Capacity(Minors)

Question 1

Capacity

Answer 1

There are some categories of people whose power to make contracts is limited by law. The main
categories are minors, and people considered incapable of contracting because of mental disorders
or drunkenness. Contracts are of course not only made between individual people. In many cases, one or both parties will actually be groups of people, such as companies, local authorities and other organisations. Such groups are generally called corporations, and the contracting capacity of a corporation depends on what type of corporation it is.

Question 2

Minors

Answer 2

The Family Law Reform Act 1969, s 1, provides that any person below the age of 18 is classed as a minor (very often referred to as an ‘infant’ in older cases). As already stated, despite the petulant views of youth, the aim of the law here is to protect rather than restrict, and this includes not only protecting minors from entering into unfair contracts,but also protecting adults in their dealings with minors, provided they act in a fair and reasonable manner. The result is that minors’ contracts are regarded as binding or voidable, depending on the circumstances.

Question 3

CONTRACTS FOR NECESSARIES

Answer 3

Minors are bound by contracts for necessaries. ‘Necessaries’ are defined in: Peters v Fleming, as articles and services needed or fit to maintain a minor, in a particular station of life which he is accustomed to, and in s.3(3) Sale of Goods Act 1979, as goods suitable to the condition in life of the minor and his actual requirement at the time of sale and delivery.

Question 4

Contracts binding on a minor

Answer 4

The only contracts which are binding on a minor are contracts for the supply of necessaries.‘Necessaries’ are interpreted as including not just the supply of necessary goods and services, but also contracts of service for the minor’s benefit.

Question 5

Contracts for necessary goods and services

Answer 5

Under the Sale of Goods Act 1979, s. 3(2) ‘necessaries’ means ‘goods suitable to the condition in
life of the minor or other person concerned and to his actual requirements at the time of sale and
delivery’. It therefore includes more than just such essentials as food, shelter and clothing, and in
deciding the issue the courts can take into account the social status of the particular minor – items

which might not be considered necessaries for a working-class child may nevertheless be necessaries for one from a wealthy background.
When deciding if a contract is one for necessaries, the courts first of all determine whether
the goods or services are capable of amounting to necessaries in law, and then consider whether
they are in fact necessaries as far as the minor before them is concerned. The tests are notoriously
difficult to apply, but effectively mean that a minor will be bound by most consumer contracts,
but usually not by commercial ones.

Question 6

Nash v Inman

Answer 6

A tailor supplied waistcoats to a Cambridge undergraduate. When the tailor sued for payment, the court held that the contract was not binding as the father provided that he already had a sufficient wardrobe of clothes.

Question 7

Chapple v Cooper (1844)

Answer 7

An undertaker sued a widow, who was a minor, for the cost of her husband’s funeral. It was held that this was a necessary service, and so the young woman was obliged to pay. In discussing what kind of goods and services could be considered necessaries, the court said ‘Articles of mere luxury are always excluded, though luxurious articles of utility are in some cases allowed.’

Question 8

Fawcett v Smethurst (1914)

Answer 8

A minor was held not to be bound by a contract for the hire of a car, even though it was a necessary service in this case, because the contract included a term making him liable for damage to the car ‘in any event’ – that is, whether or not the damage was his fault.

Question 9

Side notes

Answer 9

If a valid contract is breached by a minor, as a remedy, s.3(2) Sale of Goods Act 1979 provides that the minor is required to pay a reasonable price for goods sold and delivered.

Where there is a binding contract for necessaries, the minor is only bound to pay a reasonable
price for them, which need not be the contract price.

Question 10

Contracts of service for the minor’s benefit

Answer 10

Minors are also bound by contracts of services for the minor’s benefit, including those of employment and apprenticeship, as they enable him to fit into a trade. The courts will look at the contract as a whole, and see if it substantially benefits the minor.

Question 11

Clements v London and North Western Railway Co (1894)

Answer 11

a minor made an agreement under which he gave up his statutory right to personal injury benefit, but gained rights under an insurance scheme to which his employers would contribute. It was held that the rights gained were
more beneficial than those given up, and so the contract was, on balance, for the minor’s benefit and therefore binding.

Question 12

De Francesco v Barnum (1890)

Answer 12

A minor went into an apprenticeship where she was not to marry and was completely subject to De Francesco’s commands, while he made no commitment to employ her and was allowed to send her abroad at any time. It was held that the contract could not enforced against her as it was not for the minor’s benefit.

Question 13

Doyle v White City Stadium Ltd (1935)

Answer 13

A boxer (minor)’s license had a clause that if he was disqualified for fouling, he would not receive a fee. After he was disqualified for fouling in a fight, he failed to claim the fee from the board, as the clause was to encourage clean fighting and protect young boxers, hence it was beneficial to the minor.

Question 14

Contracts voidable at common law

Answer 14

Apart from contracts for necessaries which bind the minor, the general rule at common law is that a minor’s contracts are voidable. In other words, these contracts are not binding on the minor, but bind the other party. Thus, these contracts are valid when they are made, but can be terminated by a minor at any time before becoming 18 or within a reasonable time afterwards.

Question 15

Voidable contracts are binding, unless repudiated by the minor during the period of minority, or after a reasonable time upon reaching majority. They include:

Answer 15

purchase of shares,
partnership agreements,
marriage settlement, and
purchase of interest in land.

Question 16

Problems that my arise due to voidable contracts

Answer 16

If such a contract is terminated before any money is paid or obligations created, the position will be as if the contract had never been made in the first place, but problems can arise where obligations are incurred or money is paid, and then the minor terminates the contract. The law is somewhat unclear, but it seems likely that a minor would be liable to pay any debts arising
before such a contract is terminated. Where a minor has already paid money under a contract, and then terminates it, whether that money can be recovered will depend on whether the minor got anything in return for it.

Question 17

Corpe v Overton(1833)

Answer 17

a minor agreed to enter into a partnership, which was to be formed in the future. He paid a £100 deposit, knowing that he would lose it if he did not in the end go through with the partnership. Before the partnership was put into operation, the minor repudiated the agreement. The courts held that he was entitled to have his deposit back, because there was a total failure of consideration – at the time he terminated the contract, he had received nothing in return for it.

Question 18

Steinberg v Scala (Leeds) Ltd (1923).

Answer 18

A minor bought shares but were not fully paid up. After having paid a further £250, she later wanted that £250 back. Although she could terminate the contract, she could not get the £250 back because she had not been a total failure of consideration. She had the shares, so she had got something in return.

Question 19

Whether the minor repudiates in time to avoid the obligation is a matter of fact.

Answer 19

Edwards v Carter
It was held that 4 years and 8 months after reaching majority is not a reasonable time for the minor to repudiate the contract.

Question 20

VOID CONTRACT

Answer 20

he Minors’ Contract Act 1987 states that with the exception of the previous types of contracts mentioned above, a contract made by a minor is unenforceable and cannot be binding. This has the following implications:

1 Even though the minor may not be bound by the contract, the other party will be.
2 If the minor had already paid money under the contract, he may be able to recover it if no consideration has been made to him.
3 When the minor reaches 18, he can confirm the contract if he so wishes.
4 Ratification can be implied just by the minor continuing with the contract.

Question 21

Remedies against minors include:

Answer 21

1 The equitable remedy of restitution, which makes anyone unjustly enriched return their profit. It is used when a minor fraudulently obtains goods.

2 s.3 Minors’ Contract Act 1987, states where the contract is unenforceable or terminated by a minor, any property acquired by the minor may be given back to the adult, even if the minor has not acted fraudulently. If he has sold the property, the minor may have to pay the cost or give up any property received in exchange for them. Under

3 s.2 Minors’ Contract Act 1987, where a contract is unenforceable because it is made with a minor, a guarantee of that contract will be enforceable.

Question 22

(Minors and tort)

Answer 22

Minors can usually be liable under tort law so long as they are old enough to know the nature of
what they are doing, but this rule cannot be used as an indirect way of enforcing a contract which
would otherwise not be binding on a minor.

Question 23

Leslie Ltd v Sheill (1914)(Minors and tort)

Answer 23

a minor borrowed money, having lied about his age. The contract for the loan was an unenforceable one. In deliberately misrepresenting his age, the minor committed the tort of deceit, and knowing that he could
not sue the minor for breach of contract to recover the money, the moneylender brought an action
for damages in tort. The action was unsuccessful because the court held that it was merely an
attempt to enforce a contract on which the minor was not liable.

Question 24

Problems with the law on minors

Answer 24

The law on minors and contracts is widely thought to be out of step with modern society. Many of
the cases arose more than a hundred years ago, and often involved people between 18 and 21,
who would now be considered adults. It is also strange that the age of full contractual capacity
is 18, when an individual of 16 or 17 may legally be in full-time employment, married and even
a parent. In addition, consumer protection laws may reduce the need for special protection
for minors.

Question 25

Reform

Answer 25

In 1982, the Law Commission proposed that all contracts should be binding on minors who are
16 years or over. Below that age, contracts should be enforceable by minors, but not against them.
A minor who misrepresents their age in order to secure a contract should be liable in tort for deceit,but in other cases of fraud a minor under 16 should not be liable if the effect of that liability would
be to allow the other party to enforce indirectly an otherwise unenforceable contract.