Faculty of Law

CHAPTER 5 – CONTRACTUAL CAPACITY

 Legal capacity

bearer of rights and duties

Flows from legal personality - not dependent on
age/status
Passive: bearer of rights and duties even if infans
Active: capacity to create rights/duties
• Juristic act brings about legal consequences
• Active capacity depends on legal status, especially
mental competence and age
Contractual capacity

 Competence to create rights/duties by concluding contract

 depends on ability to appreciate nature and effect of act

 Natural persons
 Without contractual capacity
• Cannot appreciate nature/effect of act
• Infants:
- deemed unable to contract
- be bearer of rights and duties
- guardian must act
• mentally ill:
- Presumption of full mental capacity
- Order of court – prima facie proof of lack of capacity
- Burden of proof shifts – person did have capacity at the time
of conclusion of contract
• Intoxication: temp loss of contractual capacity
Natural persons …

 Limited contractual capacity

- General rule: only contract with assistance

 Minors
- 7-18
- Assistance or consent (ratification)
- Emancipation – consent given by guardian that minor can
act in certain context – not for all action
- Exception:
 Can conclude for rights only [donation]
 Statutory permission (deposits )
 Medical treatment to his/her benefit
Natural persons…
- Guardian can conclude for minor
 Rights/duties vest in minor
 High court - upper guardian
- Special cases: consent of court [immov prop]

 Guardian conclude contract for minor

• Can be set aside if to detriment + order restitutio in
integrum
- Before majority (guardian or minor with assistance)
- After majority – “minor”, if not ratified; prescription or
fraud
- On majority – repudiate or ratify [retrospective effect]
Natural persons…

 Minor concludes contract without assistance

• Not void, but cannot be enforced against minor
• Can be enforced against other party if minor willing to
perform
• Guardian must ratify, otherwise restitution
• Performance destroyed – claim of unjustified enrichment
• Damages in delict if minor fraudulent
Natural persons …

• Married persons
- Out of comm = separate estates
- In comm = joint estate
 equal powers to manage/bind
 Certain transactions – Mat Prop Act - consent of
spouse
 Making donations – informal consent
 Alienation of shares/investments – written
 Immovable prop or surety : consent and
witnesses
- Without consent, joint estate liable – damage recovered on
dissolution of marriage from other
Natural persons

• Insolvents
- Capacity limited once declared insolvent
- Cannot dispose of assets
- Contracts to detriment of estate: trustee must approve in
writing

• Prodigals
- Squanders assets irresponsibly
- Declared prodigal – similar position as minor
- Require assistance
- contracts without assistance is voidable (can be ratified)
Natural persons

 Full capacity
- All natural persons falling outside of mentioned categories
- may be limited by statute
• Cannot accept certain positions
Juristic person

• Entity on which law confers legal personality

• Not – partnerships; trusts [CPA definition of ‘juristic person’]
• Juristic persons – cannot have full legal capacity (will)
• Limit themselves – ultra vires (but act not void only because
company lacked capacity – s36 of (old) Co’s Act + s20 of
new Act).
• Cannot act by itself - through representative (agent)
State

 State and organs can conclude contracts

 Must have authority – normally legislation + comply with
prescriptions of legislations (tenders)
 State Liability Act: implications for liability where state
contracts (state liable)
 Certain (public) law rules impact on State when contracting
• Contract may not fetter the exercise of discretion
• Cannot abdicate discretionary power