An essential ingredient of a valid contract is that the contracting parties must be ‗competent to contract‘. Every person is competent to contract who is of the age of majority and who is of sound mind, and is not qualified from contracting by any law. Only a person who has contractual capacity be a party to a contract. This includes artificial as well as natural persons. The general rule is that any person may enter into any kind of contract. But special rules supply to the following persons:-
- Persons of Unsound Mind and Drunken Persons
- Married Women
- Aliens or Non Citizens
- Co-operative Societies
- Trade Unions
These special rules are explained below;
Minor‘s contracts are governed by common law rules as modifiedby the Infants Relief Act 1874. Under the Contract Act (Cap. 23), contracts in Kenya are governed by the common law of England relating to contracts as modified (interalia) by ―the general statutes in force in England on 12 th August 1897. It may therefore, be said that the ―Infant Relief Act 1874 applies in Kenya. A contract made by minors may be binding, voidable of void.
Persons of Unsound Mind and Drunken Persons
A contract made with a person of unsound mind (PUM) is binding on him only if it was during a lucid interval, i.e. an interval during which he is sane. For this purpose, it is immaterial that the other party may have been aware of the PUM‘s mental capacity. Apart form this, a contract that is entered into a PUM with a person who knows him to be mentally incapacitated, is voidable at the instance of PUM. However, where the PUM has obtained necessaries under the contract, he is, like a minor, liable to pay a reasonable price for the Sale of Goods Act.
As for a drunken person, his contractual capacity is generally the same as that of a PUM. If the drunkenness is, to the knowledge of the other party, such as to render him incapable of appreciating his acts, a contract entered into in these circumstances is voidable at the instance of the drunken person upon sobering up. But like a minor and PUM, he is liable to pay reasonable price for necessaries: Sale of Goods Act.
At common law a married woman could not enter into a contract. But under the Law Reform (Married Women and Tortfeasors) Act, 1935, the married women can sue and be sued in contract in the same way as single women.
Aliens or Non-Citizens
Alien, i.e. a person who is not citizen of Kenya, can sue and be sued. Any enemy alien, i.e. a person resident in a country which is at war with Kenya, cannot sue, but if sued can defend an action.
In the case of corporation, its contractual capacity is limited by the provisions of is Memorandum of Association. It can only enter into those contracts authorized by the Memorandum; any other contract is ultra vires and cannot be entered into by the corporation. In
case of a statutory corporation, it can only do those things which are expressly or impliedly authorized by statute.
Any contracts entered into those which are not authorized by statute are ―ultra vires‖ and therefore, void.
A co-operative society registered under the Co-operative Societies Act (Cap 490) can enter into Contracts, and be sued in accordance with the provisions of the Act.
Section 25 (1) of the Trade Unions Act (Cap. 233) provides:
Every trade union shall be liable on any contract entered into by it or by an agent acting on its behalf: provided that a trade union shall not be liable on any contract which is void or unenforceable at law‖.
A registered trade union may sue and be sued and be prosecuted under its registered name.