Session 11: Contractual Disabilities PDF

Unit VΙ – OSU4404 Session 11: Contractual Disabilities Session 11 Contractual Disabilities Contents Introduction 11.1 Capacity of parties to the contract 11.2 Minority 11.3 Marriage 11.4 Insanity drunkenness and prodigality 11.5 Insolvency 11.6 Juristic or...

Unit VΙ – OSU4404 Session 11: Contractual Disabilities Session 11 Contractual Disabilities Contents Introduction 11.1 Capacity of parties to the contract 11.2 Minority 11.3 Marriage 11.4 Insanity drunkenness and prodigality 11.5 Insolvency 11.6 Juristic or artificial person 11.7 Plurality of contractual parties Introduction In the world of contract law, understanding the capacity of parties and the dynamics of multiple parties involved in a contract is crucial. This session will delve into the legal principles that govern the ability of individuals to enter into contracts and the implications of having multiple parties engaged in contractual relationships. We will explore the concept of legal capacity, including factors such as age, mental competence, and legal disabilities that can impact a person's ability to form a valid contract. Additionally, this will examine the intricacies of contracts involving multiple parties, such as joint contracts, collective agreements, and the rights and responsibilities of each party involved. By the end of this session, you will have a comprehensive understanding of the capacity requirements for entering into contracts and the dynamics of contractual relationships involving multiple parties 30 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities 11.1 Capacity of parties to the contract Usually, any person who is of full age and full mental capacity can enter into a contract. The law protects persons who labouring under certain disabilities by not giving them the full contractual capacity. The main areas of contractual disabilities are, Minority Marriage Insanity and Drunkenness Insolvency Juristic or artificial persons Insanity and Drunkenness Marriage Insolvency Disability of Juristic or Minority a contract artificial persons Figure: Disability of a Contract 11.2 Minority According to the age of the Majority Ordinance, a minor is any person under 21 years. A minor must have either a natural guardian or a guardian appointed by the court. Contracts by minors could be either. Assisted contracts. Unassisted contracts Assisted contracts – Contracts enter into by a minor with the assistance of a guardian or contracts entered into by a guardian for and on behalf of a minor would constitute assisted contacts. Such contracts are usually valid and binding on the minor. However, minors can exercise the right to claim restitutio in integrum where the minor h been prejudiced. 31 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities Contracts for alienating or encumbering immovable property belonging to a minor cannot be entered into even with the consent of the guardian. In addition to the consent of the guardian, the permission of the court is required in order to enter into a contract pertaining to the immovable property of a minor. Unassisted contracts – The legal position is quite complicated and different in relation to unassisted contracts by minors as compared to minor-assisted contracts. The controversy surrounding the question of whether minors unassisted contracts were void and voidable was resolved at the beginning of this century. The Supreme Court in Silva v. Mohamadu (19 NLR 426) following a South African case held that such contracts were voidable at the minor instance. So later Ceylon cases followed the view that unassisted contracts of minors are voidable. It means that such contracts do not bind a minor unless he ratified it on attaining majority but bind the other party to the contract. A minor can rectify an unassisted contract expressly or impliedly upon attaining majority. Mare inactivity on the part of the minor regarding the unassisted contract after he attains majority is no indication that he has rectified the contract. When a guardian rectified an unassisted contract of a minor such ratification would be effective from the date of the contract such contracts would thereby become an assisted contract. A minor could repudiate an unassisted contract without the assistance of a court of law. However, a claim for restitution in Ingram may be instituted as a matter of causation. When a minor decided to seek the assistance of a court of law in order to repudiate a contract, he must do so within three years of attaining a majority. Such a contract can be repudiated either by the guardian during the minority or by the minor after he attains the majority. Repudiation need not be expressly done repudiation will be implied if the minor’s act unequivocally shows that he wishes to repudiate the contract. Beneficial contracts of Minors – Different rules of law applied to contracts that are considered beneficial to minors. Contracts are considered beneficial to minors not only if the minor gets the best of the bargain but also if the contract was for the minor benefit considering his position in life and the other circumstances of the case. Such contacts may be entered into without the assistance of the guardian and bind the minor to the extent to which he has benefited from the contract. However, the minor will not be held to future performance under the contract even though he has benefitted from it. The burden of providing the benefits to minors are those of service and apprenticeship and contracts for necessities. A person who supplies necessities to a minor is entitled to recover a reasonable price for the goods 32 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities supplied. Therefore, a seller of gods would not get the price agreed between himself and a minor for goods supplied to the minor but will get only the value of the actual benefit received by the minor. necessaries are not limited to absolute necessities such as food and clothing but would include such items which he considered necessary to the condition in life and state of the minor. Loans given to the minor could only be recovered if it can be proved to that the money was spent on necessities for the minor. Activity 11.1 1. What are the contractual disabilities? 2. How minority cause for a disability of a contract? 11.3 Marriage The position of a married woman in regard to her rights to contract was to a great extent the same as that of a minor before the introduction of the Married Women Property Ordinance in 1923. Therefore, a married woman couldn’t contract without the express or implied consent of her husband. She could not sue or be sued in a court of law without a joinder or her husband. A contract entered into by a married woman without the consent of her husband could bind her and her husband only if the contract conferred some benefit on them or if the husband ratified the contract. It was only in the case of household necessities that a wife could enter into a contract binding herself and her husband. These contractual disabilities that the wife was placed under were derived from the Roman-Dutch law and were removed by the Married Woman’s Property Ordinance 1923. Which was based on English law. According to this Ordinance, a married woman can enter into any contracts sue, or be sued without the joinder of her husband and deal with her immovable property without her husband’s consent. However, this ordinance does not apply to Muslims, Kandyans, and the Tamils of the northern province who are governed by their respective personal laws. According to Muslim law and Kandyan law a married woman 33 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities can enter into contracts independently. However, under the Tesawalamai law, a married woman cannot deal with her immovable property without the consent of her husband. Activity 11.2 1. How marriage causes for the disability of a contract? 11.4 Insanity, Drunkenness, and prodigality According to the Roman-Dutch law if a person is insane at the time of contracting that contract is null and void even though the other party had no knowledge of the disability. Courts in Sri Lanka have followed this view. The position in English law is somewhat different. According to English law, an insane person would be bound by his contract unless he can show that the other party knew that he was insane. However, the contracts of a person who has been judicially declared insane and is placed under guardianship are wholly void. Drunkenness comes within this category because the person who is drunk would be unable to understand the nature and effects of contracts. The Roman-Dutch law position is that a contract entered into by a person who is so drunk that he has lost his reasoning power is voidable. In order that such a contract, be voidable the English law requires in addition that the other party to the contract was aware of the drunken condition of one party that when goods are sold to a drunken person, he must pay a reasonable price. 11.5 Insolvency If a person who has declared insolvent makes a contract of any of his insolvent property such a contract is void according to the insolvency Ordinance No 7 of 1853. Any other contract made by insolvency is valid. 34 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities Activity 11.3 1. How insolvency causes for a disability of a contract? 11.6 Juristic or artificial persons. These are people created by law to whom rights and duties attach. For example, a company created by law can enter into contracts, sue, and be sued. However, a company is limited to the terms and objects of its incorporation and cannot contract outside those limits. 11.7 Plurality of contractual parties. This occurs when there are only two sides to a contract but one or both sides consist of more than one person. The person comprising one side to such a contract may be jointly, severally, or jointly and severally affected by its terms. Roman-Dutch law and English law differ in the rules relating to joint liability. The Roman-Dutch law rule is that a contract involving two or more persons is joint rather than in solidium. Therefore, each debt and each creditor are entitled only to his proportionate share of the right accruing under the contract. However, in English law, each joint debtor is liable for the whole amount of the debt even if the contract is a joint one. The Roman-Dutch law and the English law have similar rules on obligations that are jointly and severally incurred. Each of two or more debtors who contract a joint and several debts is a debtor for the whole amount a debtor who plays more than his share is entitled to contribute as against his co debtors. Further similarities in English law and Roman-Dutch law are apparent in the rules pertaining to obligations severely incurred. Obligations are severely incurred when several parties bind themselves under different contracts. Recommended reading  Weeramantry, C. G. (1967). The Law of Contracts. Mortlake Press. 35 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities  Anson’s Law of Contract, Harlow Beaton, Oxford University Press, Oxford.  Married Women Property Ordinance in 1923  insolvency Ordinance No 7 of 1853 Summary Contractual disabilities refer to certain legal limitations or restrictions that prevent individuals from entering into legally binding contracts or limit their capacity to do so. Minority, Marriage, Insanity and Drunkenness, Insolvency, and Juristic or artificial persons are the key categories of contractual disabilities. It is essential to remember that the scope of contractual disabilities and their legal repercussions can vary depending on the jurisdiction and the facts of the case. Some jurisdictions may have specific legislative safeguards and regulations in place to protect people with disabilities or others who are vulnerable to exploitation. Learning Outcomes Identify what is Contractual disability. What are the causes for contractual disability. Review Questions 1. Madhura, a minor, enters into a contract to purchase a car. Can Madhura enforce the contract? Discuss the concept of contractual disabilities and its implications in this scenario. 2. Janani, who has been declared mentally incompetent by a court, signs a contract to sell her property. Can the other party enforce the contract against Janani? Analyze the effects of contractual disabilities in this situation. 3. Damith, under the influence of alcohol, enters into a contract to buy expensive artwork. Can Damith later claim that the contract is void due to his intoxication? Discuss the impact of contractual disabilities related to intoxication. 4. Explain the concept of contractual disabilities. What are the different types of disabilities that can affect a person's capacity to enter into a contract? Discuss the legal implications of these disabilities and their effects on the enforceability of contracts. 5. Analyze the legal consequences of a contract involving a minor. Discuss the general rule regarding the capacity of minors to enter into contracts and the exceptions to this rule. Examine the protection offered to minors under contract law. 36 Copyright © 2023, The Open University of Sri Lanka (OUSL) Unit VΙ – OSU4404 Session 11: Contractual Disabilities 6. Discuss the effects of mental incapacity on the validity of a contract. What is the legal standard used to determine mental capacity? Explain the role of guardianship and legal proceedings in cases involving individuals with mental disabilities. 7. Examine the impact of intoxication on contract formation. Discuss the distinction between void and voidable contracts in relation to intoxication. Analyze the conditions under which a contract entered into while intoxicated may be deemed voidable. 37 Copyright © 2023, The Open University of Sri Lanka (OUSL)