Laila Cassim | Conveyancing Supervisor
Imagine that you see an advertisement online for a used computer. You respond to the advertisement and after a few emails back and forth about the computer, you decide you want to buy it. You want to enter into a contract with the seller for the purchase of their computer. You (the purchaser) are 30 years old, and the other person (the seller) is just 17 years old. So the question is, can this person (the seller) create and enter into the contract at age 17? In other words, does the 17-year-old have the capacity to enter into the contract as a minor?
These questions relate to what is known as contractual capacity. Contractual capacity is the ability of an individual or entity to enter into a binding contract with the appreciation of the obligations that flow therefrom. There are certain classes of people that are typically incapable of entering a contract, or lacking contractual capacity. We will now take a closer look at these categories.
WHAT IS A CONTRACT?
A contract is an agreement entered into between two or more parties, with the intention of creating mutual obligations. A contract can be concluded orally or in writing, however, there are instances wherein the law explicitly requires that a contract be in writing.
WHAT ARE THE REQUIREMENTS FOR A VALID CONTRACT?
- The parties must reach consensus;
- The parties must have capacity to act;
- Performance must be possible at the time the contract is entered into;
- The formalities in the contract must be adhered to;
- The contract must be lawful.
FACTOR’S DETERMINING A PERSON’S CONTRACTUAL CAPACITY?
There are various factors which determine a person’s contractual capacity which include the following:
- The current age at which an individual attains majority in South Africa is 18 years. Upon reaching this age, individuals are presumed to have full legal capacity and can enter into contracts without any restrictions.
- A child under the age of 7 has no capacity to act and cannot enter into a valid contract, however, the child’s parent or guardian can contract on their behalf;
- A child between the ages of 7 and 18 has limited contractual capacity and can contract only with the assistance of a parent or guardian.
Children/Minors lack the necessary maturity and understanding to fully comprehend the implications of contractual agreements and the obligations that arise therefrom. As a result, contracts entered into by minors are generally considered voidable at the minor's option. This allows minors protection from entering into unfair or exploitative contracts. However, there are exceptions to the rule of limited capacity for minors. For example, contracts for necessities, such as food, clothing, and education, are binding on minors. Additionally, contracts entered into by minors for their own benefit, such as contracts of employment or contracts for educational purposes, may be enforceable.
- Mentally Incapacitated Persons:
- Intoxicated Persons:
- A prodigal (person unable to responsibly control his finances) has limited contractual capacity and is assisted by a court appointed curator-ad-litem.
- Insolvent Persons:
- An unrehabilitated insolvent has limited contractual capacity, and is assisted by a court appointed trustee; and
- A rehabilitated insolvent has full contractual capacity.
- The matrimonial property system that a person is married under also affects contractual capacity.
- As a marriage in community of property is premised on the spouses having a joint estate, it follows then, that any obligations falling on the joint estate must be accepted by both spouses.
- As such, certain agreements entered into by one spouse will require the consent of the other spouse.
- It is also possible for the non-contracting spouse to ratify an agreement entered into by the contracting spouse, where the prior consent of that spouse was not obtained.
Not all individuals possess the same level of capacity to contract and therefore, certain individuals are afforded protection to ensure fairness and to prevent exploitation. The concept of contractual capacity plays a vital role when entering into contracts, ensuring fairness, protection and the proper functioning of transactions.
By understanding and applying the principles of contractual capacity, both individuals and businesses can engage in contractual relationships with confidence, knowing that their rights and interests are protected.
For further details or advice in this regard, it is best that you consult with a Legal Practitioner.