Capacity PDF - Contract Law

 All agreements are contracts if they are made by … parties competent to contract › S.10 Contracts Act 1950  A person is competent to contract when he is: › Of the age of majority › Of Sound mind - s.11 Contracts Act 1950 © Faculty of Law, UM 2 ...

 All agreements are contracts if they are made by … parties competent to contract › S.10 Contracts Act 1950  A person is competent to contract when he is: › Of the age of majority › Of Sound mind - s.11 Contracts Act 1950 © Faculty of Law, UM 2 © Faculty of Law, UM 3  S.12  At the time of contract, he is capable of: › understanding it › forming a rational judgment as to its effect upon his interests  A man who is usually of unsound mind can make a contract when he is of sound mind  A man who is usually of sound mind cannot make a contract when he is of unsound mind © Faculty of Law, UM 4  If a contract is entered into by a person who is not of the age of majority, the contract is … void ab initio EXCEPT 1) Marriage contracts 2) Scholarship contracts 3) Employment contracts 4) (Insurance contracts) © Faculty of Law, UM 5  7 Age of Majority Act © Faculty of Law, UM Rajeswary and Anor v Balaksrishnan & Ors 3 MC 178 A betrothal ceremony followed by the arranged marriage plans. D repudiated his promise to marry and P sought damages for his breach. © Faculty of Law, UM 8  S.10 “any marriage purported to be solemnised in Malaysia shall be void if at the date of marriage either party is under the age of eighteen years” Note: “solemnised” …. “at the date of marriage” © Faculty of Law, UM 9  10 S.4(a) Contracts (Amendment) Act 1976 Notwithstanding anything to the contrary contained in the principal Act, no scholarship agreement shall be invalidated on the ground that – (a) The scholar entering into such agreement is not of the age of majority; © Faculty of Law, UM  Government of Malaysia v Gurcharan Singh & Ors  Careful  High court held that the scholarship agreement was void and unenforceable as a minor had entered into it › Thus, the amendment was made  However, still able to claim for payment under s.69 © Faculty of Law, UM 11  12 Children and Young Persons Employment Act 1966 S.1A: ‘Child’: any person who has not completed his fifteenth year of age Young persons’: any person who, not being a child, has not completed his eighteenth year of age © Faculty of Law, UM a) Light work suitable to his capacity in any undertaking carried on by his family b) In any public entertainment, in accordance with the terms and conditions of a licence granted in that behalf under this Act c) Work approved or sponsored by the Federal/State Government and carried on in any school, training institution or training vessel d) Apprentice under a written apprenticeship contract approved by the DG with whom a copy of such contract has been filed © Faculty of Law, UM 13 a) Any employment mentioned in subsection (2) b) Domestic servant c) Office (including hotels, bars, restaurants and stalls), godown, factory, workshop, store, boarding house, theatre, cinema, club or association d) Industrial undertaking suitable to his capacity e) On any vessel under the personal charge of his parent or guardian © Faculty of Law, UM 14 However,  No female young person may be engaged in any employment in hotels, bars, restaurants, boarding houses or clubs unless such establishments are under the management or control of her parent/guardian  May be engaged in any employment in a club not managed by parent/guardian with the approval of the DG © Faculty of Law, UM 15  S.13 “ Notwithstanding anything to the contrary contained in the Contracts Act 1950 … any child or young person shall be competent to enter into a contract of service under this Act otherwise as an employer, and may sue as plaintiff …” © Faculty of Law, UM 16 Note: “Provided that no damages and no indemnity under s.13 of the Employment Act 1955, shall be recoverable from a child or young person for a breach of any contract of service” © Faculty of Law, UM 17  Employment Act 1955 13. Termination of contract without notice (1) Either party to a contract of service may terminate such contract of service without notice or, if notice has already been given in accordance with section 12, without waiting for the expiry of that notice, by paying to the other party an indemnity of a sum equal to the amount of wages which would have accrued to the employee during the term of such notice or during the unexpired term of such notice. (1) Either party to a contract of service may terminate such contract of service without notice in the event of any wilful breach by the other party of a condition of the contract of service. © Faculty of Law, UM 18  If a contract is entered into by a person who is not of the age of majority, the contract is … void ab initio EXCEPT 1) Marriage contracts 2) Scholarship contracts 3) Employment contracts  But … would be able to claim for remedies despite it being void ab initio © Faculty of Law, UM 20  21 “On adjudging the cancellation of an instrument, the court may require the party to whom the relief is granted to make any compensation to the other which justice may require.” The court has the discretion to direct a minor to make payment © Faculty of Law, UM Fiduciary relationship is required © Faculty of Law, UM 22  23 When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under the agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it © Faculty of Law, UM  S.65 Indian Contracts Act is in pari materia with s.66 Contracts Act › “When an agreement is discovered to be void, or when a contract becomes void”  A contract entered into by a minor? › Void ab initio “… this section … starts from the basis of there being an agreement or contract between competent parties; and has no application to a case in which there never was, and never could have been, any contract” © Faculty of Law, UM 24 The Privy Council in Mohori Bibee … ruled that “the (Indian Contracts) Act makes it essential that all contracting parties should be competent to contract” and specifically enacts that a person incompetent to contract by reason of infancy cannot make a contact within the meaning of the Act… no specific performance can be ordered on the agreement … held … the agreement … to be void as an agreement for sale. “We ordered the appellant to repay the $5000/- purchase price on the respondent [minor] vacating the lands occupied by him, pursuant to s.66 of the Contracts Act 1950. The deposit to be refunded by the appellant…” © Faculty of Law, UM 25  26 “If a person, incapable of entering into a contract … is supplied by another person with necessaries1 suited to his condition in life,2 then the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.” 1. Necessaries 2. Suited to his condition in life © Faculty of Law, UM  Government of Malaysia v Gurcharan Singh “what decisions there are of what constituted necessaries … were clearly decided on their peculiar facts, and the circumstances of the infant’s life and needs” “ the word ‘necessaries’ must be construed broadly and in any decision involving whether what are supplied are or are not necessaries, it is incumbent to have regard to the facts of the case, the conditions and circumstances in which the supply was made and the purpose which is served” © Faculty of Law, UM 27  Gucharan Singh › Professional or vocational training in a Teachers’ Training institution to enable the minor to qualify for and accept the appointment as a teacher  Chapple v Cooper › Burial expenses incurred by the defendant, a widow who is a minor © Faculty of Law, UM 28  In deciding on whether it is ‘necessaries’, the minor’s condition in life must be taken into account as well  The ‘necessaries’ is dependent upon the minor’s ‘life’ © Faculty of Law, UM 29  The subject matter and extent of the contract may vary according to the state and condition of the infant himself.  His clothes may be fine or coarse according to his rank; his education may vary according to the station he is to fill; and the medicines will depend on the illness with which he is afflicted, and the extent of his probable means of age.  So, again, the nature and extent of the attendance will depend on his position in society Chapple v Cooper © Faculty of Law, UM 30 Two other issues: 1. Contract entered into on behalf of a minor 2. Effect of a minor misrepresenting his age © Faculty of Law, UM 32  Sri Kakulam Subramanyam v Rurra Subba Rao AIR PC 95, India  The contract is valid if: 1. The guardian has the capacity, in law, to enter the contract on his behalf 2. The contract is for the benefit of the minor © Faculty of Law, UM 33 Would a minor, who has misrepresented his age, be estopped by s.115 Evidence Act 1950 from declaring his true age? © Faculty of Law, UM 34 When one person has by his declaration, act or omission intentionally caused or permitted another person to believe a thing to be true and to act upon such belief, otherwise than but for that belief he would have acted, neither he nor his representative in interest shall be allowed in any suit or proceeding between himself and that person or his representative in interest to deny the truth of that thing. © Faculty of Law, UM 35 When one person (A) has by his declaration, act or omission … › A, a minor, has made a statement (lied about age eg he is 21) intentionally caused or permitted another person to believe a thing to be true › Made B believe him to be 21 years old and to act upon such belief, › Entered into a contract otherwise than but for that belief he would have acted, › If it wasn’t for the lie, he would not have entered into the contract neither he nor his representative in interest shall be allowed in any suit or proceeding between himself and that person or his representative in interest to deny the truth of that thing. › A is thus not allowed to deny the statement (about being 21 years old) in court © Faculty of Law, UM 36 However  a minor who had misrepresented his age, is not prohibited by s.115 Evidence Act 1950 from bringing in evidence to prove his true age  Mahomed Syedol Ariffin v Yeoh Ooi Gark 2 AC 575 © Faculty of Law, UM 37 If a minor had misrepresented his age to be an adult, and as such, caused a contract to be entered into, the minor is not prohibited from declaring himself to be a minor to avoid the contract © Faculty of Law, UM 38 39