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Capacity. Basic Principles pp 39 - 51. Requirements for a valid contract. Capacity Agreement/ Consensus Legality Possibility of performance Formalities Certainty. Persons with no or limited contractual capacity. Minors Married persons Persons with mental illness Insolvent persons

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capacity

Capacity

Basic Principles

pp 39 - 51

requirements for a valid contract
Requirements for a valid contract
  • Capacity
  • Agreement/ Consensus
  • Legality
  • Possibility of performance
  • Formalities
  • Certainty
persons with no or limited contractual capacity
Persons with no or limited contractual capacity
  • Minors
  • Married persons
  • Persons with mental illness
  • Insolvent persons
  • Intoxicated persons
minors
Minors
  • Def: Below 21; Unmarried; Not declared a major by High Court.
  • How does one become a major?
    • Reach 21
    • Marriage
    • Emancipation by Court
    • Tacit emancipation by guardian
marriage of minors
Marriage of minors
  • Upon marriage a minor becomes a major
  • Marriage Act 25 of 1961:
    • Permission of both parents required for minor to marry
    • Boys <18, Girls <15 require permission of Min of Home Affairs to marry
  • Marriage without permission?
    • Such marriage valid until annulled by court
      • Annulment must be in best interests of minor
emancipation by a court
Emancipation by a Court
  • Age of Majority Act 57 of 1972:
    • Person of 18 yrs may apply to High Court to be declared a major.
    • This must be in minor’s best interests.
  • Factors as to whether in best interests:
    • Does minor manage own affairs
    • Financial independence
tacit emancipation
Tacit Emancipation
  • Minor granted permission to enter some/ all contracts unassisted by guardian
  • Permission may be express/ tacit
  • Factors to be considered:
    • Age of minor
    • Does minor live with parents
    • Is minor self-supporting
    • Relationship with parents
children s act 38 of 2005
Children’s Act 38 of 2005
  • Not yet in force
  • Age of majority 18 yrs
  • No longer possible to obtain emancipation order
contractual capacity of minors
Contractual capacity of minors
  • <7: No contractual capacity
  • 7 – 21: Limited contractual capacity
    • May enter valid and binding contracts with parental assistance
    • Unassisted contract is a limping one: binds major but not minor
assisted contracts
Assisted Contracts
  • Effect of an assisted contract?
    • Minor (not parent) is bound by contract and may be sued on it.
  • When is a contract assisted?
    • Before 1993: father’s assistance required
after 1993 guardianship act
After 1993: Guardianship Act
  • In terms of Guardianship Act 192 of 1993:
    • Mother and father equal guardians of children born of their marriage
    • Consent of either parent sufficient for most contracts
    • Consent of both parents required for:
      • Marriage, adoption, application for passport, sale of minor’s immovable property
    • New Children’s Act to repeal Guardianship Act, but above provisions to remain the same.
degree of oversight required
Degree of oversight required?
  • Parent must know:
    • Child intends concluding contract
    • What type of contract
    • Not: every term of contract
  • Van Dyk v SAR&H 1956 (4) SA 410 (W)
parent s consent contd
Parent’s consent contd…
  • Parent may ratify an unassisted contract
  • Consent may be express or tacit (cf. tacit emancipation)
more on tacit emancipation
More on tacit emancipation
  • Not full status as major (Age of Majority Act)
  • Authorisation to enter into some/ all contracts unassisted
  • Question of tacit emancipation usually arises in a case for strategic reasons
  • Question is one of fact
cases on tacit emancipation
Cases on tacit emancipation
  • Dickens v Daley 1956 (2) SA 11 (N)
  • Grand-Prix Motors v Swart 1976 (3) SA 221 (C)
assisted contracts which are inherently prejudicial
Assisted contracts which are inherently prejudicial
  • General rule: minor bound to assisted contract
  • Usually can only escape a contract if:
    • Misrepresentation, Duress, Undue influence
    • Material breach by other party
  • Additional ground: Assisted contract inherently prejudicial
    • Action: repudiate contract + claim restitutio in integrum
restitutio in integrum
Restitutio in integrum
  • Same remedy as for misrepresentation, duress, undue influence
  • Remedy aims to restore status quo ante
  • Effect: minor may cancel contract + claim return of his performance.
    • But: Minor must then restore what he has received from major.
inherently prejudicial contracts
Inherently prejudicial contracts
  • Prejudice must exist in contract at time of conclusion.
    • Subsequent change of circumstance does not qualify.
    • Eg. You buy shares, which then lose their value.
  • Wood v Davies 1934 CPD 250
unassisted contracts
Unassisted Contracts
  • Unassisted contract: lacks permission of at least one parent
  • NB: some contracts require both parents permission
  • Unassisted contract = “limping contract”: binds major, but not minor
limping contracts
“Limping” contracts
  • Minor’s parents may ratify/ repudiate a limping contract when they learn of it
    • This option only available once
    • If ratify: contract becomes assisted
    • If repudiate: Major must return minor’s full performance, minor need only return to extent enriched.
limping contracts contd
Limping contracts contd…
  • In event of fraud by minor: minor still not bound, but may be liable under delict
  • Election to ratify/ repudiate available to minor on reaching 21:
    • Option open for 3 yrs, provided minor does not ratify in meantime
  • Certain contracts do not require assistance of minor:
    • Banks Act: minors over 16 may operate a deposit account.
married persons
Married Persons
  • Persons married in COP limited in types of contract they may enter:
    • Types requiring joint consent set out in Matrimonial Property Act 88 of 1984
    • Eg. Sale of immovable property, sale of shares require joint consent.
insolvency
Insolvency
  • Insolvency = Liabilities > Assets
  • After sequestration: trustee appointed by High Court to manage insolvent’s estate for benefit of creditors.
  • Trustee’s consent then required for contracts which affect estate
mental incapacity intoxication mental illness
Mental Incapacity: Intoxication & Mental Illness
  • A party unable to understand actions at time of contracting lacks capacity: contract then void
  • Decisive moment = moment contract entered into
  • A person may be temporarily incapacitated:
    • Eg. Alzheimer’s, medication, alcohol, drugs
    • If don’t understand actions at time of contracting: contract void
  • Everyone presumed to be of sound mind: person alleging incapacity must prove this