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ADMS 2610 (76)
Chapter 9

chapter9. Legal capacity to contract and the requirement of legality.docx

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Department
Administrative Studies
Course
ADMS 2610
Professor
Robert Levine
Semester
Summer

Description
CHAPTER 9. LEGAL CAPACITY TO CONTRACT AND THE REQUIREMENT OF LEGALITY 1. The minor or infant: A person who has not reached the age of majority (21, 19, 18 or younger) should not be bound by their promises and are not liable on most contracts that they might negotiate. Exceptions: contracts for necessary items are enforceable against a minor. a. Enforceability and the right of repudiation: enforceability depends on the partial or complete execution of performance by minor. - Full performance will bind the minor to the agreement unless he can prove that he was taken advantage of + return the goods. - Partial performance then the agreement is voidable (if for non-necessary item) at the minor’s option. - Note: any business firm or merchant entering into a contract with a minor assumes the risk that the minor might repudiate the contract ( in which case, minor is not bound to the agreement) - An infant will be bound by contracts for necessaries and will be liable for a reasonable price for the goods received or the services supplied. b. Criteria for Necessary: goods supplied to the minor are necessary if the minor is not already well supplied with similar goods. - Contracts of employment or apprenticeship are contracts considered to be beneficial to minors and are enforceable against them - Education ventures that involve minors may not be considered by the courts as being beneficial, many are held enforceable even when the educational aspect is unusual. c. The effect of repudiation: The minor is entitled to a return of any deposit/monies paid and the minor must return the goods, any damages or wear and tear that was not a deliberate act of the minor is not recoverable or deductable from funds repayable, as the parties were aware of the possibility of damage or wear and tear in the subject matter of the contract. d. Fraudulent misrepresentation as to age: - Non necessary items- merchant can recover the goods based on fraud by minor. - Criminal law relating to obtaining goods under false pretences may also be applicable. - Treatment of minor- matter of equity - Solution: 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. e. Ratification and repudiation: Ratification- the adoption of a contract or act of another by a party who was not originally bound by the contract or act Repudiation- the refusal to perform an agreement or promise. - For continuing or permanent contracts w/ benefits and obligations- minor can repudiate before reaching age of majority or be bound by it till the end of the term( ratification is implied) - For non-necessary items, minor should ratify (acknowledge and agree to perform) such a contract on attaining the age of majority in order to be bound by it. f. Statutory protection of minors: the province of New Brunswick, Newfoundland, nova Scotia, Ontario and prince Edward island have all passed legislation requiring the ratification to be in writing before it will be binding on the infant. - BC does not allow the infant to ratify the contract in any fashion possible that would render it enforceable. - Contracts for non-necessaries and debt contracts “absolutely void”. g. Minors engaged in business: - Employment- infant can terminate with reasonable notice of termination - Contract for non-necessaries are voidable at the option of the minor and if there hasn’t been a delivery, the minor can repudiate the contract and obtain refund - If delivery has occurred, minor may return the goods and cancel its obligation. - If goods are damaged while in possession of the minor, he will not be liable for the damages and no claims for damage can be made by the other party. - If goods are resold- minor would have to give up any monies received. - In the case of sale of goods by minor, contract is voidable at the option of the minor and she would not be required to deliver the goods, however, refund must be made. - Partnership- minor in a contract for non necessaries is voidable by the minor, even though the other parties may be bound. - Repudiation under partnership- minor would not be entitled to withdraw any contribution to the partnership until the debts of the partnership has been settled. h. The parent-infant relationship: under family-law legislation, parents of a child 16 and below are jointly and severally liable with the child for any necessaries supplied to the child by the merchants. - Parents become “ agent of necessity” - Even when the parents appointed the child to act as his or her agent, the principal-agent relationship makes the parent liable for all acts of the minor. - Credit purchases- if the parents continue to pay the merchant and conduct in such a way as to show that they would continue to honour the debts incurred, all future debts would bind them for payments due. - Solution: parent must specifically state that they do not intend to be bound by subsequent purchases made by the infant. 2. DRUNKEN AND INSANE PERSONS Persons committed to a mental institution cannot normally incur any liability in contract - Persons suffering from mental impairment due to physical/ mental damage, alcohol/ drug abuse will be liable for all contracts for necessaries and will be obliged to pay reasonable price for goods/ services. - Contracts for non-necessaries entered into in an intoxicated or insane state will render the contract voidable by the person when he regains consciousness and becomes aware of the contract entered into. - It is advisable to repudiate it as soon as he returns back to sanity or sobriety, after which it becomes binding on the person. - Note that affirming a contract makes it binding on the party 3. CORPORATIONS - The statue that provides for incorporation may specifically give the corporation these rights as well. - Ultra vires: An act that is beyond the legal authority or power of a legislature or corporate body. - Everyone is deemed to know the law and the statute creating the corporation and its contents, including the limitations on its contractual powers are considered to be public knowledge and familiar to everyone. - One might in the article of incorporation limit its own power for specific reasons and such limitations might be binding on third parties. 4. LABOUR UNIONS - The legislation in most provinces and at the federal level provides for the interpretation and enforcement of collective agreements by binding arbitration rather than through the courts. - Legislation provides that a labour union certified by the Labour relations board has the exclusive authority to negotiate a collective agreement for the employees it represents. 5. BANKRUPT PERSONS A person who has been declared bankrupt has a limited capacity to contract. - All business contracts entered into before bankruptcy become the responsibility of the trustee in bankruptcy, and the bankrupt, on discharge, is released from the responsibility of the contracts and all related debts, except those relating to breach of trust, fraud and certain orders of the court. 6. THE REQUIREMENT OF LEGALITY Agreements that offend the public good/ has an illegal purpose, it may not be enforceable and is void. - Certain contracts are only rendered void by public policy in general or by specific statues. 7. LEGALITY UNDER STATUTE LAW An illegal contract includes any agreement to commit a crime, such as an agreement to rob, ass
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