2024 Legal Capacity Contract PDF

LEGAL CAPACITY Learning Outcomes: At the end of this chapter, students should be able to: 1. Define minors and effect the contract made by minors. 2. Explain exceptions under the General Rule. 3. Define necessaries and explain types of necessaries Who can make a contract?  Legal capacity refers...

LEGAL CAPACITY Learning Outcomes: At the end of this chapter, students should be able to: 1. Define minors and effect the contract made by minors. 2. Explain exceptions under the General Rule. 3. Define necessaries and explain types of necessaries Who can make a contract?  Legal capacity refers to a person ability to enter into a contract.  There are several things that make a person legally able to make a contract including age and state of mind (mental health).  If a person has no legal capacity, the contract is void and he cannot sue or be sued.  This means that some people do not have capacity to contract. Section 10 & 11Contracts Act 1950 : Section 10 : all agreements are contract if they are made by the free consent of competent parties to contract. Section 11: Every person is competent to contract if 1) age of majority (adult)– 18 years old according to the Age of Majority Act 1971. 2) sound mind and (sane)- not insane, intoxicated and mentally ill. 3) not disqualified from contracting (not bankruptcy) Q : what happen to the contract made by a minor / infant / children (Below 18 years old)?  Contract made by a minor - void  Tan Hee Juan v. Teh Boon Keat Facts : A child contracting to transfer a land. Then he applied to the court to set aside the contract. Held: The transactions were void and ordered the restoration of the property to the minor.  Mohori Bibee v. Dharmodase Ghose Facts: A child who made a loan and received Rs20,000. The creditor tried to claimed the debt. Held : The contract is void ab-initio. Whatever benefits passed to the minor may not be recovered. * Void ab-ignition means void from the beginning. Exceptions- there 5 situations where a minor can make a valid contract.  Contract of marriage  Contract of scholarship  Contract of insurance  Contract for necessary  Contract of employment CONTRACT OF MARRIAGE Rajeswari V Balakrishnan Facts: the parties were Ceylonese Hindus. A marriage agreement was made by their fathers. Subsequently, the defendant refused to marry, and the plaintiff sued for damages. The defendant argued that the contract was void because the plaintiff was a minor. Held: the contract of promise of marriage was valid.The defendant liable to pay compensation to the plaintiff for breached of contract of marriage.  Contract for necessary ▪ Section 69 CA “ If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person”  Definition : necessary means essential of life. It includes goods and services. Example: Foods, clothing, education, essential services etc. ▪ To determine whether it is a contract of necessaries or not there are 2 requirements that need to be fulfill: a) the condition of the life of a minor (his social status and his wealth) b) the goods must be suitable to his actual requirement at the time of sale and delivery  Examples: Sonia is 15-year-old student enter a contract to buy: 1. Some books from Pustaka Book Store- valid. 2. T-shirt RM10 – valid 3. Nasi lemak RM5 – valid 4. Foods from Hotel UiTM for RM200 - void 5. Order dress RM1500 from Embun Boutique – contract void Siti Nurhaliza, 16-year-old - a business women and popular singer 1. Order a dress for RM2000 – contract valid 2. Food from Hotel UiTM RM1000 – valid **** if the contract valid – minor should pay for those goods and services. Minor can be sued for breach of contract.  Cases : Nash V Inman Facts: A tailor sued a minor to whom he had supplied 11 waistcoats. The minor was an undergraduate at Cambridge University. Held : 11 waistcoats were not necessary as he had already owned enough clothing. There was no contract.The tailor’s claim failed. Doyle V White City Stadium There was an agreement to train a boxer between the Defendant and the plaintiff, an infant. Held: The contract was enforceable (valid) as it was considered that the contract was beneficial because of the training provided.  Contract of scholarship  Section 4(a) Contract (Amendment) Act 1976: No scholarship agreement shall be invalidated on the ground that the scholar is a minor.  Means: Contract of scholarship are valid for minor.  Scholarship includes an award, bursary, loan, sponsorship and appointment to the course of study.  If the minor enter a contract of scholarship, the contract is valid and can be sued if he breach of contract. Gov. of Malaysia V Gurcharan Singh  Facts : a minor jointed a Teacher’s Training College, sponsor by the government RM11,500. Among the terms in the agreement was that he has to serve the government for 5 years. However, after servicing 3 years, Gurcharan breached the contract. The government claimed back the amount of sponsorship.  Gurcharan argued that firstly, the contract entered into between him and the government was void on the basis that he was still a minor at the time of contracting.  Held : Contact was valid contract because education is necessary. Therefore, he has to pay back the government. ** the government won the case, but they were not awarded the full amount they claimed because the courts reasoned that as Gurcharan had already spent about 3 years working for them, the government could only get back an equivalent portion of what they had spent on educating him (about RM2,300). Contract of Insurance  Insurance Act 1963: a minor over the age of 10 may enter into a contract of insurance. If under the age of 16, a written consent of his parents or guardian is essential Contract of employment  Minors can enter into employment contracts under the Children and Young Persons (Employment) Act 1966 which states that any child or young person may enter into a contract of service and be employed.  [Though, they can't be employers]. 2) SOUND MIND  Section 12 Contract Act 1950 : a person is said to be of sound mind if at the time when he makes it, capable of understanding it and of forming a rational judgment.  S.12 Illustration (a) CA: A patient in a mental hospital, who is at intervals of sound mind, may contract during those intervals.  S.12 Illustration (b) CA: A sane man, who is delirious from fever, or who is so drunk that he cannot understand the terms of a contract or form a rational judgement as to its effect on his interests, cannot contract whilst such delirium or drunkenness lasts. 3) NOT DISQUALIFIED BY LAW  A person who has entertained the age of majority and sound mind can always enter a contract if he is not disqualified by any other written law which he is subject to. Means he is not bankrupt or insolvent.