LAW OF CONTRACTS: Your Sword, Your Shield 3

Today, I will be talking about the legal capacity of the parties to enter into a contract.

Here we go!

5. Legal Capacity to Enter Into a Contract

This means a person's legal ability to enter into a contract. To best explain who can enter into a contract, let's use some examples of who is allowed or forbidden to enter into a contract. 

Age of Maturity

For one, a person must be of age of maturity, and the law sees this as age 18 or older. However, there are times when a minor can enter into a contract. 

This is true if the contract is for housing, food or things necessary to sustain life.There are a few other exceptions to this. 

Case Study

Timi, a 17 year old, passes himself off as an adult and buys a new high-end stereo system on a payment plan. When his mom sees the stereo, she gets angry and calls the store to demand Timi's deposit back. 

The store owner has a right to retain Timi's deposit and hold him to the contract and the payment plan. You see, Timi falsely identified himself as being of legal age to contract for the stereo purchase. 

To take this a step further, suppose Timi bought the stereo system the day before his 18th birthday. If he does nothing to cancel the contract prior to turning 18, he is obligated to the terms of the contract simply because he did nothing to cancel while he was still a minor. 

Therefore, any contract entered into with a minor (below 18), will not be enforceable. 

Mental Illness

It is also necessary for the parties to be free of mental illness, like schizophrenia or other conditions that challenge a person's mental state.

There is a standard that courts use to determine whether a person truly understands the promises made in a contract. 

One test the court may perform is a cognitive test, and this determines whether meaning was understood by the party in the areas of reasoning and understanding language. 

A motivational test may also be used. This test determines whether a party suffers from delusions or mania. This is an important factor because this may skew a person's ability to understand the scope of the contract. 

Case Study

Peju suffers from bipolar disorder. When she is on medication, she is able to think and understand day-to-day events. However, when she is not medicated, her thinking becomes derailed. 

One fine day, Peju entered into a contract to purchase a home. The home was well beyond what she could afford. However, she had a little cash in the bank. 

Peju called the bank to request that the funds be transferred to the seller. A loan was taken out for the balance. 

Peju's family may be able to void this contract because of her state of mind. Of course, there will be testing and documentation needed to prove her mental state. If proven that Peju lacks mental capacity, the deal will dissolve. 

Thus, people of unsound mind cannot enter into a contract.

To contract a minor or person of unsound mind, it is advisable that such be done with their parents. guardian or such persons who have charge over them, who may sue or be sued on their behalf.

Influence

No party to a contract can be under the influence of alcohol or drugs, meaning intoxicated or influenced by illicit drugs. 

This includes both voluntary intoxication and the influence of the other party to cause or encourage intoxication. This is worth explaining. 

Both parties to the contract must be of a sober mind. If one party chooses to drink or take drugs prior to the contract commitment, the contract can be voided. 

If one party intentionally influences a person to drink to the point of intoxication, and this can be proven, the contract can be voided.

A registered company has the capacity to enter into contract within its objects clause as is contained in it articles and memorandum of association.

Thus, any contract entered into outside it stated objects is unenforceable.

It is therefore advisable that you conduct a check on the objects clause of any company before contracting with them.

In my next write up, I will be writing about terms of contract which is the final part of the elements of a contract.

Afterwards, I will write about how contracts can be terminated.

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See you next time.