COMPARATIVE CONTRACT LAW :
CAPACITY AND CONSENT
LLM - COMPARATIVE LEGAL SYSTEMS
KILAW
FALL 2013
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DR MYRA WILLIAMSON
THIS LECTURE…
CAPACITY
CONSENT
ELEMENTS OF A CONTRACT
As well as offer, acceptance, intention to
create legal relations and consideration,
there are some other elements that need
to be present for a contract to be legally
binding. They are:
• Capacity
• Consent
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If these are missing, the contract might
be void, voidable or unenforceable
SOME USEFUL SOURCES
Max Young’s Contract Law Lectures:
http://www.legalmax.info/members2/conlec/ind
ex.htm
Wikipedia pages including this one:
http://en.wikipedia.org/wiki/Capacity_(law)
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http://law.jrank.org/pages/12504/ContractLaw.html (overview of US contract law)
CAPACITY & CONSENT – DEFINITIONS
Contractual capacity = means that each
party must have the legal capacity (or the
ability) to make a contract.
Consent = means that each party must
genuinely agree to be a party to the
contract – they can’t be forced to enter
into the contract
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In other words, each party must be
competent to enter into a legally binding
contract
VOID, VOIDABLE &
UNENFORCEABLE: DEFINITIONS
Void = means that the contract has no legal effect – the socalled agreement gives no legal rights to either party (it’s
really a contradiction in terms to say a ‘void contract’)
• ie – it is void “ab initio” which means from the beginning
Voidable = means that the contract may be void by the
choice of one of the parties –
• a contract based on fraud can be considered voidable by the
party who has been deceived
• ie if the parties wish to perform it, they can, but the court will not force
them to
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Unenforceable = the contract is valid but it is
unenforceable at law because of some defect (eg it is not
in the form required by law)
CAPACITY – OVERVIEW
General rule: any person, of whatever
nationality, gender, age etc may enter
into a binding contract
•“person” includes natural and corporate
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BUT some persons need to be protected
by the law because they might be taken
advantage of so there are some laws that
limit their capacity to enter into contracts
CAPACITY – OVERVIEW
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The law limits the capacity of certain
‘persons’ to bind themselves by a
promise. These persons are:
•Minors
•Mentally disordered and drunken
persons
•Corporations
•The Crown and public authorities
CAPACITY: CONSEQUENCES &
AIMS
What if contractual capacity is missing: The consequences
are different:
• sometimes the contract will become void
• in other cases it will be voidable or even unenforceable
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Aims:
• Minors, mental capacity: the aim is to protect those who
do not have proper capacity
• With public authorities = the aim seeks to protect public
finances and taxpayers
• Corporations = the aim is to protect investors and
creditors
CAPACITY – MINORS
Different countries make different laws for minors
Most countries set an age at which individuals have to
attain to be able to enter into a contract
UK: a “minor” is someone under the age of 18
This is called the age of majority
Source: Births and Deaths Registration Amendment Act
(No 1 of 2002): see this link:
The rule at common law - a minor could not enter into a contract
except for when it was for the “necessaries” of life and his “actual
requirements” at the time of sale and delivery
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http://www.legislation.gov.uk/ukpga/Eliz2/1-2/20
CAN MINORS ENTER
INTO CONTRACTS?
If under 7 – no
If over 7 and under the age of majority – yes, BUT…
•
The law assumes that a minor cannot fully understand the
implications of entering into a contract, so
•
Anyone who enters into a contract with a minor should be
aware that the contract is VOIDABLE at the option of the
minor, until they reach the age of majority
•
This means, the minor can cancel the contract at any time,
even if it is to the disadvantage of the other party
•
Exceptions: contracts for service, apprenticeship and
education
•
Why these exceptions: organizations that deal with minors
need some degree of certainty when entering into these
types of contracts that allow minors to make a living (or start
to make a living); also, because they are for the minor’s
benefit
CAPACITY – MINORS
So, even though minors can enter contracts, they can
declare them void in all but two categories:
1. Contracts for “necessaries” of life
2. Contracts for the “minor’s benefit”
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These questions then arise…
What are “necessaries”?
What are contracts for the “minor’s
benefit”?
1. NECESSARIES
Generally: contracts for food, clothes, medical attention,
educational book etc
Authority: Nash v Inman (1908)
• (note: the age of capacity was 21 up until the law changed in 1970)
Plaintiff – a Saville Row tailor
Defendant – student at Cambridge University
Defendant ordered clothes (including 11 fancy waistcoats at 2 guineas each) for a total cost of
£145
Plaintiff sued for payment
Defendant’s father proved that he already had enough clothes suitable to his condition in life
before his son placed the order
Held: because of the father’s evidence, the clothes were not “necessaries” and so the Plaintiff lost
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Court of Appeal held that the tailor failed to prove that the clothing was suitable to the student’s
actual requirements at the time of sale and delivery
2. CONTRACTS FOR THE
MINOR’S BENEFIT
Generally, minors can enter into contracts for training,
apprenticeships etc so as to qualify for a suitable trade or
profession
Clements v London and North Western Railway
1894
• A minor entered into a contract of employment with a
railway corporation
• He promised to accept the terms of insurance against
accidents (giving up his rights under the Employers
Liability Act 1880)
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• Held: When looked at as a whole, the contract was for his
benefit and so he was bound by his promise
2. CONTRACTS FOR THE
MINOR’S BENEFIT CON’T…
Doyle v White City Stadium 1935
• Doyle – a boxer –made a contract with the British Boxing
Board of Control
• If D was disqualified, he wouldn’t get the prize money
• D fought – was disqualified but then sued the BBBC
• D argued: I was a minor, therefore, not bound by the
agreement to forfeit money if disqualified
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• Held: D failed because the agreement was similar to an
employment contract; it was for his benefit so he was
bound by it
2. CONTRACTS FOR THE MINOR’S
BENEFIT CONTINUED…
But, compare that case with the case of:
De Francesco v Barnum 1890
B was 14, agreed to become the apprentice of De Francesco in “the
art of choreography” (ie dancing) for 7 years
During that time, B agreed not to take any other contract without De
Francesco’s permission, not to marry, but she would receive certain
payments
Barnum was entirely at the disposal of De F
The court will look at the whole contract to see if it is for the overall
benefit of the minor: if it is, they’ll enforce it, if it isn’t, they won’t
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Held: overall, the contract was not beneficial to B and therefore was
unenforceable
CAPACITY OF MINORS
– SUMMARISED
General rule: minors (usually under 18) have the capacity to
enter into contracts but they can declare them void until they
reach the age of majority – the law provides them with special
protection
Exception:
1. Contracts for the necessaries of life when they are an actual
requirement at the time of the contract being made
• Eg food, clothing, medical attention, educational books
2. Contracts which are for the minor’s benefit
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• Eg training, employment, apprenticeships
• The court will look at the overall effect of the contract to see if it
is for the minor’s benefit. If it is, it will enforce it.
Don’t forget the underling policy: to protect minors
CAPACITY – THE BIG PICTURE
There are four categories of persons which have limited
capacity to enter into contracts (see slide 8 above)
• Minors
• Mentally disordered and drunken persons
• Others: Corporations
• The Crown and public authorities
We will look only at the 1st and 2nd bullet points
We already discussed minors
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Now, mentally disordered and drunken persons
MENTALLY DISORDERED
OR DRUNK PERSONS
General rule: contracts entered into by insane persons are
voidable at the option of the person who is insane
In UK: an insane person is a person who has an impairment
or a disturbance in the functioning of their brain and is
therefore incapable of managing their affairs: the Mental
Capacity Act 2005
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The contract will not be binding if this state existed at the
time that contract was entered into AND the other party was
aware of it
MENTALLY DISORDERED
OR DRUNK PERSONS
Imperial Loan Co. v Stone 1892
Not only does the person have to prove that they were so
insane that they did not know what they were doing BUT they
also have to show that the person with whom they contracted
knew him to be insane and incapable
In such cases, the contract is voidable at the option of the
insane person
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Same rule applies for drunk persons: if they enter a contract
whilst drunk, it is voidable at their option. But if they affirm it
once they become sober, its binding: Matthews v Baxter 1873
SUMMARY OF CAPACITY
A party to a contract must have the legal capacity to enter into it
If they don’t the contract could be void, voidable or unenforceable
We looked at the position of minors (young people), mentally
impaired and drunk people
They shouldn’t be held to the contracts they enter because they
may not understand what they are signing up to
Other categories exist for which special rules apply but we did not
cover them (eg, companies, public agencies, “aliens”)
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To read about those other categories, and much more, try this link:
http://www.lawteacher.net/contract-law/lecture-notes/capacitylecture.php
CONSENT
A few brief words on the requirement of consent
At common law, there is a rule which states that the parties
must have freely entered into the contract for it to be valid
Parties can’t be forced into a contract
Rationale: there would be no ‘meeting of the minds’ if one of
the parties did not freely enter into it
The courts should not be used to enforce a contract where
one party did not want to enter into it
CONSENT
General Rule: a valid agreement may only be made where the
parties exercise their own free will when entering into it - no
one can be forced to enter into a contract
Two forms of pressure:
1. Duress – means violence or the threat of violence (and,
more recently, also economic pressure) to a party to a
contract or to a member of his family
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2. Undue Influence – means a more subtle form of pressure
placed upon a party to make them enter the contract
DURESS
When a contract is made using threat of violence or economic
pressure or unlawful constraint.
Contracts made under duress will be voidable – the party under
duress can choose whether to remain bound
Some examples of how the courts interpret ‘duress’:
Cummings v Ince 1847
Threats to have somebody declared to be mentally unstable with a
lunatic asylum as a destination to make somebody sign over their
property is clearly extreme and the agreement will be set aside
Welch v Cheeseman
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• W transferred her house to the man she lived with because of
the threat of violence from him
• Effect: contract is voidable – transfer was set aside (cancelled)
because she entered the contract under duress
DURESS CONT’D…
The courts include ‘economic pressure’ and not just physical
pressure
The position now is it is not what is threatened but whether the
threat created a “coercion of the will, which vitiates consent”:
In The Universal Sentinel, 1983, the trade union had said that if
certain payments were not made they would induce the crew to break
their contracts thus trapping the ship in port. This was economic
duress that vitiated the agreement to make the payments.
Scarman emphasizes that compulsion can be seen as leaving a party
with ‘no practical choice open to him’. What makes a threat capable
of being seen as duress is that it is:
·
Illegitimate – a legal wrong.
·
Wrongful - such as blackmail threat.
·
Contrary to public policy.
UNDUE INFLUENCE
• It is presumed to exist where there is a close relationship between
the parties:
• husband and wife
• lawyer and client
• doctor and patient
• If there is no pre-existing relationship then the party alleging undue
influence has to prove it
DURESS AND UNDUE
INFLUENCE
There are some interesting sources on the internet – take a
look to see more examples of how the courts have
interpreted the requirement of ‘consent’:
• http://aptum.co.uk/law/contract/vitiatingfactors/duress/duress
• http://www.thestudentroom.co.uk/wiki/Revision:Contract_
Law_2#Economic_Duress
• It seems that it is quite a fluid area – what is legitimate
pressure v what is illegitimate pressure is hard to predict
CONSENT SUMMARISED
Each party to the contract must have genuinely wanted to
enter into the contract.
If there has been duress or undue influence then the contract
will be voidable at the option of the party who has suffered
the duress or undue influence
They may want to affirm the contract, despite the duress, and
continue. They can do that if they wish.
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There are many cases and examples which show how the
courts have interpreted this requirement of genuine consent
COMPARISON…
• What is the situation in the civil law?
• What is the situation in Kuwait?
• Is common law the same as civil law
with regards to capacity and
consent?
• What are the similarities and
differences?