Summary
CML1001F Part B Summary
- Course
- CML1001F Business Law I
- Institution
- University Of Cape Town (UCT)
Chapter Summaries of Part B of the course Detailed accounts of all the included here. Essential!! To your success in academics!!
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PART B: THE LAW OF CONTRACTVoid vs Voidable
Void:
Meaning: no contract
Circumstances which lead to: mistake, illegality, lack capacity
Consequences: unenforceable –unjustified enrichment
Voidable:
Meaning: valid but flawed
Circumstances which lead to: misrep, duress, undue influence, lack capacity
Consequences: election ratify or rescind Restitutio in integrum (comes from rescind)
1. FORMATION OF A VALID CONTRACT
In order for a contract to be valid and binding in law, all of the following requirements
must be met:
o If one or more is missing, the contract is not valid (void), and the courts will not
enforce it.
1. The parties must have contractual capacity.
2. The parties must have a serious intention to contract.
3. The parties must communicate their intention to each other.
4. The parties must be of the same mind, i.e. no misunderstandings or mistakes.
5. The agreement must be lawful.
6. Performance of the contractual obligations must be possible.
7. The agreement must comply with all the formalities required by law for that
particular kind of contract. Most contracts are verbal.
8. The agreement must be certain in its terms.
1.1. CONTRACTUAL CAPACITY
The general rule is that every legal person has full contractual capacity.
However there are exceptions, certain people have limited or no contractual capacity,
either to protect themselves or other people. The law places restrictions on their ability
to enter into contracts.
People with limited or no capacity are the following:
o Minors (under 18)
o Married people
o Mentally ill
o Insolvents (bankrupt people)
o Intoxicated people (drugs or alcohol)
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,a) Minors
A minor is an unmarried person under the age of 18 .
o By the Children’s Act 38 of 2005, which came into effect in June/July 2007.
o Before July 2007, it was 21.
A major is a person over 18 with full capacity.
Marriage
o A minor becomes a major on marriage regardless of his or her age.
Therefore they would have full contractual capacity apart from the limitations
placed by marriage.
o If the marriage is dissolved by death or divorce before the person turns 18, they
remain a major.
Constructional capacity of minors
o 0-7 = No contractual capacity (parents will invest your money and control your
property if you inherit a lot of money for example)
o 7-18 = limited (you need parents’ permission)
Effect contract without assistance
o Common Law limping = major bound but minors parents have election
o Consumer Protection Act Voidable at option minor
If your parents entered into a contract with you since you were under 18, the contract
stands only with you and the other party, not your parents and the other party and you
If you have entered into a contract that is inherently prejudicial, you have 3 years to pull
out from age 18.
Contractual Capacity of Minors Who Have Not Been Married
o Guardianship (Parental Responsibility)
Guardianship means the control over and the administration of the estate of
a minor, as well as assistance in performance of legal acts, such as
contracting.
Guardianship is different from custody.
Custody means who the child lives with, who is responsible for their
daily care. The custodial parent will deal with minor decisions (going to
a party, food, day-to-day care).
It does not matter who has custody, normally both parents retain
guardianship.
o Guardianship of the children of parents who are/were married:
Both the father and the mother have equal guardianship of a child born of
their marriage.
This means that either parent, without the consent of the other, can carry out
the powers of guardianship.
However, the consent of both guardians is required for the following:
1. The marriage of the child.
2. Giving up the child for adoption.
3. The removal of the child from South Africa.
4. Application for the passport of the child.
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, 5. Selling immovable property belonging to the child.
a. Land, house, flat, farm
o Guardianship and children of parents who were never married:
The mother may be the sole guardian (automatic right).
However, the father can be an equal guardian if he can prove the following
(not an automatic right):
1. At the time of the child’s birth he was living with the mother in a
permanent life partnership.
2. Or, he has in some way acknowledged the child, and contributed to its
maintenance and upbringing.
Infans and Pupillus
Minors are divided into two categories:
o Infans – this is a child under the age of 7.
Has no contractual capacity at all.
For him to acquire rights and duties under a contract, it must be entered into
by the guardian on his behalf.
Example: Rachel is 4 years old, and she must have swimming lessons. Her
parents are married. Either guardian will have to sign the contract on her
behalf. The signature clause of the contract will look like this: “Jane Franco
on behalf of Rachel Franco (signature) (mother/guardian)”
o Pupillus – this is a minor between the age of 7 and 18.
Limited contractual capacity.
This means he can enter into contracts in his own name, provided he is
assisted by his guardian.
Assistance means that the guardian must consent to the contract,
before or at the time that it’s entered into.
The consent can be expressed (verbal or written) or implied.
Example of expressed consent: John is 16 and he asks his mother if he can
buy a motorbike. His mother says yes (verbal). John then goes to the
dealership without his mother and he signs the papers. In law, that is an
assisted contract.
Example of implied consent: John is 16 and he tells his mother he wants to
buy a motorbike. She doesn’t say anything. The next day she buys him a
motorbike helmet (that is implied consent, so there is a valid contract).
To see if there has been implied consent, you look at the conduct of the
guardian.
Were they aware of the contract?
And did they show no objection?
The guardian can enter into a contract on behalf of the child, but they don’t
have to.
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, Effect of an Assisted Contract
A duly assisted contract is:
o In the case of an infans, one made on behalf of the minor by the guardian.
o In the case of a pupillus, it is a contract made by the minor with the assistance of
the guardian or on the minor’s behalf by the guardian.
o The effect of a duly assisted contract is that the minor is bound (liable under the
contract), not the guardian. Therefore, the contract is valid and enforceable against
the minor.
However if the contract is substantially prejudicial to the minor, the High
Court may set it aside.
Effect of an Unassisted Contract
In the case of an infans, the contract will be void (doesn’t exist).
In the case of a pupillus, he will not be bound under the law of contract.
o The contract is then known as a limping contract.
Adult: contractual obligations
Minor: no contractual obligations (No burden).
Unequal because you never take advantage of the minor.
o In practical terms this means that the minor, with the assistance of the guardian,
can choose whether to enforce the contract or not.
o The choice lies solely with the minor, the adult is bound by his decision.
o If minor chooses to enforce the contract, it is known as ratification.
Here the other party is bound by the contract and has no choice but to
perform, and so is the minor.
Ratification while still a minor can only take place with the assistance
(consent) of the guardian which can be expressed or implied.
Example: John is 16 and he buys a motorbike unassisted on the 28 th
of Feb. This is a limping contract. He tells his mother about the
contract and she says that’s great (express ratification) on the 5 th of
March. John is bound by the contract therefore the contract has been
ratified. This means that the contract is now valid and enforceable
against John from the 28th February, not when he told his mother. If
John doesn’t tell his mother about the contract, and she finds out
about it, and she buys him a motorbike helmet. You can see from her
conduct that she has impliedly ratified the contract. Note: parent can
only ratify contract if aware of it.
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