ACCT 202 Lecture Notes - Lecture 5: Equitable Remedy, Specific Performance, Indian Act
29 May 2018
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Chapter 9: Legal Capacity to Contract and the Requirement of Legality(pg 151-165; PDF 184-195)
Capacity to contract is the fifth essential element of contract law
• Certain classes of promisors must be protected as a matter of public policy, either for reasons of
their inexperience and immaturity, or because of their inability to appreciate the nature of their
acts in making enforceable promises. They may not get into contracts that would bind them at
law.
An infant: is a person who has not reached the age of majority as common law it is those under the age
of 21 years, in most provinces 18 or 19 years of age
• The law attempts to balance the protection of the minor with the need to contract by making
only those contracts for necessary items enforceable against a latter minor such as food, shelter,
and clothing on credit. The law provided limited liability to minors, treated as such as a matter
of equity.
• The merchant is protected because the minor is liable on the contract; the infant is protected in
that the Merchant may only charge the infant a reasonable price for the goods.
• Any business firm or merchant that decides to enter into a contract with a minor assumes the
risk (in the case of a contract for a non-necessary) that the minor might repudiate the
agreement
Enforceability of any contract for non-necessary goods will depend to some extent on whether the
contract has been fully executed by the minor, or whether it has yet to be performed.
• if the contract has been executed by the minor they are bound by the agreement and can only
Repudiate the contract if they can show that they had been taken advantage of by the
merchant, and/ or can return all the goods purchased.
• If the minor has not executed the contract(executory contract) ad it’s yet to e pefoed, it
ay e oidale at the io’s optio. Ad may also apply to necessary items if the repudiate
the contract (return goods) before delivery is made the minor would probably not be bound by
the agreement
Criteria that is a Necessary for a minor:
• Mehat ust e ale to ko the goods ae atually eessay ad that they do’t hae a lot
of similar goods
• Examine the social position of the infant in deciding the question
• Contracts of employment or apprenticeship are contracts considered to be beneficial to minors,
and are enforceable against them
The Effect of Repudiation: For contracts that have not been fully performed (executory contracts) for
non-necessary goods or services the minor or infant may repudiate the contract at any time at their
option. Once contract has been repudiated the minor is entitled to refund of any deposit to contractor
but if the minor has purchased the goods on credit and taken delivery, the minor must return the goods
before the merchant is obliged to return deposit. If the goods are damaged(not a direct result of the
io’s delieate at) the contractor may not receive compensation for this damage from funds if the
retuned deposit because the merchant should not be permitted to recover under the law of torts what
he or she cannot recover by the law of contract. But if the minor deliberately misuses the good the
contractor is entitled to recover the loss by way of an action for tort
find more resources at oneclass.com
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Fraudulent Misrepresentation as to Age
When a minor has attempted to use age minority in a manner that is contrary to public policy, the courts
will either provide the other contracting party with a remedy for the loss caused by the infant, or
prevent the infant from avoiding liability under the contract.
• Minor cannot use protection of the rules of contract to commit fraud on an unsuspecting
merchant and the criminal law relating to obtaining goods under false pretenses may also be
applicable
• Merchants cannot hold a minor to a contract for non-necessaries even if they have represented
themselves as having majority age. But they may recover goods on basis of minor fraud
Repudiation: The refusal to perform an agreement or promise.
Ratification: The adoption of a contract or act of another by a party who was not originally bound by the
contract or act.
When the minor has entered into a contract of a continuing or permanent nature under which the
minor receives benefits and incurs obligations (such as engaging in a partnership, or purchasing non-
necessary goods on a long-term credit contract) the contract must be repudiated by the minor within a
reasonable time after attaining the age of majority. Otherwise, the contract will become binding on the
minor for the balance of its term.
For contracts for non-necessary items purchased by a minor, when the contract is not of a continuing
nature, the infant must expressly ratify (acknowledge and agree to perform) such a contract on
attaining the age of majority in order to be bound by it.
New Brunswick, Newfoundland, Nova Scotia, Ontario, and Prince Edward Island have has legislations
requiring the ratification to be in writing before it will be binding on the infant
Bitish Coluia’s’ legislatio euies a ifat aot atify a otat of this atue i ay fashio
that would render it enforceable by the adult contracting party having the effect of rendering contracts
for non-necessaies ad det otats asolutely oid.
Minors Engaged in Business
• Contracts of employment, if they are lawful and contain terms that are not onerous, are
generally binding on minors. Minor need only give reasonable notice to terminate, and the
infant would be free of all obligations imposed by the agreement.
• law generally does not support the thesis that an infant must, of necessity, engage in business
atiity as a piipal so it’s diffeet fo pateships ad sole popietoships
• Infant merchant: buying the equipment for business, its treated by courts as contract for non-
necessaries voidable at the option of the minor. If the goods are delivered they may get deposit
back once returned the goods to contractor even if it damaged (not by minor) but if the minor
has sold the goods, he or she will be required to deliver up any monies received.
• “ale of goods: the ifat ehat aot e oliged to pefo the otat if they do’t at
to. If they eeie deposit they do’t hae to pefo service but must return the deposit.
• Partnership: consistent with public policy concerning infants contracts, partnership agreement
involving contracts of non-necessity is voidable by the minor, the infant must repudiate it promptly
on or before reaching the age of majority if they want to avoid liability under it. In doing so they will
ot e oligated to ay dets of pateship duig ioity ut a’t ithda otiutios to
partnership until partnership debts are paid. After reaching the age of majority, the minor will be
oud y the otat, ee though io did’t atify it as it ould e iplied.
find more resources at oneclass.com
find more resources at oneclass.com
