BusinessCommercial Law Contractual Capacity What is contractual capacity

Business/Commercial Law Contractual Capacity

What is contractual capacity? � Fouché (2007) defines contractual capacity as “the capacity the law grants a person to perform valid legal acts”. This means that unless a person has contractual capacity they will be unable to enter into a valid contract.

The general rule ……………… � While the general rule is that all persons have contractual capacity there a number of exceptions where persons have no or limited contractual capacity.

What determines contractual capacity? � There a number of factors that determine whether or not a person will have contractual capacity such as age, insolvency, intoxication, insanity and being a prodigal.

Age � Infans 0 -7 years – no contractual capacity � Minor 7 – 18 years – limited contractual capacity

Summary �A minor may enter into a contract with the assistance of a parent or guardian. � A minor may enter into a contract without the assistance of the parent or guardian at the time of contracting but the parent or guardian later becomes aware of the contract and approves it. � A minor may enter into a contract without assistance where he only obtains rights or benefits. � Where a minor enters into a contract without assistance the other party cannot hold the minor to the contract but the other party has to perform.

Emancipation � Sometimes a minor has gained a degree of independence from their parents (for example, think of a minor who is a successful model earning their own income). In such cases the parent or guardian may give permission for the minor to control their own affairs. This is known as emancipation. Emancipated minors may contract without assistance from the parent or guardian.

Insanity �A person who is mentally insane has no contractual capacity and a Curator will be appointed by the High Court to handle their affairs.

Intoxication �A person who is intoxicated (drunk) to the extent that they do not know what they are doing has no contractual capacity and a contract concluded while they were intoxicated will be void.

Prodigal �A person who has been declared a prodigal (someone who recklessly wastes their money) by the High Court has limited contractual capacity and must be assisted by a Curator.