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Chapter 7

Chapter 7 – Formation of Contracts (Continued)

Business Administration
Course Code
BUS 393
Richard Yates

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Chapter 7 – Formation of Contracts (Continued)
Minors (under 19) not bound by their contracts
Necessaries and Beneficial Contracts of Service
Minors are bound by contracts for necessaries (eg. food, clothing,
lodging, transportation)
Minors are bound by contracts for service that substantially benefit
Exception: In BC, ALL contracts are unenforceable against minors
unless enforceable by legislation
On Becoming an Adult
If minor ratifies contract at age of authority, she is bound
Minor must repudiate within a reasonable time
Executory contract – parties entered into contract but minor has not
benefitted or paid – not bound
Partially executed contract – minor will have to return/pay for goods
and then will get a full refund
Executed contract – if minor has benefitted, cannot escape contract
=> not bound if received no benefit at all
Parents’ Liability
Parents are not responsible for minor’s contracts
Responsible if they guarantee an obligation
Infants’ Liability for Torts
Minor may be liable for tort, independent of contract
Insanity and Drunkeness
Must be shown that person could not understand the nature of the act being
To escape contractual liability, must prove insanity/mental incompetence as
well as that the person dealt with knew or should have known of the
Must repudiate contract when sober/sane
Others of Limited Capacity
Some crown corporations and government bodies
Enemy aliens in times of war, foreign governments, foreign diplomats,
bankrupts, Indians
Contracts Performed Illegally
Difference between contracts performed illegally and formed illegally
Lawful contracts performed may be enforced => courts use discretion
Contracts Formed Illegally
Illegal contract is void and will not be enforced
Court will not restore parties to original position, unless one party is innocent
Conduct that is immoral or against public policy also creates an illegal
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