The Concept of Capacity to Contract in The English Law

In the English Law, A contract is said to have formed if both the parties of the contract express their intention to contract unequivocally. By entering into an agreement enforceable by law, it is presumed that both the parties accepted their own roles and obligations. Capacity to contract is specified in terms of the ability of persons entering into a contract. It prescribes the exceptions where the people aren’t allowed to contract.

WHO ARE COMPETENT TO CONTRACT?

Competency to enter into a contract is a vital prerequisite to make any contract enforceable. Generally, a person being competent to contract depends on the age and the mental condition of any individual. Not every person has legal competency to become parties to a contract for enforcing the said contract. A person must be capable of making a declaration of his intention of initiating a contract or terminating it. The declaration made should be legally binding.

Every individual has the legal capacity to enter into a contract unless there are few exceptions. Any person who is said to be a major i.e., above the age of 18 years is capable to enter into a valid contract. Any individual who is said to make rational decisions, under the consequences arising out of a particular action of the said individual is capable to become a party to a contract.

Any individual who is of sound mind, and not disqualified by law is capable of enforcing a contract. The psychological condition of individuals entering into a contract also is an important factor to enter into a contract. People whose psychological conditions are not apt are not allowed to enter into a contract.

Children below the age of 18 do not have complete legal competency to enter into a contract. They are said to have limited capacity as it is believed that children are not capable of making rational decisions and cannot understand the consequences arising out of any of their actions. In such cases, they can partially become parties to any contract and can enter into any legal transactions under the guidance of their parents or any legal representatives.

EXCEPTIONS OF ENTERING INTO A CONTRACT:

People who lack the capacity to enter into a contract, are not capable of understanding their actions and consequences. People such as minors i.e., those aged below 18 years, intoxicated persons come under the category of exceptions of entering into a contract. If such people enter into a contract, the contract is said to be voidable i.e., it lies within the discretion of the other person to halt the contract or continue its enforcement.

MINORS:

According to the law, people who are below the age of 18 do not have the capacity to enter into a contract on their own. Minor can sign a contract and in such a case, he can honour the enforcement of the contract or can also avoid the performance of the contract. However, even minors’ capacity to contract is also subjected to few exceptions. When a minor enters into a contract for basic necessities such as food, shelter, clothing which is for his own benefit, such a contract cannot be held void. A contract can be made void by a minor who is below the age of 18. If a minor in a contract turns major during the contract, the contract would not be made void.

For example, a minor aged 17 signed an agreement for availing of sports equipment. The contract continued for two years as the minor paid monthly instalments accordingly. After two years, the minor wanted to make the contract void. But it was not allowed by the court of law as the minor age was now 19 and thus all capacity to continue to the party of the contract. Now the contract cannot be held void.

MENTAL INCAPACITY:

People who are not capable mentally of entering into a contract can make the contract void. The guardian of the person also can make the contract void. If any contract is made for basic necessities, that cannot be made void. If any person who is capable of understanding the meaning of the declaration made for contract and is able to rationally analyse its consequences, he is competent to contract. This is known to be a “cognitive test”. There is also a test called the “affective test” where a contract can be held void the contract if one of the parties is not able to act reasonably. “Motivational test” is generally taken to understand the individual’s ability to judge on to enter into an agreement or not. The varying results may indicate any ill mental conditions like bipolar disorder.

For example, A entered into a contract to sell a product and asserted later that he was not capable of entering into a contract and hence the contract was void. He was diagnosed with depression and was recently out. He was not able to analyse business deals and their effects. The court of law ruled out these statements and declared that A had the capability to contract as his understanding level made him competent to contract.

In Campbell v. Hooper, it was held that under English law, if any lunatic enters into a contract, the knowledge of other party becomes vital. If he is aware, the contract is voidable. Just the fact of one party being lunatic does not make the contract void. Along with that, the knowledge of the other party is equally considered.

SUBSTANCE USE:

Inebriated people with alcohol or drugs are generally not considered under the lack of competency to enter into a contract. The court of law believes that any individual who is voluntarily inebriated can enter into a contract as the individual is able to make decisions on his own. Such an individual must not avoid his roles and responsibilities with respect to the contract as he takes all responsibility for his actions. If any person is involuntarily intoxicated and enters into a contract, then such contract is voidable. Also, when a person is voluntarily intoxicated to such an extent where he is unable to understand the actions and their consequences, then the intoxicated party can avoid performing the contract.

Aishwarya Says:

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