Capacity to Contract Case Summary PDF

Preview

Summary

All Case Summary Of Capacity to Contract, Facts and Points Needed To Summaries A Great Case....

Description

Capacity to Contract Case Summary Mentally Ill / Intoxicated Persons York Glass Co. Ltd v Jubb [1925] All ER 285 Jubb contracted to purchase the plaintiff’s company business. On the date of contracting, he was technically insane and shortly thereafter was placed in a lunatic asylum. The receiver of his estate, who was appointed under a lunacy statute, repudiated the contract. The plaintiff company sued for damages, alleging the repudiation was wrongful. HELD: A contract entered by someone of unsound mind is valid unless the impaired person can show that the other party was aware, at the time of contracting, that the impaired person was so insane that he was incapable of understanding what he was doing. In this case, there was no evidence to show that the plaintiff company knew or suspected that Jubb had been insane at the point of contracting. The contract was valid and Jubb’s estate had to pay damages for not performing the contract. Blomley v Ryan (1956) 99 CLR 362 Blomley entered into a contract to purchase a farm from Ryan. Ryan was 78 and was suffering the effects of specific performance – one issue (this case will also crop up later in the unit) was whether Ryan had the requisite capacity to contract. HELD: Mere’ drunkenness will not permit a person to get out of a contract. However, where one party was – to the knowledge of the other – ‘seriously affected by drink’, equity will refuse specific performance. In addition, if a court is satisfied a ‘contract disadvantageous to the party affected has been obtained by "drawing him in to drink", or that there has been real unfairness in taking advantage of his condition, the contract may be set aside.‘ Inadequacy of consideration will be relevant but not determinative. In cases like this where intoxication is the main disadvantage relied upon, the adequacy (or otherwise) of consideration is particularly important. In this case the sale price was significantly below market price – the only explanation for this was that Ryan was old and impaired by habitual drinking to excess and who contracted during a bout of heavy drinking rendering him ‘utterly incapable of forming a rational judgment about the terms of any business transaction.’ This was apparent to Blomley (through his agent) who took unfair advantage of that condition. Specific performance and damages were, therefore, denied.

Gibbons v Wright (1954) 91 CLR 423 Gibbons and her two sisters-in-law became owners of land as joint tenants. Subsequently the sisters executed documents converting the joint tenancy into a tenancy in common. After their death Gibbons claimed that these documents were ineffective because the sisters lacked mental capacity (if this was the case she would become sole owner). HELD: There is no ‘fixed standard of sanity’ – simply a requirement that each party be of ‘such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation.’ The capacity required is relative to the transaction being effected – what is the capacity of the party to understand the nature of the transaction when explained? Here, it was necessary to show that the two sisters were: ‘Capable of understanding, if the matter had been explained to them, that by the executing the mortgages ... they would be altering the character of their interest in the properties ... so that instead of the last survivor ... becoming entitled to the whole, each of them would be entitled to a one-third share...’ This was not satisfied here. Their Honors then considered if the lack of capacity rendered the contract void or voidable; they concluded lack of capacity made a contract voidable only – so unless the sisters, in their lifetime, sought to avoid the contract it remained valid and enforceable.

Necessaries Chapple v Cooper (1844) 153 ER 105

A young widow was sued successfully for the funeral expenses for her late husband, as these services were regarded as necessaries. Point of law is that if a person orders a service that is required and suitable for their condition in life at the time of sale and delivers, they are liable (however, the onus is on the party supplying the goods/service to prove they are necessaries). Ryder v Wombwell (1868) LR 4 Exch 32 A pair of cuffing’s worth £25 and £15 goblets were held to be necessary goods for a child with a £500/year income. (Although the verdict was set aside for lack of evidence; the legal principle still applies). It is up to the Plaintiff (claimant) who is

trying to enforce the contract to show that the goods are necessary goods. Nash v Inman [1908] 2 KB 1 Nash,a tailor on Savile Row, entered into a contract to supply Inman (a Cambridge undergraduate student) with, amongst other things, 11 fancy waistcoats. Inman was a minor who was already adequately supplied with clothes by his father. When Nash claimed the cost of these clothes Inman sought to rely on lack of capacity and succeeded at first instance. HELD ‘At common law ... the contracts of an infant were voidable except such as were necessarily to his prejudice; these last were void.’ However, infants have a limited capacity to contract. To succeed, the plaintiff had to prove the contract within this limited capacity, which his Honor defined as follows: ‘An infant may contract for the supply at a reasonable price of articles reasonably necessary for his support in his station in life if he has not already a sufficient supply. To render an infant's contract for necessaries an enforceable contract two conditions must be satisfied, namely, (1.) the contract must be for goods reasonably necessary for his support in his station in life, and (2.) he must not have already a sufficient supply of these necessaries.’ This could not be satisfied here.

Common Mistake Scott v Coulson [1903] 2 Ch 249 At the time of entering a contract for life insurance both parties believed the person whose life was to be insured was living. When in fact he was dead HELD: The contract was void for mistake as it was a common mistake as to the existence of the subject matter (Res-extincta) Leaf v International Galleries [1950] 2 KB 86 The claimant purchased a painting from the defendant. Both parties believed that the painting was by the artist Constable. In fact 5 years later the claimant discovered the painting was not a Constable. The claimant brought an action based both on misrepresentation and mistake.

HELD The claim based on misrepresentation was successful however, since it was an innocent misrepresentation, the claimant had lost the right to rescind the contract through lapse of time. With innocent miser the time starts to run from the date of the contract not the date of discovery. The claim based on mistake was unsuccessful as the mistake related to the quality and did not render the subject matter something essentially different from that which it was believed to be. He believed he was buying a painting and he got a painting.

Common Mistake - exception McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 The Commonwealth Disposals Commission sold McRae a shipwreck of a tanker on the Jourmaund Reef, supposedly containing oil. No tanker ever existed. CDC argued there was no liability for breach of contract because it was, void given the subject matter did not exist. HELD: High Court of Australia held that McRae succeeded in damages for breach of contract. They rejected the contract was void because CDC had promised the tanker did exist. Courturier v Hastie was distinguished because there the parties had both shared the assumption the corn existed, but here CDC had actually promised the tanker existed and therefore had assumed the risk that it did not.

Mutual Mistake Raffles v Wichelhaus (1864) 2 H & C 906 Plaintiff agreed to sell defendant cotton described as arriving ‘ex Peerless from Bombay’. However, there were in fact two ships named the Peerless leaving from Bombay with a cargo of cotton. The plaintiff intended to refer to one of the ships and the defendant the other. The defendant refused delivery. HELD: There was no contract because of ambiguity in the contract and evidence the parties intended to refer to different ships – therefore no consensus ad idem.

Mistake vs Misrepresentation Cundy v Lindsay (1878) 3 App Cas 459 Blenkarn, a rogue, wrote to Lindsay, the plaintiff, offering to purchase goods. The rogue signed the letter in such a way as to represent himself as Blenkiron & Co, a respectable company. The plaintiff supplied the goods to the rogue, the invoice

being made out to Blenkiron & Co. The rogue disposed of the goods to Cundy, the defendant, who was ignorant of the fraud. The plaintiff sued the defendant for conversion of the goods. The action therefore was between two innocent parties. HELD: there had been a unilateral mistake as the negotiation did not take place face to face.The  evidence clearly demonstrated that the plaintiffs believed themselves to be dealing with, not the rogue Blenkarn, but the reputable firm, Blenkiron & Co. They never intended a contract with Blenkarn,"of him they knew nothing", and hence, there was no contract. "There was no consensus of mind which could lead to any agreement or any contract whatever. "Property remained with the plaintiff.  Lords Hatherly and Penzance agreed. Lord Gordon concurred. Phillips v Brooks Ltd [1919] 2 KB 243 A rogue purchased some items from the claimant's jewelers shop claiming to be Sir George Bullogh. He paid by cheque and persuaded the jewelers to allow him to take a ring immediately as he claimed it was his wive's birthday the following day. He gave the address of Sir George Bullogh and the jewelers checked the name matched the address in a directory. The rogue then pawned the ring at the defendant pawnbrokers in the name of Mr. Firth and received £350. He then disappeared without a trace. The claimant brought an action based on unilateral mistake as to identity. HELD: The contract was not void for mistake. There had been a fraudulent misrepresentation, as the negotiation was face to face. Where the parties transact face to face the law presumes they intend to deal with the person in front of them not the person they claim to be. The jewelers were unable to demonstrate that they would only have sold the ring to Sir George Bullogh. Ingram v Little [1961] 1 QB 525 Two sisters Hilda and Elsie Ingram sold their car to a rogue calling himself Mr. Hutchinson. They agreed a price for cash, but when the rogue offered a cheque Elsie said the deal was off. She wanted cash or no sale. The rogue then gave them his full name and address and Hilda went to the post office, which was two minutes down the road, to check the details out. When she returned she informed Elsie that the details checked out and the sisters agreed to let Mr. Hutchinson take the car. The cheque was dishonored and the car was sold on to Mr. Little. The sisters brought an action to recover the car. HELD: The contract was void for mistake. The Court of Appeal held that the sisters only intended to deal with Mr. Hutchinson at the address given because they were not willing to offer a sale for payment by cheque from anyone else. This case has received widespread criticism and has not been followed since.

Rescinding the Contract Car & Universal Finance Co v Caldwell [1965] 1 QB 525 Mr. Caldwell sold his Jaguar car on 12th Jan to a rogue, Norris, who had paid £10 cash deposit and left another car as security and gave a cheque for £965. The following day Mr. Caldwell went to cash the cheque and discovered it was fraudulent and the car left as deposit turned out to be stolen. Mr. Caldwell reported the incident to the police and used his best endeavors to co-operate with the police to find Norris in order to rescind the contract of sale. He also contacted the Automobile Association to try to locate the car. Norris had acquired a voidable title to the car as the contract was induced by fraudulent misrepresentation. Norris sold the car on to a third party on 15th Jan. The question for the court was whether the actions taken by Mr. Caldwell were sufficient to avoid the contract. HELD: Mr. Caldwell had successfully rescinded the contract. He had taken all steps possible to demonstrate that he no longer wished to be bound by the contract. He should not be prejudiced by the fact that his endeavors failed to locate Norris....