Download Theme 3 Contractual Capacity

Consensus continued...
Contractual Capacity
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Parties reached consensus in a situation where they would
not have concluded the contract had they been aware of
the real circumstances.
In such cases the contract is null and void or voidable if
the prejudiced party elects do so.
If the contract is null and void – no legal obligation is
created.
Factor which influence consensus are:
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Error
Misrepresentation
Duress
Undue influence
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This is a misunderstanding / misconception by one or
more of the parties regarding certain facts, events or
circumstances.
Error in motive (reason for conclusion of the contract:
◦ Party errors regarding the reason which motivated the
conclusion of the contract.
◦ This does not influence the validity of the contract.
◦ If error was caused due to misrepresentation by the other
party – such a contract is voidable due to misrepresntation
and not error.
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Error as to the contents / existence of the
contract
◦ Error regarding the person with whom the
contract is concluded
eg.
Employment
contract. Error nullifies the contract.
◦ Error regarding the name of the person with
whom the contract is concluded eg. Pete vs Peter.
Error is irrelevant and contract remains valid.
◦ Error regarding the nature of the contract
eg.
Sale vs Lease. Error nullifies the contract.
◦ Error regarding the performance Error regarding
the contents of the contract influences consensus.
Eg. Siver vs copper. This type of error nullifies the
contract provided it is also iustus error.
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Iustus-error approach
 We have to determine if the error was a
reasonable and fair mistake / error before
consensus will be set aside.
 The person claiming error must prove that
error was both material and reasonable.
 Material = substantial enough to influence
consensus.
 Reasonable = if it could objectively be
excused in law.
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A false statement of fact made either expressly or
tacitly. This can be done intentionally or negligently.
Contracts = voidable if the misrepresentation has
influence upon the motive or reason for the
conclusion of the contract.
Misrepresentation must be material and persuade the
other party to conclude the contract.
A person claiming misrepresentation must prove that
a false statement was made.
A mere expression of opinion however is not a
misrepresentation. Puffing does not constitute
misrepresentation.
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If the prejudiced party decides to elects to avoid the
contract no contractual remedies are available.
Restitution and Delictual damages can be claimed.
Damages can be claimed for intentional and negligent
misrepresentations, but not innocent misrepresentations.
Eg. Contract of Sale:
◦ Actio quanti minoris – price reduction is claimed for damaged due
to misrepresentation. If buyer wished to continue with the contract.
◦ Actio redhibitoria – prejudiced party claims full restitution and
damages.
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Duress can cause a person to do something which they would
normally not have done.
It could be so serious that he acts without being aware of what
he is doing – vis absoluta (loses contractual capacity
temporarily, thus contract null and void)
In less serious situations a person is influenced to do something
he would not have done if he was not under duress. vis
compulsiva (contractual capacity is retained , thus contract
voidable)
Requirements:
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Other party to the contract must be responsible for the duress.
Duress must have caused the conclusion of the contract.
Duress must consist of a wrongful threat of damage / harm.
Contract must be prejudicial to party under duress.
Threat must be of an imminent or inevitable evil.
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Consensus was improperly obtained.
Requirements:
One contracting party must have obtained influence over the
other party.
Influence must have weakened the prejudiced party’s resistance
and rendered his will pliable and open to manipulation.
Influence must have been used in an unconscionable manner.
Influence must have convinced the prejudiced party to reach
consensus to his own detriment.
Prejudiced party reached consensus which he would not have
done had there not been undue influence.
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Legal capacity:
Capable of bearing legal rights and duties.
Eg. Infans has legal capacity, but not contractual
capacity.
Contractual capacity:
The competence to perform a juristic act.
2 components of contractual capacity:
◦ The ability to form a will
◦ The ability to act with sound judgement in accordance with
such a will.
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All human beings are natural persons, but their legal capacity / status
may differ.
Status is determined by a persons qualities (age, sex, etc.) and
circumstances (marriage, insolvency, etc.)
Status determines contractual capacity.
◦ Person’s without contractual capacity
◦ Person’s with limited contractual capacity
◦ Person’s with full contractual capacity
Juristic persons are artificial persons created by law eg. Company, CC,
etc.
◦ A separate legal identity with its own legal personality is awarded to such a
juristic person.
◦ A juristic person is established with certain aims and objectives in mind and
must act within the authorised powers given (intra vires vs ultra vires)
◦ A juristic person acts through a representative or organs, which are always
natural persons.
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These persons cannot perform any jusristic act.
◦ Persons under the age of 7:
◦ Infans has legal capacity but no contractual capacity.
◦ A parent / guardian may act on his behalf for the purpose of
administration of the estate and for his maintenance and support.
◦ Mentally incapacitated persons:
◦ Every person is presumed to be sound of mind, unless the contrary
is proven.
◦ Mentally deficient persons =certified and declared to be unsound
of mind by the High Court.
◦ Contracts concluded by these persons are null and void unless at
the time of conclusion they had all their mental faculties.
◦ These persons have legal capacity and can aquire rights / duties by
juristic acts performed by his curator on his behalf.
◦ Persons in a state of automatism or under the influence of
medication or alcohol:
◦ Person is unable to form intent and realise the consequences
of his actions due to the influence of eg. Epilepsy, alcohol,
medication, etc.
◦ No contractual capacity exists while this state persists. Juristic
acts performed in such a condition is null and void.
◦ Performance delivered must be returned or if that is not
possible he is liable in terms of unjustified enrichment.
◦ The person claiming contractual incapacity must prove it.
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These persons can only perform juristic acts with the assistance
of another person.
The assistance
supplements the inadequate powers of
judgement of the person with limited contractual capacity.
Minors:
All natural persons between 7 an 18 years.
Majority can be obtained by
◦ turning 18;
◦ conclusion of a valid marriage (majority status remains in case of
devorce);
◦ through an order of court.
A minor must be assisted by a parent / guardian when
performing a juristic act, or obtain consent before / after
(ratification) he acts.
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Where minor has full contractual capacity:
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Where minor acts with consent or assistance of parent /
guardian:
◦ Only rights and no duties are obtained. If any duties are obtained the
assistance of the parent / guardian is required. If contract is not to the
benefit of the minor – restitutio in integrum.
◦ Supplement the minor’s lack of capacity and advise him at the time of
performance of the juristic act.
◦ Juristic acts by minors can be ratified by parent / guardian.
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Where guardian acts on behalf of the minor:
◦ Rights and duties are obtained by the minor due to act of the parent /
guardian.
◦ Act may only be to the benefit of the minor – if not restitutio in
integrum.
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Where additional consent above and beyond consent of
the parent / guardian is required:
◦ Consent of the Master of the Supreme Court is required for eg. Sale
of immovable property < R100000; >R100000 consent of High
Court required.
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Prohibited acts:
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Emancipation:
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Minor pretends to have attained majority:
◦ Eg. Marriage.
◦ Consent to act independantly, this may revoked at any time.
◦ Majority not obtained.
◦ Minor is bound as if he has majority status, and a claim for
restitution not available.
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A contract concluded on behalf of a minor which is
prejudicial to the minor - Restitutio in integrum can be
claimed.
Contract is set aside and parties placed in the position they
were in before conclusion of the contract.
Minor cannot claim restitution:
◦ Minor acted fraudulently.
◦ Minor ratifies contract after majority is obtained.
◦ Action has prescribed.
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Where parent / guardian exceeds authority:
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Where minor acts as representative of parent / guardian:
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Where minor acts without consent or assistance:
◦ The minor will not be held liable.
◦ Principles of Agency apply. The agent will not be held liable.
◦ Minor liable if ratification takes place.
◦ If minor already performed – restitution is claimed, unless ratification
takes place.
◦ Performance delivered by other party – no counter performance can be
claimed, minor returns performance with possibility of claim in terms
of unjustified enrichment.
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Marriages before 1 November 1984:
◦ In community of property:
◦ One joint estate, owned equally in undivided shares.
◦ Before 1 December 1993 – husband still retained marital power,
thus wife had limited contractual capacity.
◦ Out of community of property – community of property excluded:
◦ 3 estates formed.
◦ Out of community of property – community of property and profit
and loss excluded:
◦ 2 estates existed.
◦ Before 1 December 1993 – husband still retained marital power,
unless excluded by an antenuptial agreement.
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Marriages after 1 November 1984:
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In community of property:
Both spouses have equal capacity to manage the joint estate.
Consent required in some instances to protect spouse.
Out of community of property:
2 seperate estates with accrual system.
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Prodigals:
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Persons under curatorship:
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Insolvency:
◦ Habit or inclination to dissipate away his finances.
◦ Placed under curatorship by court and limitation on contractual
capacity can only be lifted by an order of court.
◦ Unable to manage own affairs due to disability, illness, etc.
◦ Curator assists in handling of the affairs, contractual capacity not
affected in any way.
◦ Contractual capacity limited regarding acts such as selling assets
without consent of trustee.
◦ Contractual capacity regarding eg. Marriage is not affected.
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Has full contractual capacity to perform juristic acts.