CAPACITY TO CONTRACT

Unit 1              Contract made by Infant

Unit 2              Contract made by Illiterate Persons Unit 3  The capacity of Corporations

Unit 4              Contract made by Mental persons and Drunken persons

 Capacity to Contract

 CONTENTS

1.0  Introduction

2.0  Objectives

• Main Contract
• Essence of Law of Contract
• Infant
  • Contract made by Infant
  • Voidable Contract
  • Void Contract
  • Contract Absolutely Void
• The Position at Common Law

4.0       Conclusion

5.0       Summary

6.0       Tutor-Marked Assignment

7.0       References/Further Readings

 INTRODUCTION

Under the Nigerian Law, an infant is someone below the age of 18 years and therefore cannot enter into a valid contract. Customary law regards the attainment of the age of puberty as the stage of capacity for infants. This, however, varies between boys and girls as was held in Labinjoh v. Abake (1924) 5 NLR 33. In this case, plaintiff an adult trader sued a girl of 18 years for the sum of £50 being the balance of goods sold to the defendant who claimed she was an infant and that the contract was void. Plaintiff maintained that the age of majority in Nigeria was the age of puberty and not 21 years. The court held that the age of majority in Nigeria is 21, hence the adult trader could not recover her money. Moreover, the following categories of contracts are not enforceable against such infants under the Infants Relief Act (England) 1874.

 OBJECTIVES

• meaning of capacity
• the essence of capacity in a contract
• the effect of lack of capacity in a contract

 MAIN CONTENT 

• Essence Of The Law Of Contract

The fundamental principle of law of contract had be said to be ensure peace, order and security as well as the smooth and efficient or commerce, industry and economy. This is because the law takes congnisance of the need for the satisfaction of reasonable and well founded expectation created by promises and agreement. The legal relations brought about by the law of contracts, enable someone to whom service, goods, money or some other benefits has been promised to enforce the promise or obtain remedy for its breach.

Accordingly, since we all engage in the activity of contracting, the law of contract is all an important one. The aim of the law of contract is not only to maintain order but also promote justice in every day by day contract. Justice in this context involves the balancing of the interests of all the parties to the contractual obligation.

Similarly, law of contract seeks to provide appropriate remedies where a party has suffered injury due to the action or inaction of the other. For example, the provide a civilized method of obtaining remedy where there is a breach of contract in any aspect of law of law contract. The remedy of a breach of contract may be damages, specific performance, injunction rescission, indemnity. It depends on the fact and circumstances of each cases. However, it should be noted that, in law of contract some rules are developed in other to ensure that a group of people are not exploited or defraud in a contractual relationship because of their status. These group includes; companies, illiterates, infant etc.

In concluding, law of contract aims at promoting trade and commerce within a particular society.

 Infants

The power of an infant to enter into a contract is governed by rules of common law as limited by statute. At common law, an infant is a person who has not attained the age of maturity, 18 in some jurisdiction, but 21 years in Nigeria. Under the infant law, and Uniform Law Cap. 49 Laws of Western Nigeria 1959 an infant means a person under 21 years of age. However, under the customary and Islamic law, the contractual capacity of an infant depends on his physical capacity and maturity. Thus, in Labinjo v. Abake 5 NLR 33 the court stated that the contractual capacity begins at puberty. In Folata v. Dowoma (1970) NWLR 105. It was held under Muslim law that maturity is determined by physical maturity or a declaration of the youth in question or failing this, by reaching the age of 15 lunar months in the case, a youth sold a family house-

Enforceable Contract against infant

• Contract for necessaries, that is goods and services that are suitable for his condition in life, for example, education ,clothing and food. Thus food., is essential to everybody but if a minor is well provided with food, he will not be liable in contract if he orders for more. in Nash v. Inman[1908]2 K.B.1. where a dressmaker supplied a custom-made fanciful suits to a Cambridge infant undergraduate for his matriculation, it was held that the plaintiff action would fail, the suits being essentially a luxuries and not
• Contract for services service or a apprenticeship are enforceable against an infant. In Doyle v. White City Stadium Ltd, [1935]1 K. B.110 an infant boxer entered into an agreement to fight within the rules and that he would not be paid his entitlement if he violated the rules. There was a violation and he was not paid. He sued the organization. Held that he was bound by the agreement as for his benefit.
• Trading contracts and promises of marriage are enforceable against an infant. In Shears v. Mendeloff (1914) 30 TLR 342 where an infant boxer employed a Manager whom he paid he paid on commission basis, it was held that he was not liable being a trading contract.

 Contracts by infants.

A contract made by an infant can be classified into;

• Voidable contract
• Valid contract
• Void contracts

 Voidable contracts:-

The rules of common are that a contract made by an infant at the instance of an infant is binding on him. Certain contracts are treated as binding on him unless he repudiates them within a reasonable time while others are not binding on him unless he ratifies them when he reaches the age of majority. The contracts are those an infant acquires an interest in  the subject matter of a permanent nature, that is, contracts to which continuous or recurring obligation, are incident, and where an infant undertakes such a contractual obligation, he remains bound by it until he decided to put an end to it.

Examples are;

1. where an infant purchases shares in a company, he acquires an interest of a permanent nature with a obligation that he is bound to discharge until he repudiates the contract and;
2. an infant in partnership agreements although he is not liable for partnership debts incurred during his infancy, he has no right to prevent their discharge from the common assets. The contract continues and he may repudiate at the age of majority. If he did not, he will be holding himself not as a partner and becomes liable for debt incurred since his

 Valid contract:-

Two contracts are valid on an infant. These are contracts of

• contract of necessaries
• contract of service that are beneficial

(a)    Contract on Necessaries:

The Nigeria Sale of Goods Act 1958, as amended, defines necessary goods as goods suitable to the condition of life of an infant and to his actual requirements at time of sale and delivery. 

The Nigeria Act further provides that where necessaries are sold and delivered to an infant or minor to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price thereof. The provision appears to say that an infant is obliged to pay for necessaries, not just when they are sold but when they are delivered to them. It has been stated that this could not be so at law common since the agreement is purely contractual. Therefore, an infant is liable for an executor contract for the sale of necessaries and not only on delivery. However, I hold the view that an infant’s liability for the sale of goods is quasi-contract and partly statutory and delivery is an extension of the contract and without it, an infant is not obliged to pay the real price for the goods but only a reasonable price. Thus, in Roberts v. Gray (1913) 1 KB 520, an infant was held liable on an executory contract for education and training. This may not be applicable to where an infant purchases goods.

The second issue on the statutory provision is that the goods must be suitable for the condition in life of the infant requirement at the time of sale and delivery. The provision makes it clear the goods must be suitable also at the time of delivery. The goods must be suitable for his actual requirement not only when the contract was concluded but also when the goods are delivered. Thus, in Nash v. Imman (1908) 2 KB 1, the defendant was an undergraduate at Cambridge. He was sued by the plaintiff, a tailor for £122. 19s being the value of clothes supplied to him. The clothes included eleven fancy waistcoats at two guineas each. The defendant was an infant at the time of the sale and delivery, and he already had an adequate supply of clothes suitable for his condition in life. The court held that an action to claim failed because the tailor did not adduce evidence that the clothes were suitable to the condition in life of the student.

Alderson B. gave the most comprehension meaning of necessaries in Chappel v. Cooper (1844) 13 Md W 253.

“Things necessary are those without which an individual cannot reasonably exist. In the first place, food raiment, lodging and the like. About these there is no doubt. Again as the paper cultivation of the mind is expedient as the support of the body, instruction in art or trade, or intellectual, moral and religious information may be necessary also. Again, as man lives in society, the assistance and attendance of others may be necessary to his well being. Hence, attendance may be the subject of an infants contract”. Then, the classes being established, the subject-matter and extent of the contract may vary according to the state himself. His clothes may be fine or coarse according to the station he is to fill, and the medicines will depend on the illness with which he is afflicted; and the extent of his probable means when of full age, so again, the nature and extent of attendance will depend on his position in society. But all these cases, it must first be made out that the class itself is one in which the things furnished are essential to the existence and reasonable advantage and comfort of an infant contractor. Thus, articles of mere luxury are always excluded, though luxurious articles of utility are in some cases allowed”.

In Peters v. Fleming (1840)6 M & W 42 a watch was held to be necessary for an undergraduate, but the question whether a gold chain was necessary was left to jury, for it depends on his station in life. What is a necessary for an infant from a rich and well-to-do family will not be for an infant from poor family. It is a question of fact whether goods are capable of being necessaries and the process involves the status of the infant in life.

Goods, which are supplied to an infant for the purpose of trading, are not a contract for necessaries. The infant is not bound to pay for them, so also agreement for work or labour. An infant who married is liable for contract made by his wife when she had the authority to pledge for his credit e.g. food or essential household goods.

 (b)   Beneficial Contract of Service

It is of advantage that an infant should be trained for future trade or profession. To obtain livelihood, he may enter into contract of apprenticeship, services, education and instruction. Such a contract must, however substantially be for the benefit of the infant or to his advantage. 

An infant is free to repudiate any contract, which is not for his benefit. The fact that some terms are prejudicial to him is not enough to repudiate the contract, as the advantages are more that the disadvantages.

 Contract Absolutely Void:

The Infants Relief Act renders certain contract absolutely void. These are:

1. Contract of loan or advancement or bank overdraft;
2. Contract for goods other than necessary goods and ;

• Account stated.

 i. Contract of loan

Loans may be obtained in banks, finance houses ad from individuals or corporate bodies. Apart from loan advanced to an infant to enable him purchase necessaries, an infant cannot be liable for any loan given to him Nash v. Imman (1908) 2 KB 1. An infant can open a bank account. The bank, must, however, be cautious of granting advancement or overdraft to an infant except they can prove it is for the purchase of necessaries. Any loan contract is absolutely void.

1. Contracts for goods other than Necessaries

The determination of goods that are necessaries is a question of mixed law and fact. The judge is in the right position to determine the articles that are capable of being regarded as necessaries. A watch was held for an necessary for an under graduate Peters v. Fleming (1840)6 M & W 42. The contracts for necessaries for an infant must be beneficial to him and most not contain harsh or onerous terms Fawcett v. Smethurst (1914) 84 LJ KB 473. A contract where goods are supplied for the purpose of trading is not a contract for necessaries. An infant is not bound to pay for such goods or agreement for work or labour to carry on a trade Merchantile Union Guarantee Corp Ltd. V. Ball (1937) KB 498.

 iii. Account Stated

An account stated is defined as ‘a claim by one party to payment of a definite amount, which is admitted to be corrected by the other party Chitty on Contracts (25th Oct.) para. 2057. This is merely an admission of a debt out of the court and is equivalent to a promise from which the existence of a debt may be inferred. Such admission is only evidence of a debt and can be rebutted. An example of account state which is I.O.U.

In contracts that are absolutely void against the infant, the contract remains binding on the adults concerned. However, where an infant sues on an absolutely void contract, the court will deny him remedy because there is no mutuality unless an infant has performed his own part of the contract. Again, if any part, or the whole of the loan is expended in the purchase of necessaries, the lender can recover the amount expended under an equitable doctrine of subrogation. Subrogation simply put is, substitution of one person to the rights and duties of the original person. The lender can be subrogated to the seller of necessaries to enable him recover the amount of the loan spent in purchasing necessaries.

The provision is not limited to goods sold. Goods exchange is also included. The  provision states that the contract is absolutely void but this does not mean that the contract is not without effect. The other contracting party remains bound but he cannot be granted specific performance against an infant.

Moreover, goods or money paid or delivered to an infant is not void and it is recoverable only if there is a total failure of consideration De Francesco v. Barnum (1980) 45 Ch. D 430.

In Valentine v. Canali (1889) 24 QBD 166 it is not only the loan made to an infant, which is void, the guarantee of the loan is also void since there is no valid loan and so no debt to guarantee. In Coults & Co. v. Browne-Lecky (1947) KB 104 (1946) 2 All ER 207, the guarantors of an infant loan were hold not liable on their contract of guarantee since the principal debt was itself void.

The Position At Common Law

The general rule at common law was that contracts made by an infant were voidable at his options, i.e., not binding on the infant but binding on the other party. The contracts were classified into groups for this purpose:

• Contracts which were binding on the infant unless he repudiated them during infancy or within a reasonable time of attaining his majority, and
• Contracts which were not binding on him until and unless he ratified them after the attainment of majority.

Furthermore, two types of contracts were regarded as absolutely binding at common law. These were (a) contracts for necessaries and (b) beneficial contracts of service.

STATUTORY INTERVENTION

The position at common law was modified by the Englisg Infants Relief Act of 1874 in the following manner:

• The Act specifically declares that three particular types of contracts with infants are absolutely void. These are,
  • Contracts of loan, i.e., lending money to an infant,
  • Contracts for goods (other than necessary goods) and
  • Accounts stated. This rather obscure and confusing term, “account stated”, a defined in Chitty on contracts, 5^th By A.G. Guest as follows at para 057 “…a claim by one party to payment of a definite amount. This is merely an admission of a debt of court and is equivalent to a promise from which the existence of a debt may be inferred. Such admission is only evidence of a debt and can be rebutted” An “I.O.U.” for example, is an account stated.
• Secondly, the Act stipulated that it would no longer be possible for an infant to ratify at majority, those contract which were formerly not binding on an infant unless

ratified by him after the attainment of majority. In other words, if he now ratifies such contracts, such “ratification” has no legal effect; it is nugatory.

 -LIABILITY FOR NECESSARIES

Section 2 of the Sale of the Goods Act section 3 of Sale of Goods Law, West defines necessary goods as “good suitable to the condition in life of such an infant or minor or other person, and to his actual requirement at the time of sale and delivery” Emphasis supplied.

In the same section, the Act provides that: a person who by reason of mental incapability or drunkenness is incompetent to contract, he must pay a reasonable price, thereof.

 -THE MEANING OF NECESSARIES

Still the best and most comprehensive definition of necessaries is that give by Alderson, B., in Chapple v. Cooper: (1844) 13 M. & W. 53 at p. 58

Things necessary are those without which an individual cannot reasonably exit. In the first place, food, raiment, lodging and the like. About these there is no doubt. Again, as the proper cultivation of the mind is as expedient as the support of the body, instruction in art or trade, or intellectual, moral and religious information may be a necessary also. Again, as man lives in society, the assistance and attendance of others may be a necessary to his well-being. Hence attendance may vary according to the state and condition of the infant himself. His clothes may be fine or coarse according to his rank; his education may accord to the station he is fill, and the medicines will depend on the illness with which he is afflicted, and the extent of his probable means when of full age. So again, the nature and extent of the attendance will depend on his position in society… But in all these cases it must fist be made out that the class itself is one in which the things furnished are essential to the existence and reasonable advantage and comfort of the infant contractor. Thus, articles of mere luxury are always excluded, though luxurious articles of utility are in some cases allowed.

 -LOANS FOR NECESSARIES

An infant cannot be liable for a loan advanced to him to enable him purchase necessaries. If, however, the loan any part of it is expended in the purchase of necessaries, the lender can recover the amount expended thereon under the equitable doctrine of subrogation. Subrogation means the substitution of one person or thing for another, so that the same rights and duties which attached to the original person or thing attach to the substituted one. In this case, the lender whose loan has been used to buy necessaries is subrogated to the seller of the necessaries. That is, he is placed in the position of the seller of the necessaries. That is, he is placed in the position of the seller of the necessaries, thus enabling him to recover that amount of the loan spent by the infant in purchasing.

 CONCLUSION

Where an infant fraudulently misrepresents his age by deceiving the other party that he is over 21 years, the plea of infancy is still open to the infant. However, guilty will grant relief against the infant by compelling him to restore any ill-gotten induced by fraud. This is made possible by the doctrine of restitution. The doctrine operates; 

1. If the infant obtains goods by fraud, and remains in possession of them, the infant will be made to return them.
2. Where an infant has parted with goods, there is an authority, which held that hs is accountable for the proceeds of sale Stock v. Wilson 1913) 2 KB 235. However see the principle declares in Lesile Ltd. v. Sheill (1914) 3 KB 607. 627 where Lord Summer declared “Restitution stopped where repayment began”.

 

• Where an infant obtains a loan by fraud, that money cannot be recovered, thus in Lesile Ltd. v. Sheill (supra), an infant could be compelled to restore a loan of $400 which he has obtained by fraudulent misrepresentation of his age, for to do so would constitute an enforcement of the contract, not application of the doctrine of restitution. The essence of a loan of money is that the borrower shall repay the equivalent sum, sometimes, with interest. This is exactly what the Infant Relief Act declares void. It will thus defeat the purpose of the law.

SUMMARY

The general principle is that a contract made by a minor with an adult is binding on the adult but not on the minor. If, after attaining his majority, he ratifies it by an act confirming the promise he made when a minor, he is bound. There need be no consideration for the act of ratification. A contract by a minor is not void and any money or property transferred by him under the contract can be recovered only if there has been a total failure of consideration.

"... where necessaries are sold and delivered to an infant (or minor)... he must pay a reasonable price therefor.'Necessaries' in this section means goods suitable to the condition of life of such infant (or minor)... and to his actual requirements at the time of sale and delivery." 

"Necessaries" are those things without which a person cannot reasonably exist and include food, clothing, lodging, education or training in a trade and essential services. The "condition of life" of the minor means his social status and his wealth. What is regarded as necessary for the minor residing in a stately home may be unnecessary for the resident of a council flat. Whatever the minor's status, the goods must be suitable to his actual requirements-if he already has enough fancy waistcoats, more cannot be necessary: Nash v. Inman [1908] 2 KB 1, CA.

TUTOR-MARKED ASSIGNMENT

Who is a Minor

The meaning of necessaries in the context of both goods and services

Jane left school last year at the age of 16. She took a job as an office assistant in an insurance firm.Her wages are N10,000 per month, and she is required to give three months’ notice to terminate her employment.

She recently agreed to buy a ‘Suzuki’ motorcycle so that she could spend more time with her boyfriend, John, who is mad about motorcycles. She also signed a written agreement to buy a one quarter share in AIICO insurance company.

Jane has now been offered a job as a receptionist at N15,000 per month, provided she can start immediately. She has failed to pay for the motorcycle or the shares in AIICO Insurance company. Advise Jane.

 REFERENCES/FURTHER READINGS

OLUSEGUN YEROKUN, Modern Law of Contract, 2^nd ed., Nigerian Revenue Project Publishers (2004)

T.O DADA, General Principles of Law, 3^rd ed., T.O. Dada & Co. (2006)

I.E. SAGAY, Nigerian Law of Contract, 2^nd ed., Spectrum Law Publishing (2001)

EWAN MACINTYRE, Business Law, 1^st ed., Pearson Education Limited (2008)