Capacity

1. Capacity Basic Principles pp 39 - 51

2. Requirements for a valid contract • Capacity • Agreement/ Consensus • Legality • Possibility of performance • Formalities • Certainty

3. Persons with no or limited contractual capacity • Minors • Married persons • Persons with mental illness • Insolvent persons • Intoxicated persons

4. Minors • Def: Below 21; Unmarried; Not declared a major by High Court. • How does one become a major? • Reach 21 • Marriage • Emancipation by Court • Tacit emancipation by guardian

5. Marriage of minors • Upon marriage a minor becomes a major • Marriage Act 25 of 1961: • Permission of both parents required for minor to marry • Boys <18, Girls <15 require permission of Min of Home Affairs to marry • Marriage without permission? • Such marriage valid until annulled by court • Annulment must be in best interests of minor

6. Emancipation by a Court • Age of Majority Act 57 of 1972: • Person of 18 yrs may apply to High Court to be declared a major. • This must be in minor’s best interests. • Factors as to whether in best interests: • Does minor manage own affairs • Financial independence

7. Tacit Emancipation • Minor granted permission to enter some/ all contracts unassisted by guardian • Permission may be express/ tacit • Factors to be considered: • Age of minor • Does minor live with parents • Is minor self-supporting • Relationship with parents

8. Children’s Act 38 of 2005 • Not yet in force • Age of majority 18 yrs • No longer possible to obtain emancipation order

9. Contractual capacity of minors • <7: No contractual capacity • 7 – 21: Limited contractual capacity • May enter valid and binding contracts with parental assistance • Unassisted contract is a limping one: binds major but not minor

10. Assisted Contracts • Effect of an assisted contract? • Minor (not parent) is bound by contract and may be sued on it. • When is a contract assisted? • Before 1993: father’s assistance required

11. After 1993: Guardianship Act • In terms of Guardianship Act 192 of 1993: • Mother and father equal guardians of children born of their marriage • Consent of either parent sufficient for most contracts • Consent of both parents required for: • Marriage, adoption, application for passport, sale of minor’s immovable property • New Children’s Act to repeal Guardianship Act, but above provisions to remain the same.

12. Degree of oversight required? • Parent must know: • Child intends concluding contract • What type of contract • Not: every term of contract • Van Dyk v SAR&H 1956 (4) SA 410 (W)

13. Parent’s consent contd… • Parent may ratify an unassisted contract • Consent may be express or tacit (cf. tacit emancipation)

14. More on tacit emancipation • Not full status as major (Age of Majority Act) • Authorisation to enter into some/ all contracts unassisted • Question of tacit emancipation usually arises in a case for strategic reasons • Question is one of fact

15. Cases on tacit emancipation • Dickens v Daley 1956 (2) SA 11 (N) • Grand-Prix Motors v Swart 1976 (3) SA 221 (C)

16. Assisted contracts which are inherently prejudicial • General rule: minor bound to assisted contract • Usually can only escape a contract if: • Misrepresentation, Duress, Undue influence • Material breach by other party • Additional ground: Assisted contract inherently prejudicial • Action: repudiate contract + claim restitutio in integrum

17. Restitutio in integrum • Same remedy as for misrepresentation, duress, undue influence • Remedy aims to restore status quo ante • Effect: minor may cancel contract + claim return of his performance. • But: Minor must then restore what he has received from major.

18. Inherently prejudicial contracts • Prejudice must exist in contract at time of conclusion. • Subsequent change of circumstance does not qualify. • Eg. You buy shares, which then lose their value. • Wood v Davies 1934 CPD 250

19. Unassisted Contracts • Unassisted contract: lacks permission of at least one parent • NB: some contracts require both parents permission • Unassisted contract = “limping contract”: binds major, but not minor

20. “Limping” contracts • Minor’s parents may ratify/ repudiate a limping contract when they learn of it • This option only available once • If ratify: contract becomes assisted • If repudiate: Major must return minor’s full performance, minor need only return to extent enriched.

21. Limping contracts contd… • In event of fraud by minor: minor still not bound, but may be liable under delict • Election to ratify/ repudiate available to minor on reaching 21: • Option open for 3 yrs, provided minor does not ratify in meantime • Certain contracts do not require assistance of minor: • Banks Act: minors over 16 may operate a deposit account.

22. Married Persons • Persons married in COP limited in types of contract they may enter: • Types requiring joint consent set out in Matrimonial Property Act 88 of 1984 • Eg. Sale of immovable property, sale of shares require joint consent.

23. Insolvency • Insolvency = Liabilities > Assets • After sequestration: trustee appointed by High Court to manage insolvent’s estate for benefit of creditors. • Trustee’s consent then required for contracts which affect estate

24. Mental Incapacity: Intoxication & Mental Illness • A party unable to understand actions at time of contracting lacks capacity: contract then void • Decisive moment = moment contract entered into • A person may be temporarily incapacitated: • Eg. Alzheimer’s, medication, alcohol, drugs • If don’t understand actions at time of contracting: contract void • Everyone presumed to be of sound mind: person alleging incapacity must prove this