ADMN 3250H Chapter Notes - Chapter 9: Embezzlement, Ultra Vires, Trade Union
30 Jun 2018
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Chapter 9 – Legal Capacity to Contract and the Requirement of Legality
What is the effect of consideration on the alteration of a contract when there is
a prior existing legal duty owed under the contract?
What is the general rule with respect to capacity to contract?
What are the rules with respect to the contractual capacity of minors and
people who have a temporary or permanent mental impairment?
Minors
The adult with full capacity to contract is bound in every case by the contract
negotiated with a minor, since the adult person has no obligation to do
business with a minor unless the adult wishes to do so
Any business firm that decides to enter into a contract with a minor assumes
the risk that the minor might repudiate the agreement
A minor will be bound by contracts for necessaries, and will be liable for a
reasonable price for the goods received or the services supplied
Merchant is protected because minor is liable on contract; and minor is
protected because merchant may only change minor a reasonable price for
goods
General rule relating to contracts that have not been fully performed for non-
necessary goods or services is that the minor or infant may repudiate the
contract any time, at his or her option
Drunken and Insane Persons
Those persons who have been committed to a mental institution cannot
normally incur any liability in contract
Persons who suffer mental impairment from time to time are subject to a
number of special contract rules
In general, persons who suffer from some mental impairment will be liable
on any contract for necessaries negotiated by them, and they will be obliged
to pay a reasonable price
Law makes no distinction between minors and persons suffering from some
mental disability
oMerchant involved would be entitled to payment even if he or she
knew of the insane or drunken state of the purchaser
What is the effect of contractual capacity as it relates to corporations, First
Nations, unions, bankrupts, community associations and unlicensed
professionals/tradespeople?
Corporations
Corporations formed under Royal Charter or letters patent are generally
considered to have all the powers to contract that a natural person may have
find more resources at oneclass.com
find more resources at oneclass.com
Document Summary
Chapter 9 legal capacity to contract and the requirement of legality. Any business firm that decides to enter into a contract with a minor assumes the risk that the minor might repudiate the agreement. A minor will be bound by contracts for necessaries, and will be liable for a reasonable price for the goods received or the services supplied. Merchant is protected because minor is liable on contract; and minor is protected because merchant may only change minor a reasonable price for goods. General rule relating to contracts that have not been fully performed for non- necessary goods or services is that the minor or infant may repudiate the contract any time, at his or her option. Those persons who have been committed to a mental institution cannot normally incur any liability in contract. Persons who suffer mental impairment from time to time are subject to a number of special contract rules.
