Contractual Capacity of an Infant Q1 – Estate Agent's Examination Part 1&2

Q.
a) Define 'Contractual Capacity'. (5 marks)

b) Describe the circumstances in which an infant is contractually bound. (15 marks)

(20 marks, 2014 Q1)

A.
a) Some terminologies on contract are available in earlier posts:

Definition provided by Business Dictionary is:

"The legal capability to form a binding contract. A number of classes of people lack contractual capacity, and these include minors, the mentally challenged, those under the influence of an intoxicating substance and incarcerated convicts."

Ref:

http://www.businessdictionary.com/definition/contractual-capacity.html#ixzz3W0rPhFkF

b) Circumstances in which an infant is contractually bound.

Who Is a Minor or Infant?

Traditionally, a minor or an infant is anyone under the age of 21. This has been changed by statutes in almost every state, and a minor is now anyone under the age of 18. The term infant and minor are used interchangeably in most situations.

What Is the Rule When Contracting With an Infant?

Generally seeking, anyone who contracts with an infant or minor is doing so at their own peril. That means that the law gives to infants the ability to void, or exit the contract as they see fit. The most common justification for the rule is to protect minors from assuming obligations which they are not capable of understanding. It is obvious to see that this will lead to harsh results, so some general exceptions have been created.

Are There Exceptions to Creating a Binding Contract with a Minor?

If every contract with a minor was invalid, no one in their right mind would ever enter into a contract with a minor. To allow some minors to enter into contracts and/or prevent minors from abusing their position, there are several exceptions including:

1. Sports or Entertainment Contracts

Generally speaking, minors who enter into sports or entertainment contracts are held to them, and cannot void them at will.

2. Necessaries

Contracts for certain goods and services that are necessary to the health and safety of infants cannot be voided. Such goods and services include food, clothing, and lodging or shelter. In some instances, an automobile or motorcycle is also considered a necessary.

3. Disaffirm the Whole Contract

A minor who decides to void a contract because of his age must void the entire contract. The law does not let them to continue to enforce some of the contract while voiding other parts.

4. Ratification

A minor can only void a contract while they are still under the age of maturity (again, usually 18), or for a reasonable time after they have reached that age. If a person does nothing to disaffirm the contract after they stop being a minor, the law can find that they will no longer be able to void the contract

Can an Attorney Help Me with Minor Contracts?

If contracting with a minor, the contract may not be legally enforceable. If you are in the process of drafting a contract, or have already done so and the other party is seeking to defend against its enforcement because they are a minor, contacting an experienced business attorney is strongly recommended.

- See more at: http://www.legalmatch.com/law-library/article/can-a-minor-contract.html#sthash.GTRglyGp.dpuf

In our local setting, the same principles above apply. A good lecture note was produced by Norazla Abdul Wahab for her MGM 3351 course on this subject. I attempt to summarize the key points here.

Circumstances where minors (less than 18 years old) can enter into valid contract & liable on that contracts are:

Contracts for necessaries
Contract of scholarship
Insurance contract
Marriage contract
Employment Contract

1. Contracts for necessities:

As when it is indispensable in need of such goods or services depending on the condition of such infants and to his actual requirements at the date.

Usually are food, shelter, clothing, medical services and even education. However luxurious articles are excluded. So, in such manner, an infant is held to be bound to the contract for paying for such supplies.

PART VI

OF CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT

Claim for necessaries supplied to person incapable of contracting, or on his account

Section 69. If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.

2. Contract of scholarship:

In a lot of situations, especially in the remote interior of Malaysia, children are offered boarding schools nearby townships with scholarships until university. Such conditions may have contractual obligation for the children to return to serve the people of their states. However, as they have grown up, they might not return. Thus, the contract while they were minor can be enforced as it is deemed necessity for the children to have education. It is like the first point above.

Case: Government of Malaysia v Gucharan Singh [ 1971] 1 MLJ 211

3. Insurance Contract:

Capacity of minor to insure. Insurance Act 1996.

Section 153. (1) Notwithstanding any law to the contrary, a minor who has attained the age of ten years but has not attained the age of sixteen years, with the consent in writing of his parent or guardian -

(a) may effect a life policy upon his own life or upon another life in which he has an insurable interest; or

(b) may assign the life policy on his own life.

(2) A minor who has attained the age of sixteen years -

(a) may effect a life policy upon his own life or upon another life in which he has an insurable interest; or

(b) may assign the life policy on his own life, and is as competent in all respects to have and exercise the powers and privileges of a policy owner in relation to a life policy of which he is the owner as he would be if he had attained the age of majority.

4. Marriage Contract:

As marriage is under customary law, hence different adat and customary practices are allowed to bind the infant to marriage.

Contracts promise to marry entered into by minor are valid. A minor can sue or be sued in case of breach of promise to marry. In such scenario, the Age of Majority Act, 1971 is referred.

What is age of majority?

From Age of Majority Act, 1971,

Section 2. Subject to section 4, the minority of all males and females shall cease and determine within Malaysia at the age of eighteen years and every such male and female attaining that age shall be of the age of majority.

Section 4(a) of the Age of Majority Act 1971 provides that :

“nothing in the Act shall effect the capacity of any person to act in the following matters, namely marriage, divorce, dower and adoption. Therefore a minor may sue or be sued for a breach of promise to marry”.

Hence, it actually provides that the Age of Majority Act, 1971 does not cover the Section 4 provisions. In other words, marriage, divorce, dower and adoption can not be confined to adults above 18 years old (which is the purpose of Age of Majority). Therefore, infant can be bound to marriage, divorce, dower and adoption, although they are not yet 18 years old.

5. Employment Contract:

CHILDREN AND YOUNG PERSONS (EMPLOYMENT) ACT 1966

Contractual capacity

Section 13. Notwithstanding anything to the contrary contained in the Contracts Act 1950 [Act 136] or the provisions of any other written law, any child or young person shall be competent to enter into a contract of service under this Act otherwise than as an employer, and may sue as plaintiff without his next friend or defend any action without a guardian ad litem:

Provided that no damages and no indemnity under section 13 of the Employment Act 1955, shall be recoverable from a child or young person for a breach of any contract of service.

Therefore, it protects a child in employment being sued for damages, although the infant can come to a contract, there is no room for abuse of this capacity.

Ref:
Rachel Wenzel, 2015. Minors and Contract Lawyers. Legal Match, available at
http://www.legalmatch.com/law-library/article/can-a-minor-contract.html

Norazla Abdul Wahab. MGM 3351 course, available at

http://www.scribd.com/doc/231826214/4-Contract-Capacity#scribd, or

http://www.vodppl.upm.edu.my/uploads/docs/%284%29%20Contract%20-%20Capacity.ppt