CAPACITY
Topics you will cover:
- Capacity
- Exceptions
- Legal Capacity
- Minors & Capacity (Contract Law)
- Exceptions to contracts with minors
- Contract with minors voidable
- Voidable contract
- Payment made by minor
- Necessary goods & services
- Mentally challenged
- Incorporated companies
Cases included in this chapter:
Case #1: DOYLE v WHITE CITY STADIUM [1935]
Case #2: CLEMENTS v LONDON & NORTH WESTERN RAILWAY
COMPANY [1894]
Case #3: DEFRANCESSCO v BARNUM [1890]
Case #4: PROFORM SPORTS MANAGEMENT LTD. v
PROACTIVE SPORTS MANAGEMENT LTD. [2006]
Case #5: STEINBERG v SCALA (LEEDS) LTD. [1923]
Case #6: EDWARDS v CARTER [1893]
Case #7: PEARCE v BRAIN [1929]
Case #8: NASH v INMAN [1908]
1
Case #9: HART v O'CONNOR [1985]
- Capacity:
• The general rule of English law is that any person compotent
to his/her self to any contract he/she chooses to make,
provided that it's not illegal or void for reasons of public policy.
- Exceptions:
• At common law, there are exceptions to this rule, in the case
of Corporations, Minors, Married Women, Mentally
Incompotent and Intoxicated Persons.
• The exceptions are now greatly induced in scope.
For example, a series of statutes from 1870-1949 abolished the
married women disabilities and she now enjoys full contractual
duties.
- Legal Capacity:
• The law states that individuals who enter into a contract must
leave a capacity to enter into a contract, otherwise it's
voidable.
• Adults who have full capacity are able to enter into contract
and enforce them at law.
• The law set out those who do not have legal capacity to
contract, particularly providing special legal protection to those
who are minors or under mental disability.
- Minors & Capacity (Contract Law):
• Individuals who are under the age of 18 are known as
2
"Minors" under the Family Reform Act 1969.
• Minors can enter into a contract at law, however such a
contract is voidable by the minor before they reach 18 and for a
reasonable time afterwards. This means that a minor can
enforce a contract, but they can also terminate it if they wish. A
minor does not have to give any reason for cancelling the
contract.
- Exceptions to contracts with minors:
• Once the minor reaches the age of 18, the contract becomes
legally binding on both parties, however there are exceptions
to the general rule.
• A minor may need to enter into a contract to buy necessities
such as food, clothing, medicine and other things necessary for
them and their lifestyles.
• Minors may also need to enter into legally binding contracts
for their education such as apprenticeships.
• These types of contracts must be fair to be enforceable
against the minor. So if a minor pays a reasonable price for
items required in the circumstances, the minor is legally
required to fulfill the contract. Which is, to pay for the goods or
service.
• A case where such a contract has been enforced is that of
DOYLE v WHITE CITY STADIUM, where there was an agreement
to trade a boxer. There was no money paid but the contract
was enforceable as it was considered that the contract was
beneficial because of the training provided.
• Another case where the contract was held enforceable in
CLEMENTS v LONDON NORTH WESTERN RAILWAY CO., where
certain benefits were removed following a contract was
3
employment, but the contract was considered to be beneficial
and upheld.
- Contracts with minors voidable:
• The courts may not uphold a contract if it's considered not to
be to the benefit of the minor.
• For instance, in the case of DEFRANCESSCO v BARNUM, a
minor aged 14 years old, entered into an agreement to train as
a dancer on stage. However, the contract had conditions which
were considered not beneficial to the minor and therefore the
minor was not bound by the contract.
• More recently, in the 2006 case of PROFORM SPORTS
MANAGEMENT LTD. v PROACTIVE SPORTS MANAGEMENT LTD.
the court had to consider a contract entered into by the
footballer Wayne Rooney (who was 17 at the time) with his
agent. The High Court ruled that the contract was voidable
because it was not an agreement equivalent to contracts of
apprenticeship, education and service.
- Voidable contract:
• A 'voidable contract' is a contract that can be ended. The
contract is still valid but it can be avoidedby the minor who can
legally terminate the agreement before reaching the age of 18
years, or within a reasonable time period will depend on the
facts if the case.
• In the case of STEINBERG v SCALA (LEEDS) LTD., the contract
was voided because the minor was unable to keep up with
payments. However, in the case of EDWARDS v CARTER the
court decided that the contract could not be rejected and the
agreement was enforceable.
4
- Payment made by minor:
• If money is paid by a minor under a contrac, then usually this
cannot be recovered unless it can be proved that the contract
has not been beneficial to the minor.
• So if a minor enjoys goods or services, then seeks to
terminate the contract and recover money already paid he
cannot be reimburred.
• In the case of PEARCE v BRAIN, a minor exchanged a
motorcycle for a car but found that the car had defects. The
court held that the contract must stand as he had used the car
and, therefore had enjoyed the benefit of it.
- Necessary goods & services:
• A minor is legally obliged to pay for goods and services
necessary to his/her station in life, provided the contract as a
whole is for his/her benefit.
• "Necessaries" are goods or services that he/she actually
requires at the time of sale and delivery.
• The leading case illustrating this is, NASH v INMAN. A minor
who was a student at Cambridge was persuaded by a tailor to
order a large quantity of clothing, including 11 fancy waistcoats
on credit. The court held that because he had already enough
clothes, the goods were not neccesseties and he could not be
required to pay for them.
- Mentally challenged:
• A person suffering from mental disorder can make a contract
but such a contract is voidable and can be set aside by the
mentally disordered person. Provided that he/she can can
5
prove that he/she was incapable of understanding what he/she
was agreeing to and also that the other party knew of this at
the time of contract.
• In the case of HART v O'CONNOR, under the Mental Health
Act 1983 a person whose affairs are controlled by the court of
protection cannot make a valid contract. All his/her affairs will
be dealt by a relative or other person who is answerable to the
court.
• Similar rules apply to a person who is drunk or drugged when
he/she makes a contract.
- Incorporated companies:
• A company or a corporation is a legal person separate from
it's members and has the legal power to make a contract in its
own name.
• The purpose for which the company was formed is laid down
by its memorandum of association.
• The relationship between the members of the company and
the powers of the directors are regulated by the articles of
association.
