Capacity is the ability to incur legal obligations and acquire legal rights.
Persons are generally presumed by the law to have the ability to enter into contracts. However, such capacity may be absent or impaired. Capacity may be determined by age, mental or legal status. Different rules apply to minors, bankrupts, drunkards, insane persons and corporation.
(a) Capacity of minors/infants
A minor is a person below the age 18. The law governing contract with minors comprises of two principles:
- Minors should be protected from their own incompetence and inexperience.
- The law does not intend to cause unnecessary hardships to those dealing with minors.
Contracts with minors may be valid, void or voidable.
- Contracts for necessaries
Necessaries are goods suitable to the condition of a minor into its actual requirements at the time of sale such as basic needs. Infants are generally liable for necessaries supplied to them. It is the responsibility of a supplier to prove that the goods supplied were actually necessaries. An infant is only liable for executed contracts for necessaries but not for executory contracts.
- Contracts of service for the infant’s benefit
A beneficial contract of service is one that will help the infant earn a living from his/her skills, education, apprenticeship etc. e.g a music recording contract, sports contract etc
Voidable contracts with minors
These contracts are valid until avoided by the minor before attaining the age of 18 years or within a reasonable time. They include:
- Contracts for purchase of shares in a company.
- Contracts of lease where there is an obligation to pay rent.
- Contracts to enter and form a partnership business.
These are contracts that create no liability to the infant. The following contracts with minors are considered void and non-existent:
- Contracts for supply of goods other than necessaries.
- Contracts for payment of money lent. However, where the money borrowed by the minor was for purchasing necessaries, the loan is still void but the lender is allowed to subrogate himself to a supplier of necessaries and not as a lender. To subrogate is to take the position of another.
- All trading contracts i.e contracts to supply an infant with goods for the purpose of resale. It is the responsibility of the merchant to ascertain the age of the minor because not knowing the age is not an acceptable defence.
(b) Capacity of drunkards
Contracts for supply of necessaries to a drunkard are valid. Necessaries to a drunkard may include accommodation, food, transport, medical attention e.t.c. however; the drunkard is bound to pay a reasonable price and not necessarily the whole contract price. Other contracts with drunkards are voidable. The drunk is expected to avoid the contract once he/she becomes sober. The right to avoid a contract may be lost with time. The objective of this rule is to prevent persons from taking advantage of others in their state of drunkardness.
(c) Capacity of insane persons
Contracts with insane persons are valid if they are about supplies of food, medical attention e.t.c. other Contracts are voidable at the option of the insane persons. For persons who suffer temporary mental illness, contracts entered into when they are sane are valid unless the insane person can prove that:
- At the time of entering the contract he was suffering from mental illness.
- The other party knew or ought to have known about the mental illness.
