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Defective Contracts = void, voidable, age capacity - Coggle Diagram

- - - - if something is vitiated, its effectiveness is spoiled or weakened = its kryptonite
  - - - "leaving aside challenges going to the reality of consent, such as those based on fraud, duress or undue influence, the courts do not review the fairness of men's bargains either at law or in equity." Cavendish Square Holding BV (Appellant) v Talal El Makdessi [2015] UKSC 67 per Lord Neuberger PSC at Para 13
- - - - main and most important factor in legal capacity
      - Scotland legislation
        
        Age of Legal Capacity (Scotland) Act 1991
        
        modern scots law under Age of Legal Capacity Act 1991 stages
        
        a child to the age of 16 has no or only limited ability to enter legal contracts
        
        from 16-18 a person has full capacity to enter into contracts, but subject to the right to have these contracts reduced by a court in certain limited circumstances.
        
        over 18 full legal capacity
        
        Section 1: Age of legal capacity
        
        section 1(1) as from the commencement of this act
        
        a) a person under the age of 16 years shall, subject to section 2 below, have no legal capacity to enter into any transaction;
        
        b) a person of or over the age of 16 years shall have legal capacity to enter into any transaction
        
        section 2: exceptions to the general rule
        
        1) a person under the age of 16 years shall have legal capacity to enter into a transaction
        
        a) of a kind commonly entered into by persons of his age and circumstances, and
        
        b) on terms which are not unreasonable
        
        2) a person of or over the age of 12 years shall has testamentary capacity, including legal capacity to exercise by testamentary writing any power of appointment.
        
        3) a person of or over the age of 12 years shall have legal capacity to consent to the making of an adoption order in relation to him.
        
        4) a person under the age of 16 years shall have legal capacity to consent on his own behalf to any surgical, medical or dental procedure or treatment where, in the opinion of a qualified medical practitioner attending him, he is capable of understanding the nature and possible consequences of the procedure or treatment.
        
        Section 3: setting aside of transactions
        
        1) a person under the age of 21 years (the applicant) may make application to the court to set aside a transaction which he entered into while he was of or over the age of 16 years but under the age of 18 years and which is a prejudicial transaction
        
        2) in this section "prejudicial transaction" means a transaction which
        
        a) an adult, exercising reasonable prudence, would not have entered into the circumstances of the applicant at the time of entering into the transaction, and
        
        b) has caused or is likely to cause substantial prejudice to the applicant.
        
        Section 4: Judicial Ratification
        
        to safeguard those contracting with 18-16 year olds against the contract being held void, a joint application may be made to a sheriff to have the proposed contract judicially ratified i.e. approved.
        
        Age of legal capacity scotland act section 4(1)(3)**
        
        a judicially ratified contract cannot be subsequently set aside on the ground of prejudice section 3(3)(j)
        
        judicial ratification cannot be applied for retrospectively
        
        legal capacity has 3 stages
      - England Legislation
        
        Family Law Reform Act 1969
        
        Section 1: reduction of age of majority from 21 to 18
        
        1) as from the date on which this section comes into force a person shall attain full age on attaining the age of 18 instead of attaining the age of twenty-one; and a person shall attain full age on that date if he has then already attained the age of eighteen but not the age of twenty-one.
        
        Section 12; persons under full age may be described as minors instead of infants.
        
        a person who is not of full age may be described as a minor instead of an infant.
        
        supplemented by case law
        
        Minors capacity Act 1987
        
        this act provides guarantees for minors contracting with adults
        
        a contract is binding on the adult but not on the minor.
        
        a contract with a minor is voidable, that means he or she is able to cancel any contract at any time before reaching the age of 18 and for a reasonable time after that
        
        if the minor ratifies the contract after having reaching the age of 18 by, for instance an act confirming a promise made when a minor he is legally bound.
        
        England Legal capacity has 2 stages
        
        Sale of Goods Act 1979
        
        section 3 capacity to buy and sell
        
        1) capacity to buy and sell is regulated by the general law concerning capacity to contract and to transfer and acquire property
        
        2) where necessaries are sold and delivered to a minor or to a person who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price for them
        
        3) in subsection (2) above "necessaries" means goods suitable to the condition in life of the minor or other person concerned and to his actual requirements at the time of the sale and delivery.
        
        Nash v Inman [1908] 2KB1
        
        facts = N was a Saville row tailor Inman was a Minor "aged 18" student at Cambridge uni. N sold clothes credit to Inman for what was around £145. N sued to recover the money and Inman pleaded infancy. existing law only allowed infant to contract for necessities.
        
        held = judge found that Inman was a minor and he already had enough clothing at the time of sale, therefore there was no evidence that the clothing could be necessaries. = in favour of Inman.
        
        because Inman was an infant he was not liable to pay up since there was never a contract between him and the tailor for want of contractual capacity
        
        Proform Sports management Ltd v Proactive Sports Ltd & Stretford [2006] EWHC 2903
        
        Issue = whether there can be liability for inducing the breach of a voidable contract with a minor + whether the contract in issue fell within the class of contracts that were enforceable against a minor
        
        facts = Claimant football agent, Proform, entered into a representation agreement with Wayne Rooney when he was 15 years old. In June 2002, the player and his parents wrote to Proform stating they would not renew the agreement when it expired in December 2002.Three days after the expiry of the agreement, the player entered into a new representation agreement with the Defendant, Proactive Sports. Proform Sports Management brought proceedings against the new agent for unlawful interference with and/or the procuring of a breach of contract. D applied for summary judgment on the grounds that as a matter of law there was no liability for inducing the breach of a voidable contract with a minor
        
        held = Rooney wins
        
        1) there could be no liability for inducting the breach of a voidable contract with a minor. if the contract was entitled to lawfully terminate then there was no breach
        
        2) the only contracts which are binding on a minor are one for necessaries = rooneys one was not necessary = voidable
        
        3) claimant had no real prospect of establishing that the agreement was a contract for necessaries, the player was entitled to void the contract and the defendant is not liable for inducing breach
    - - if a persons legal capacity is impaired then they lose the ability to make contracts
        
        Adults with incapacity (Scotland) Act 2000
        
        provides a framework for safeguarding the welfare and managing the finances of adults (people over 16) who lack capacity due to mental illness, learning disability, dementia or a related condition or an inability to communicate. a court order is needed to invoke these provision
- - - - void
        
        it does not exist + objectively it never existed even if the parties subjectively believed it to exist.
        
        cannot be enforced
        
        "It may be objected that a void contract is a meaningless expression; but it is a useful one to describe a contract that is perfect in form but void in substance” ingram v little [1961] 1QB 31 at pp 63,64, Per Devlin, J
        
        3 Characteristics of Void Contracts
        
        contract is null + void ab initio
        
        rescission (cancellation) of the contract is unnecessary
        
        3rd parties rights are affected by the invalidity = no title may pass under a void contract with one statutory exception to do with Bills of exchange (which we're not concerned with).
        
        A contract is a legal bridge by which title + ownership is transferred but void contracts can transfer no title/ownership to goods because the bridge does not exist.
        
        Nemo dat quod non habet = no one can give what he does not have
        
        Morrison v Robertson 1908 SC 332
        
        The contract for the sale of cattle was made with an essential error as to the identity of the buyer. The courts considered that error as to the identity of the party to be an essential error that prevented the creation of this particular contract. = sale cancelled and ownership of cattle remained with seller
        
        Casemine summary of case
        
        A brought an action against C to recover the cows or their value
        
        Alexander Telford had no credit or means obtained possession of the cows with A's consent.
        
        A argued that there was no contract of sale with Telford and that Telford's misrepresentation was not the cause of the sale.
        
        issues = whether there was a valid contract of sale between A and Telford, and whether Telford had possessory title to the cows which he could transfer to C.
        
        ruling = court found there was no contract of sale between A and T, A was deceived by Telford's false representation and never intended to contract with him, therefore T had no possessory title to the cows which he could transfer to C.
      - voidable
        
        a voidable contract is a shaky bridge - transfer of title is possible until contract cancelled but not afterwards
        
        voidable contracts are valid until they are set aside, they are annullable, cancellable.
        
        has a precarious legal existence, they are legally fragile.
        
        contract is valid until rescinded
        
        Rescission does not operate retrospectively
        
        innocent 3rd parties will not be affected by the invalidity i.e. not impacted by the recession
        
        the riming of recission is crucial if a third party involved.
        
        there are 3 conditions for rescinding a voidable contract
        
        third party rights must not have been affected
        
        restitutio in integrum must be possible*
        
        no unnecessary delay, innocent party must rescind promptly
        
        Wilson v Marquis of Breadalbane (1859) 21D 957
        
        facts = contract for sale of cattle was held to be voidable because there was a disagreement by the parties about the price. W thought he was selling for £15 per cow but M thought he was buying for £13 a cow + price is essential part of consensus in idem. by the time M tried to rescind the contract, the cattle had already been slaughtered.
        
        held = no contract as to price, since the cattle had been taken and appropriated by M... M must pay the market value of cattle since the cows cannot be recovered
      - unenforceable contracts