LAW OF CONTRACT
CAPACITY
OUTLINE
MEANING
INFANTS
LUNATICS
DRUNKARDS
ENEMY ALIENS
CORPORATE BODIES
GOVERNMENT
Meaning of Capacity
Capacity refers to the ability of a person to
enter into a contract.
Contracting parties may be natural or artificial
persons.
A party may have full capacity, limited
capacity or may lack capacity.
Those with limited or lacking capacity may
include: infants, drunkards, lunatics and enemy
aliens.
Meaning of capacity
A party may lack or have limited capacity
because:
1. They are vulnerable and need protection
from unscrupulous persons
2. unsuspecting members of the public need
protection from these persons (in the case
of enemy aliens).
INFANTS
Under the common law, an infant, is a person
under the age of 21.
The Companies Act, 1963 provides: “infant
means any natural person under the age of 21 or
such other age as may from time to time be
declared by any enactment to be full age for
legal purposes.”
Children’s Act, 1988 – a child is a person below
age 18
INFANTS
Per the 1992 Constitution of Ghana, a person
shall:
Vote at age 18
Become member of parliament at age 25
Become president at age 40
For the purpose of entering into a contract, it is
respectively submitted that the legislative
intervention the age of majority is 18. Any under
18 is infant.
INFANTS
At common law, an infant cannot enter into a contract.
Therefore, he cannot sue or be sued.
However, it is not an absolute that an infant can neither sue,
nor be sued.
Infants can sue or be sued to enforce the following types of
contracts:
1. contracts for necessaries.
2. contracts that are beneficial to infants.
3. beneficial contracts of service.
4. when infants have themselves perform their side
of the bargain.
Necessaries
 Necessaries are items that are vital to the condition of life
of the infant at the particular point in time.
 Necessaries include the bare essentials of life – such as
food, shelter and clothing, infants education as well as
things which are suitable to the situation of life of the infant
and the infant’s actual needs at the time of sale and delivery.
 The definition of necessaries precludes luxuries and
opulence.
In the case of Nash v Inman, it was held that the plaintiff
could not recover for the cost of eleven fancy waistcoats he
sewed for the infant defendant.
contracts that are beneficial to
infants
An example of a case where a contract was held to be beneficial to an infant is
Champlin V Leslie Frewin where it was held that the time to determine
whether a contract was for a minor’s benefit was the time it was made.
Fact of the case: the minor had presented a manuscript about his life titled I
couldn’t Smoke the Grass on my Father's Lawn to the defendant to publish.
(the manuscript had been written for the minor by someone else) However,
after the plaintiff had agreed with the defendant publishers to publish, he had a
second thought and therefore sued to avoid the contract. The defendant
successfully resisted the action.
It was held that minor plaintiff not (simply) by the money to be made for him
but because, although he had a ghost writer, the publishing contract could have
helped him to make a start as an author.
In this case, the minor could not now avoid the contract because, at the time he
entered into it, it was for his benefit.
beneficial contracts of service
A beneficial contract of service is a contract of
employment which, viewed as a whole, is to the
advantage of the infant.
If the restrictive conditions in these contract
unreasonable or seem to outweigh their
beneficial ones, the contract is unenforceable
against the infant.
when infants have themselves
performed their side of the bargain
when infants have themselves performed their
side of the contract, they may sue to enforce it.
In the case, Lartey v Barnnerman, it was held
that a person seeking specific performance who
has himself completed his side of the contract
will be able to obtain a decree.
Infants – cont’d
There is a final class of contract that binds infants unless
they disaffirm them during their infancy or within a
reasonable time after attaining majority.
This class includes contracts such as:
Those in relation to property
Marriage settlements
Real property rentals
Liability for calls on shares
Partnership transactions
These contracts are voidable at the instance of the minor
anytime during his infancy or within a reasonable time
after becoming an adult.
LUNATICS
 A lunatic is a person of unsound mind, a mentally
incompetent person, an insane person, a person who is
not mentally composed (non compos mentis)
 Insanity does not automatically incapacitate a putative
contracting party. The insanity must be obvious.
 The insanity must exist at the time of the contract.
 Lunacy makes contracts voidable not void.
DRUNKARDS
A contract entered into with or by a person who, at the
material time, was so drunk that he did not know the
consequences of his act and whose drunken condition,
as just described, was known to the other party, is
voidable at the option of the drunken party.
DRUNKARDS
Since it is voidable only – not void – the drunken
party when he regains his sobriety and senses can
ratify the contract.
A ratified contract is binding on the drunken man.
Note:
It is not ratification that makes a contract with a
drunken man valid.
Since this contract voidable only, it is valid until the
drunkard applies to the court to set it aside, which
he may or may not get.
ENEMY ALIENS
It is contrary to public policy for courts to
enforce contracts between parties who include
enemy aliens.
To do so constitutes providing assistance to the
enemy.
An enemy alien is a national of a country with
whom Ghana is at war.
CORPORATE BODIES
These are artificial legal persons who, by law, have
the power to hold property, sue and be sued.
They have perpetual succession and may enter into
a contract.
They include:
Statutory corporations
Registered companies
Incorporated partnerships
Incorporated trusts etc.
CORPORATE BODIES
At common law, Corporate bodies who exceeded
their powers were considered ultra vires.
According to the Companies Act, 1963, section
204, by ordinary resolution the directors may
exceed their powers.
GOVERNMENTS
Governments have unlimited contractual capacity.
They enter into contracts to build schools, hospitals,
dams etc.
The various ministries may enter into contracts in
their names.
But to enforce such contracts in court by or against
the ministry, it is the Attorney General who must
sue or be sued.
INTENTION TO CREATE LEGAL
RELATIONS
Parties can only enforce promises if they mean
the promises to be taken seriously, and if in fact
they are taken seriously by each other.
Social promises between relatives or friends may
not be considered to create legal relations.
But it depends.
INTENTION TO CREATE LEGAL
RELATIONS
In Carlill V Carbolic Smoke Ball Co, the
court was of the view that the fact that the
company had advertised that it had
deposited 1,000 pounds in a bank to meet
claims was indication that it intended to
create legal relations
INTENTION TO CREATE LEGAL
RELATIONS
In Balfour v Balfour, an arrangement between
spouses while living in amity was considered
not to create a legal relations.
In Merritt v Merritt, an arrangement between
separated spouses for the conveyance of a
house as part of a marriage a marriage
settlement was held to create legal relations
and was binding.