of a damages claim (not specific performance)

Question 14

Void contracts

Answer 14

never enforceable

Question 15

s49 Supreme Court Act

Answer 15

§ “The following contracts entered into by a minor are void-
□ contracts for the repayment of money lent or to be lent;
□ contracts for payment for goods supplied or to be supplied, other than necessaries;
□ accounts stated”

Question 16

MENTAL INCAPACITY or INTOXICATION

Answer 16

• A contract made with a person with impaired mental capacity or a person who is intoxicated may be voidable at the option of that person

Question 17

• The person seeking to set aside a contract on grounds of mental incapacity must show that:

Answer 17

• s/he was incapable of understanding the contract at the time that it was made; and

that the other party to the contract knew or ought to have known of the incapacity

Question 18

Where can mentally incapable or intoxicated people NOT make the contract void (exception to general rule)

Answer 18

• Exception: necessaries (s.7 Goods Act 1958 (Vic))