One particular group of people unprotected by the law of capacity is the elderly, who may be subject to consumer pressure. There is some protection in consumer law (which applies to all consumers), and they will generally elicit the sympathy of the court, but as a matter of law there is no specific provision regarding contracts with elderly people.
Some general problems still arise with the law of capacity in contracts.
Like many other areas of law it is not widely known. This has been addressed by statute concerning corporations (really the subject of in-depth study in the area of company law), but regarding minors it remains a problem. Obviously large organisations will be well aware of their position in law when dealing with minors, and will develop policies based on it.
This leaves the small retailer at a disadvantage, although this, arguably, is a wider problem of access to the law generally.
A further difficulty is that in the absence of formal identity cards, such as are carried in some other European countries, it is very difficult for a retailer to identify a minor, without causing offence, and therefore potentially losing custom. However, in pursuing the general aim of protecting minors, the combination of common law and statute now maintains a reasonably balanced approach, so as not to leave an adult dealing with a minor in an unreasonable position.
Summary
Most adults have full capacity. The following have limited capacity in forming contracts, for various reasons:
Is the law of contractual capacity now satisfactory? Are there any other groups of people who are vulnerable, yet still unprotected?
Figure 5.3
• Corporations (organisations, such as universities and companies):
limited according to the instrument creating the corporation (e.g. a statutory corporation by the statute, a limited company by the articles of incorporation) – to enable businesses to trade with limited liability.
• Diplomats and sovereigns – to facilitate international diplomatic relations and travel.
• Those who are drunk or of unsound mind – for protection when vulnerable.
• Minors – for protection from inexperience.
Minors Definition
• A minor is a person under eighteen years of age – Family Law Reform Act 1969. Identity may be a problem, without any official documentation.
Liabilities
• Necessaries, in other words, things needed to exist, suited to the position in life of the minor, and required at the time must be paid for by a minor – Sale of Goods Act 1979 s.3, Nash v Inman, Peters v Capacity Fleming, Wharton v MacKenzie. Necessaries may include ‘luxurious items of utility’ – Chapple v Cooper.
• Contracts of education, training and employment (beneficial contracts of service) will be binding if on the whole for the benefit of the minor and not oppressive – Clements v London & NW Rail Co, Doyle v White City Stadium, Roberts v Gray, De Francesco v Barnum, Mercantile Union Guarantee v Ball.
• Voidable contracts (those of continuing obligation) may be repudiated before or around the eighteenth birthday – Edwards v Carter, Steinberg v Scala.
Legislative measures
• Guarantees for loans may be enforceable against an adult guarantor – Minors’ Contracts Act 1987 s.2. Restitution may be ordered (minor may have to hand back property unfairly acquired or property representing it – Minors’ Contracts Act 1987
• s.3. Problems arise regarding goods exchanged for money, and the section can obviously not apply to goods which have been consumed.
Questions
1 Anna, aged 17, obtains a loan from Brillbank and enrols for a course in underwater photography at Countyshire College, payment being on a monthly basis. She is hoping to make her career in this field. Anna then visits her local bookshop, Dreamread, and buys a quantity of books on credit. Most of these are for her course, one is about pop music and one is entitled ‘Stylish Swimming’. On the way home Anna is also tempted to subscribe to a mobile telephone service from Evertalk. Two months later,Anna decides that the course is not helping her at all and no longer wishes to attend classes. She has only made one of the monthly payments. Dreamread demands payment for the books and Anna wishes that she had not taken on the mobile phone subscription. On top of all this,Anna’s bank overdraft has grown so Brillbank is now asking for repayment of the loan. Advise Anna regarding outstanding payments to Brillbank, Countyshire College, Deamread and Evertalk.
OCR 2003
2 Ben is a 17 year old student at Campshire College, following a course in media studies.
Whilst shopping at Downtown Stores he is persuaded by a sales assistant that a computer would be useful to him, so he agrees to buy one on credit. He also decides to buy on credit from the same store an expensive digital camera for his planned holiday abroad. The bus service to Campshire College is terminated by the local authority, so Ben decides to buy a car in order to attend lectures. He obtains the money for this by a loan from Evergreen Bank, guaranteed by his mother. Ben later experiences financial difficulties, and is unable to pay either the credit payments to Downtown Stores or the loan repayments to Evergreen Bank. In addition he sells the camera to a friend, retaining the proceeds in his bank account ready to pay for his holiday. Advise Ben regarding the payments for the computer, the camera and the loan repayments to Evergreen Bank.
3 Critically assess the amount of protection which the law gives to a minor who enters into a contract with an adult.
4 Consider whether the law of contractual capacity is satisfactory for the society in which we live. Are there any areas which are in need of reform?
5 Minors are clearly in need of protection in the formation of a contract, but not at the expense of fair-minded adults with whom they may be dealing.’ How far does the law of contract support this view?
6 Discuss the reasons why limits are placed on the contractual capacity of certain parties within society.
OCR 2004