LAW
Week 7 Slides 2014 2.pptx

Week 7 Slides 2014 2.pptx - Lack of capacity Chapter 5...

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Lack of capacity Chapter 5 Making deals
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Capacity A contract will only be enforceable if both parties have the legal capacity to enter into contracts. As a general rule, a party will not have legal capacity to contract if they are: a minor, or a person lacking intellectual capacity.
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Minors The three types of contract that may be enforceable against minors are: contracts for necessaries: Bojczuk v Gregorcewicz (1961); beneficial contracts of service: Hamilton v Lethbridge (1912); and contracts where the minor acquires a continuing interest or undertakes a continuing obligation.
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Persons lacking intellectual capacity If a party lacks intellectual capacity and purchases goods that are necessaries, they can be compelled to pay a reasonable price for those goods. If the contract is not for the sale of necessaries, the contract will still be enforceable against a person lacking intellectual capacity unless: the person was not capable of understanding the nature of the agreement they were entering into, and the other party knew or should have known of their lack of capacity.
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Lack of Capacity A person may lack capacity due to mental illness or intoxication; but be careful, the intoxicated person must be so intoxicated that the truly don’t know the consequences of their actions This determination is factual and varies from case to case
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Legal Capacity *Be careful here: For the contract to be voidable, the person cannot just be a little drunk - they had to be so intoxicated that they did not know what they were doing – and the other party had to know it. “Jim weighs 150 kgs. He drinks two cans of beer before he signs a contract.” 6
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Legal Capacity *Be careful here: For the contract to be voidable, the person cannot just be a little drunk - they had to be so intoxicated that they did not know what they were doing – and the other party had to know it. “Kim weighs 40 kgs. She drinks 32 cans of beer before she signs a contract.” 7
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Lack of legality Chapter 5 Making deals
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Common law illegality Certain contracts are categorised by the common law as illegal and unenforceable, including: contracts to commit a crime or a tort, contracts that promote corruption in public office, contracts intended to evade the payment of tax, and contracts that prevent or delay the administration of justice.
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Statutory illegality An agreement may be illegal because it breaches a statutory prohibition. The effect of breach of a statutory provision upon the validity and enforceability of the contract depends upon the wording of the statute itself. The statute may: penalise the conduct of the parties but not invalidate the agreement, invalidate the agreement but not penalise the parties, or penalise the parties and invalidate the agreement.
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Lack of formality Chapter 5 Making deals
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Written contracts Legislation requires certain contracts to be in writing and signed in order to be effective and enforceable, including:
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