Formations of a Contract: Legality
A contract is considered legally binding after there is Offer, Acceptance and
Consideration BUT 2 elements that are assumed to be present are
1) the party has the CAPACITY to be in a contract
2) the contract is legal
1) Illegality with Respect to Parties: Capacity
Capacity: the competence to enter into a contract
The general rule with minors and contract is that the contract is enforceable by the
minor but not enforceable against the minor.
i) Contracts for Necessaries
An exception to the general rule (food, clothing, lodging, medical attention,
legal advice and normal transportation)
ii) Contracts for Non-Necessaries
The general rule is held, for non necessaries the minor may repudiate the contract
even if beneficial towards the minor.
iii) Beneficial Contracts of Service
An exception to the general rule, minors are held to contracts of beneficial service
such as employment or apprenticeship BUT not contracts that exploit the minor.
iv) Contractual Liability upon Attaining the Age of Majority
The minor can repudiate the contract or ratify the contract.
B) Mental Incompetence ( Capacity )
Individuals who have disabilities or head injuries(pending on ability to reason)
sometimes the elderly, people under the influence of drugs or alcohol or all people
who LACK THE CAPACITY to enter into a contract.
Same general rule as applied to minors, contracts with people who are mental
incompetent are enforceable by the incompetent person but unenforceable against
the incompetent person.
The mental incompetent person can repudiate or ratify the contract once they
become competent again. Bound to pay reasonable price for necessaries and not bound to non necessaries.
Under the Influence
If a person wishes to repudiate the contract once they sober up, they must prove
1) they were not able to make a rational decision
2)the other party was aware of the other party being under the influence ( hopefully 3
party present for witness)
C) Incompetence Due to some other Factors
1) Bankrupt Debtors (lack)
2) Illegality with Respect to Contracts: Contracts Void or Illegal
Difference b/w a VOID or ILLEGAL contract?????
1)Void Contract “Void Ab Initio”
when contracts are void it means the contract never existed from the beginning, when
contracts are void the courts will „ SET ASIDE THE CONTRACT” meaning they will
try and restore the parties at positions they were in before the contract.
3) Illegal Contacts
An illegal contract is one that is entered into and violates a law when formed or
performed. When contracts are illegal the courts will not bother to help the parties at all.
a) Contracts that are Void by Statue
A provision in a contract may be void by Statue – „ The Workers Compensation Act‟
and „The Tenants Protection Act‟ – no pets void.
(a) Contracts Illegal by State
1) Illegal when Formed ( contracts goal to break the law, planned to break law)
2) Illegal when Performed( a contrac