Chapter 5- CONTRACTUAL CAPACITY PDF

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LEGAL AND CONTRACTUAL CAPACITY, JURISTIC AND NATURAL PERSONS AND THE STATE ...

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CHAPTER 5 – CONTRACTUAL CAPACITY 5.1) LEGAL CAPACITY        

All persons have legal capacity = legal subjects – bearers of rights and duties. Flows from legal personality and not dependant on age/ status. Passive – even infans have capacity to inherent and acquire rights and duties under contract concluded for them by parents or guardian. Active – capacity to create rights and duties – depends on legal status, especially mental competence & age. Not all persons have capacity actively to create, alter/ destroy rights and duties by performing juristic acts. Juristic acts – brings about legal consequences for person performing act, eg; incl execution of will and conclusion of contract. Performance of juristic act – expression of actor’s will – law confers full capacity to do so on sane and old enough person – able to appreciate nature and consequences of their actions. Eg: infans – no capacity to perform juristic act.

5.2) CONTRACTUAL CAPACITY  

= competence to create rights and duties by concluding a contracts. Extent of person has the capacity to contract – depends upon their ability to form and express legally relevant will – in turn depends upon ability to appreciate nature and effect of act.

5.3) NATURAL PERSONS   

All humans have passive legal capacity – status may differ – depends on attributes (eg; age) and circumstances (eg; insolvency). Status determines person’s contractual capacity Classified into f.f categories:  Persons without contractual capacity  Persons with ltd contractual capacity  Persons with full contractual capacity

5.3.1) PERSONS WITHOUT CONTRACTUAL CAPACITY  Persons with mental faculties – so undeveloped/ impaired = cannot appreciate nature and consequences of acts.  Infans, some mentally ill persons and intoxicated persons.  Infans:  unable to perform juristic acts and cant conclude contract independently,  can be bearer of rights and duties – guardians or parents act on their behalf.  Guardian may contract o.b.o the infans for purposes of administering infan’s estate, maintenance and support.  Guardian may not conclude an engagement contract o.b.o the infant.  Person claiming someone lacked contractual capacity at time of conclusion of contract must prove – at relevant time – latter was incapable of appreciating nature and effect of actions. 1

 Person been declared as mental health care user by order of crt – crt order = prima facie proof of lack of capacity.

 Burden of proof shifts to person alleging presence of capacity to prove insane person had capacity (lucid interval) at time of conclusion of contract.

 Mentally ill persons only acquire contractual rights and duties when administrator concludes contract on their behalf.

 CPA – any agreement with mentally unfit person as declared by competent crt = void – supplier 

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knew/ could’ve reasonable determined fact. Section doesn’t apply – consumer/ person acting their own behalf by act/ omission led supplier to believe that they had unfettered legal capacity to contract/ attempted to obscure or suppress absence of capacity. Intoxication = temp. loss of contractual capacity – only if person was under influence of alcohol/ drugs to extent that they didn’t even know they were concluding a contract, didn’t know the provisions – fact that judgment was impaired ≠ sufficient. Test is satisfied – contract = void ab initio and can’t be ratified. Burden of proof rest with person alleging intoxication and incapacity.

5.3.2) PERSONS WITH LIMITED CONTRACTUAL CAPACITY  Gen rule: these persons can only conclude contracts with assistance/ consent of another person.  Assistance/ consent supplements inadequate powers of judgment of person with ltd contractual capacity.

5.3.2.1) Minors  Persons between 7-18 yrs – have insufficient capacity to incur binding obligations under contract.  Consent given before/ at time of contracting or afterwards by guardian’s subsequent ratification of contract – validated retroactively.

 Indifference ≠ consent.  Guardian refuses consent – crt = upper guardian of all minors – may upon application consent o.b.o guardian or where guardian - consented – crt may set aside consent.  Emancipated: o Minor’s entitled to act independently in certain business transactions becos parent/ guardian – given express/ tacit general consent to act as such without obtaining additional consent/ assistance. o Have full contractual capacity only for specific juristic acts – provided they have actual ability to act independently. o Consent given by parent/ guardian can be revoked at any time – status of minor reverts to ltd contractual capacity. o Doesn’t cause minor to attain complete majority for all actions. o If transaction = minor’s detriment – still entitled to claim restitution in integrum o Certain cases = forbidden by law, eg; statute expressly requires consent of parent/ guardian, master of H/crt or crt.

 Carry on learning from pg 152-153 5.3.2.2) Married persons  Married o.c.o.p: o separate estates and contractual capacity – unaffected by marriage. o Parties concluded ANC verbally/ writing prior marriage. 2

o Contract = writing and signed and is notarially executed and registered in Deeds Office within 3 months from date of marriage.

o ANC binds 3rd parties.  Married i.c.o.p: o Joint estate and capacity to bind estate = ltd by statute o Co-owners in equal, undivided shares, administer joint estate concurrently – both husband and wife have equal capacity to perform juristic acts and to manage joint estate.

o Powers can be exercised independently without consent of other spouse. o Certain transactions – so NB can be concluded with consent of the other spouse – MPA. o MPA prescribes transactions/ juristic acts i.r.o which informal consent (express/ tacit), written o o

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consent or written consent attested by 2 witnesses = required. Transactions may be ratified. Spouse concludes transactions without required consent and other contracting party – not aware and couldn’t have been reasonably aware spouse’s consent = required – joint estate – held bound to contract. Dissolution of marriage (divorce/ death) – loss caused by conclusion of unauthorised contract – recouped from contracting spouse’s share of joint estate Where one spouse has separate estate, eg; property inherited under will stipulating shouldn’t fall into joint estate – spouse has full, independent contractual capacity i.r.o separate estate.

5.3.2.3) Insolvent persons     

Fact that person = insolvent (assets exceed liabilities) Once crt places order of insolvency placing person’s estate under sequestration = capacity is ltd. Sequestration – insolvent estate vests in trustee Trustee’s function = to wind estate for benefit of estate creditors During sequestration – insolvent may/requires: o Validly enter into contracts, unless doesn’t purport to dispose of any assets of insolvent estate/ if to the benefit of the estate. o Written consent of trustee to approve any contract that is to the detriment of the estate.  Contracts entered into – prior sequestration that benefited one creditor above others/ under which insolvent disposed of property for no value = may be set aside for benefit of general body of creditors.

5.3.2.4) Prodigals  Prodigal = person with normal mental ability who, through some defect of character/ will, squanders assets irresponsibly – threaten to reduce him/ herself and dependants to penury.

 Person declared prodigal by court, whereupon contractual capacity resembles that of minor.  Administration of prodigal’s estate – placed in hands of curator whose assistance and consent – required for any contract imposes obligations upon prodigal.

 Contracts concluded by prodigal without requisite assistance/ consent = voidable than void – can be ratified by curator.

 Persons with disability/ illness – unable to manage their own affairs – may be placed under curatorship by crt order.

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5.3.3) PERSONS WITH FULL CONTRACTUAL CAPACITY  Gen rule: all natural persons falling outside abovementioned categories – full capacity to enter into contracts.

 H/ever sometimes specific statutory prov’s may limit capacity.  Eg: person who has been found guilty of crime involving dishonesty, such as fraud = disqualified from being appointed as company director.

5.4) JURISTIC PERSONS  

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Juristic person – artificial entity with no physical existence upon which law confers legal personality. Legal personality – capacity to acquire rights and incur obligations, eg:  Companies  Close corporations  Bodies incorporated by statute i.e. SA Broadcasting Corporation, universities and governing bodies of public schools  Certain voluntary associations (clubs, societies etc) – display essential characteristics of corporation – perpetual succession of it members and having rights and duties in own name, separate from its members. Partnerships & trusts ≠ juristic persons – h/ever often treated as separate entities Trusts:  Assets and liabilities of trust vest in trustees of trust in capacities as trustees – they contract in name of trust  H/ever they and partnerships – sometimes deemed to have legal personality for ltd purposes of certain statutes. Very nature of things – juristic person cannot have legal capacity/ powers of natural person, eg; cannot adopt child, marry or be appointed as guardian of minor, draft a will etc. Rights, powers and capacity to enter into contracts – determined and ltd by terms of constitutive docs, eg; statute, charter, constitution of club, founding statement of close corporation or memorandum and articles of association of company. Any contract concluded outside scope of powers = ultra vires and devoid of legal effect – h/ever no longer true of companies i.t.o s36 of previous Companies Act and s20 of New Act – no act of company was void by reason only of fact that company was without capacity/ power to perform act. Cannot act by itself (no physical existence) – act through organs/ representatives (natural persons). Only natural persons with necessary power/ authority to represent juristic person can bind it by performing juristic act on its behalf. Eg: where ABC (Pty) Ltd wants to buy piece of land on which to erect an office block, deed of sale has to be drawn up and signed by parties to contract. Company is immaterial entity cannot physically sign a doc, deed will signed by one/ more directors/ officers of company in representative capacity.

5.5) THE STATE    

Juristic person State and organs have capacity to enter into contracts – from CL prerogative May be held liable to perform its obligations under contract i.t.o State Liability Act – provides that contract entered into in the ordinary/ necessary course of gov. administration and was directly/ indirectly authorised by responsible minister. Cannot be treated as any other contracting party, eg; where discretionary powers have been conferred upon public authority – powers must be exercised in accordance with principles of public law (uncertainty about scope of principle). 4

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Contract entered into by public authority – purports to fetter exercise of its discretionary powers – not enforceable. Cannot by contract relinquish its discretionary powers to others. In exercise of contractual powers – state held to higher standard than ordinary private party – might have to act in accordance with principles of administrative justice. Various statutes and regulations relating to tender procedures and procurement policies – impact on ability of state to freely contract in commercial sphere = bind state. State cannot do anything/ perform any act if no authority for it.

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