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Part IV Validity, 16 Capacity to Contract

From: Global Sales and Contract Law

Ingeborg Schwenzer, Pascal Hachem, Christopher Kee

Content type:
Book content
Product:
International Commercial Law [ICML]
Published in print:
26 January 2012
ISBN:
9780199572984

From: Oxford Legal Research Library (http://olrl.ouplaw.com). (c) Oxford University Press, 2023. All Rights Reserved. Subscriber: null; date: 06 June 2023

Subject(s):
Performance of contract — Electronic commerce and choice of law — Rome I Regulation and choice of law

(p. 203) 16  Capacity to Contract

  1. A.  General Remarks 16.01

  2. B.  Capacity of Natural Persons 16.06

    1. I.  Capacity to Bind and be Bound 16.07

      1. 1.  Age-Related Incapacity 16.10

      2. 2.  Impaired Mental Capacity 16.14

    2. II.  Consequences of Lack of Capacity 16.15

      1. 1.  Valid 16.16

      2. 2.  Voidable 16.20

      3. 3.  Void 16.23

      4. 4.  Valid only with Ratification and Unenforceable 16.25

    3. III.  The Incapacity of Office 16.28

  3. C.  Capacity of Legal Persons 16.30

    1. I.  General Remarks 16.30

    2. II.  Ultra Vires Doctrine 16.31

  4. D.  Capacity and Conflict of Laws 16.34

    1. I.  Conflict-of-Laws Rules 16.34

    2. II.  Electronic Contracting 16.39

A.  General Remarks

16.01  The legal capacity to enter into contracts is sometimes a neglected topic in the context of the sale of goods. While there is considerable commonality amongst approaches to this question amongst jurisdictions worldwide, there are sufficient differences to warrant sellers, in particular, to take precautionary measures. Indeed, this is true particularly in an age where electronic contracting means one does not always know the identity of the party with whom one is dealing.

16.02  All legal systems acknowledge to some extent that there are those who attempt to act in the market but who require special protection. Consequently legal systems have decided that these people should not be able to enter into binding legal contracts.1 This concept is what is meant by the term capacity to contract.

16.03  Legal capacity in this work is concerned only with a person or party’s legal ability to contract. It is important to make two observations in this regard. First, some jurisdictions distinguish between the capacity to have legal rights and the capacity to make legal decisions. It is only the latter that is discussed in this chapter. Secondly, it is necessary to distinguish the issue of capacity to contract from that of applicable law. In some jurisdictions, predominantly civil law jurisdictions, different laws apply when a person or party is classified as a merchant. In such an instance the issue is not the ability to enter the contract but rather which law applies. The ability of an agent to contract on behalf of a principal is dealt with elsewhere in this book.2

16.04  Legal capacity is not a matter dealt with by the uniform projects, rather the application of domestic laws is specifically reserved. Article 3.1(a) PICC specifically excludes questions of legal capacity. It is generally accepted the issue is also excluded from the CISG by virtue of the Article 4 exclusion of matters relating to validity.3 The issue is also understood as excluded from (p. 204) the OHADA Uniform Law.4 However, while it may be the case that the OHADA Uniform Law does not define who is a minor, it does expressly deal with certain other aspects of capacity.5

16.05  This chapter first addresses the question of capacity of natural persons. In all jurisdictions considered, the capacity to contract is a right which exists per se but is subject to exceptions. These exceptions can be broadly divided into two categories: the capacity to bind and the incapacity of office. The chapter then considers the capacity of legal persons, focusing specifically on the impact of the ultra vires doctrine. Finally specific issues in the context of electronic contracting are considered. Under this heading particular attention is given to the law applicable to legal capacity and what steps should be taken by sellers in this regard.

B.  Capacity of Natural Persons

16.06  As a general proposition all jurisdictions recognize that natural persons have the legal authority to enter into contracts. This proposition is however subject to exceptions, which are broadly consistent across all jurisdictions. The exceptions can be divided into two categories which might be described as distinguishing between a person’s condition and a person’s office. A person’s condition refers to something internal and unique to them, such as age, mental capacity, etc. The second category includes those who are denied the capacity to enter into particular contracts only because of the office they hold.6

I.  Capacity to Bind and be Bound

16.07  This category includes those persons who because of their condition do not have the ability to generate legal effect from that purported contract. In other words, they lack the capacity to bind or be bound to the contract.

16.08  An initial distinction can be made between absolute incapacity and relative incapacity. Contracts entered into with those who are absolutely incapable will be void. The more difficult issues arise where the law recognizes a need to adjust the level of protection provided to some people by allowing some contracts in some circumstances. People such as these can be said to have limited capacity.

16.09  Determining whether a person is absolutely incapable or has limited capacity is in many cases an arbitrary process based on the condition of the person at the time of contracting.

1.  Age-Related Incapacity

16.10  The most commonly appreciated lack of capacity concerns age. Those in this category are commonly referred to as ‘minors’ or ‘infants’. All jurisdictions state that minors lack the capacity to contract. However there is significant divergence amongst the jurisdictions as to who is a minor.

16.11  Minors of a very young age are considered to be absolutely incompetent in many jurisdictions. Ages of this kind of minority appear to vary between from 6 to 16 years of age.7 For purposes of distinction it is useful to describe these people as infants.

(p. 205) 16.12  The age of majority in most civil law jurisdictions is 18 years of age,8 although in some countries it is 209 or 21.10 Pursuant to the traditional common law rule a person under the age of 21 was considered a minor. This has been altered by statute in most common law jurisdictions, and the age of majority is now typically reached at 18 years of age.11 Although 18 years of age might be broadly described as the international minimum, there are nevertheless some jurisdictions that grant capacity at earlier ages.12

16.13  Emancipated minors can generally be excluded from a discussion of incompetence. Emancipated minors are those whom the law recognizes are to be treated as adults. Not all jurisdictions are familiar with concept of emancipation of minors, and even amongst those which are the circumstances leading to recognition vary. A non-exhaustive list of examples include those who are married,13 those who have entered military service,14 those who have entered into an employer–employee relationship,15 or those who support themselves and are not financially dependent on an adult,16 or who are appointed the head of an enterprise.17

2.  Impaired Mental Capacity

16.14  Most, if not all, jurisdictions seek to protect those who have an impaired mental capacity, and generally consider them incapable of entering into a contract.18 This impairment is not one that arises because of a lack of age or experience, but rather because of some aspect of their (p. 206) physical or mental condition. Examples include those who are mentally ill,19 as well as those who are under the influence of alcohol or drugs.20 Although dogmatically a distinction may be drawn between those who ordinarily have impaired mental capacity but occasional lucid moments, and those that are only temporarily impaired due to alcohol or drugs, the effect is essentially the same. The critical question is whether at the time of contracting the contracting party is mentally capable.21

II.  Consequences of Lack of Capacity

16.15  The consequences of contracting with a minor of limited competence or mentally impaired person varies depending on both jurisdiction and circumstances. In some instances the contract will be valid or voidable, however it may also be void, valid only with ratification, or unenforceable. In the first group the starting point is that the contract is binding, whereas in the second group the starting point is that the contract is not binding. In reaching these different consequences the legal system has to weigh the need to protect the potentially vulnerable party against the expectations of the co-contractant.

1.  Valid

16.16  Rather than adopting an arbitrary approach of designating an age at which a person becomes less in need of protection literally overnight, some jurisdictions have adopted a more flexible and clearly preferable approach. Although very similar variants are found in a limited number of other jurisdictions,22 this approach is most clearly stated in Scotland. As noted above the age of majority in Scotland is 16 years; however, minors under that age do have the capacity to enter into contracts of a kind typical for someone their age and circumstances and provided the terms are not unreasonable.23

16.17  In the context of sale of goods law, common law jurisdictions will typically regard contracts for the necessities of life as valid even where concluded with a minor or a person lacking competence because of mental capacity or drunkenness. A similar principle although not necessarily connected to sales law is recognized in some other jurisdictions.24 A typical example of the common law rule can be found in section 3 of the English Sale of Goods Act (1979).25 This provision specifically refers to circumstances where actual delivery has been made, (p. 207) suggesting that where delivery has not occurred the issue would be governed by the common law.26

16.18  One might reasonably ask: ‘what are necessities of life?’ In general terms these are such things as food and drink, necessary clothes, and medicine. It is however a question that has prompted considerable debate27 and an apparent difference between the common law jurisdictions which closely follow the development of the law in England on the one hand and the USA on the other.28 The traditional common law rule and the statutory restatements of it indicate that necessities are relative to the minor’s needs and condition in life. Thus in 1908 although 11 waistcoats may have been necessities in the life of an undergraduate Cambridge University student, as he already had numerous waistcoats they were not needed and the contract was not enforceable.29 Similarly, because a minor lived at home with his parents where he received food, clothing, and shelter, the operation of his business was not a necessity and a service contract he had entered was therefore not enforceable.30

16.19  As a concluding remark to situations in which contracts are considered valid it can be noted that many jurisdictions will not let minors escape their obligations where they have deliberately misled their co-contractant about their capacity.31

2.  Voidable

16.20  A voidable contract is one which is valid until the party with the right to rescind the contract actually does so rescind. It must be distinguished from the situation where there is an invalid act that may be ratified.32 It is the party who is lacking capacity who has the right to avoid, and not the full capacity co-contractant.33

16.21  Rendering contracts with persons lacking capacity voidable—that is, placing the onus on the person lacking capacity (or their guardian) to rescind the contract—is a solution adopted by some jurisdictions.34 Distinct from other common law jurisdictions35 this is also the position (p. 208) adopted in the USA. The minor (or person with impaired capacity36) loses the right to ‘disaffirm’ the contract after obtaining capacity if they ratify the contract or fail to disaffirm it within a reasonable time.37

16.22  A potential consequence of the contract being voidable is that property may pass to the minor and from the minor.38 Many of the civil codes in which a contract is considered voidable also include provisions requiring the parties to make full restitution.39 Traditionally in the common law the minor was entitled to full restitution, whereas the other party had to bear any loss of value in the goods or even their destruction.40 Modern practice in the USA however appears to be moving away from a strict application of this approach where the circumstances justify.41

3.  Void

16.23  In a limited number of circumstances contracts are void and incapable of ratification. These are typically situations where the contract was with an infant42 or an insane person,43 or is extremely prejudicial to the minor or person with impaired capacity. Such contracts cannot be corrected by ratification or the passage of time.44

16.24  There are occasionally references in legislation45 and commentary46 that suggest that contracts with minors and those suffering from mental incapacitation more generally are void. Where these are found it must be questioned whether the situation has been misdescribed, and that what is really intended is that the contract would be valid only with ratification as discussed below.

4.  Valid only with Ratification and Unenforceable

16.25  All legal systems recognize that contracts made for the benefit of minors or those suffering from some kind of impaired mental capacity are capable of ratification by a guardian47 and in most cases also the incapable person upon becoming capable. This is the case whether the contract is (p. 209) considered voidable as described above or instead valid only with ratification as explained here.

16.26  In this situation the contract is not void as such, but rather is in a suspended state until such time as the ratification is made by the now capable minor or a guardian. During this period it is unclear whether the contract will ultimately be valid or invalid. In most jurisdictions where this occurs the co-contractant remains potentially bound in the event the contract is ratified, although this is not the case in Germany or China.48 Where a co-contractant does remain bound they naturally have an interest in having the issue of validity determined promptly. To assist parties in this position many codes have provisions allowing the co-contractant to request a guardian or now capable minor to declare its intent. Significantly there is some divergence as to whether a failure to respond has the effect of making the contract valid49 or invalid.50

16.27  In common law jurisdictions (other than the USA) the contract is often described as unenforceable.51 This is in many ways very similar to the situation of suspension just described. The co-contractant remains bound to the contract but is unable to enforce the contract against the minor or person lacking capacity unless the contract is validly ratified. Although the contract is unenforceable it is still possible that there may be a transfer of property. Statutory enactments in some common law jurisdictions now give the courts the power to order restitution from a minor.52

III.  The Incapacity of Office

16.28  All jurisdictions attempt to avoid the difficulties that arise when one party has a conflict of interest in a transaction. Although typically arriving at the same practical outcome, two distinct approaches to this issue can be discerned.53 The first, usually considered in the context of agency law, is that as a matter of contract formation an agent cannot contract with itself.54 The second, assumes such a contract is possible, and so addresses itself to the conflict of interest directly. One solution adopted by the jurisdictions in this second approach is to deny certain people the capacity to enter into certain contracts because of the office or position they hold. Common examples of disqualifying offices include: judicial officers,55 property managers, public officers, bailiffs, guardians,56 and hospital and psychiatric institution employees.57 In all these instances it is considered inappropriate for the people fulfilling the office to participate as the other party to the transaction, for example if a judicial officer were to purchase goods at a judicial sale.

16.29  Transactions entered into by people holding such offices are generally voidable at the discretion of the seller (as it is usually the seller who requires protection in this scenario).58

(p. 210) C.  Capacity of Legal Persons

I.  General Remarks

16.30  Corporations are sometimes referred to as ‘creatures of statute’.59 As the reference suggests corporations gain their capacity to contract from statute, and thus the relevant national corporate law statute must be consulted to determine the primary abilities of a corporation duly incorporated within any particular jurisdiction. Typically legal persons acquire the same rights to purchase and transfer goods as natural persons, save for rights which are confined to the real person.60

II.  Ultra Vires Doctrine

16.31  The most significant issue that may arise in the context of corporations and legal capacity is the question of ultra vires. Initially developed as a protectionary measure for those trading with corporations, the allegation (or more commonly the defence) of ultra vires is an assertion that the corporation is not bound to a particular transaction, because the very act of entering into that transaction was beyond the scope of its power. The scope of power of a corporate entity is generally determined by its object and purpose as defined in its constituent documents.61 As the corporate entity gains ‘life’ from these documents, it does not exist—and thus it has no legal capacity—beyond that foundation.

16.32  Many common law jurisdictions which received the original doctrine of ultra vires from English law have sought to alter or even abolish its application.62 Some jurisdictions have specifically granted corporations with capacity equal to a natural person.63

16.33  Similarly its relevance and application in civil law jurisdictions appears to be limited. Although the rule that acts undertaken beyond the scope or purpose of the company are void is still found in many civil law codes,64 its practical effect can be questioned as there are often exceptions. One such exception found in many jurisdictions concerns the knowledge (constructive or actual) of the party contracting with the entity exceeding its power. If the other party involved in the transaction did not know or should not ought to have known that the act was ultra vires then the transaction is binding.65 In the major Asian civil law systems there is also debate about the application of the ultra vires doctrine. While in Japan Article 43 CC appears to adopt the (p. 211) doctrine, a position which is supported by some case decisions, the prevailing view in the Japanese legal literature supports rejecting the ultra vires doctrine within the realm of commercial law.66 Chinese scholars also argue that Chinese law has rejected the ultra vires doctrine.67

D.  Capacity and Conflict of Laws

I.  Conflict-of-Laws Rules

16.34  As explained above68 while there is broad agreement amongst the different jurisdictions regarding the age of maturity it is not, however, entirely uniform. Issues could arise, in particular, in circumstances involving individuals over the age of 18 but under the age of 21. These individuals may be ordinarily treated as having capacity in a seller’s jurisdiction, but not in the (under) 21-year-old buyer’s jurisdiction.

16.35  The question of which law applies to determining capacity of a natural person is not always clear. Of the many potential laws applicable, there appear to be four that are most likely. They are: (a) the law of the domicile of the person alleged to lack capacity;69 (b) the law of the nationality of the person alleged to lack capacity;70 (c) the law where the contract was made; or (d) the law governing the contract.71

16.36  This issue was expressly excluded from the scope of the Rome I Regulation;72 however it is partially dealt with in Article 11 of the Rome Convention 198073 which states:

[i]n a contract concluded between persons who are in the same country, a natural person who would have capacity under the law of that country may invoke his incapacity resulting from another law only if the other party to the contract was aware of this incapacity at the time of the conclusion of the contract or was not aware thereof as a result of negligence.

A rule to this effect is generally recognized in most jurisdictions even those that are not members of the European Union. As the Expert’s Report on the Rome Convention explains, it is a rule which is necessary for those countries which subject capacity to either the law of the nationality or the law of the domicile.74

(p. 212)

16.37  The capacity of legal entities is sometimes governed by the law of their principal place of business75 or by the law of the place where they were constituted.76 Common exceptions are where the company has an established local operation, in which case the local law will typically apply.

16.38  Given these scenarios the outcome may well be determined by which party takes legal action first, and which jurisdiction is asked to determine the matter.

II.  Electronic Contracting

16.39  Electronic contracting presents a particular conflict of laws issue in the context of capacity. Commentators have suggested that minors make up a significant part of the online consumer population.77 The ability to purchase goods over the Internet has meant that: (a) sellers may no longer physically see the buyer and therefore cannot personally assess whether or not they are a minor or lack capacity for another reason; and (b) the buyer may well be located in a different country to that of the seller.

16.40  As noted above the applicable law governing capacity is not always predictable, particularly as Article 13 Rome I Regulation (and many of those like it in other jurisdictions) will not apply to contracts concluded between parties who are in different countries.78 It therefore seems prudent that online sellers take some precaution against this potential situation. Requiring the buyer to warrant that they are of the necessary age to enter the transaction is a fairly simple protectionary measure sellers could take.79 It is not a solution that will avoid all problems in all jurisdictions,80 but it will likely address most.

Footnotes:

2  See Ch 13.

3  Schlechtriem/Schwenzer/Schwenzer/Hachem, Art 4, para 32.

5  OHADA Arts 6–12 AUDCG.

6  This may instead be dealt with as an agency issue in some jurisdictions, see paras 13.28 et seq.

7  6 years: Vnm Art 21 CC; 7 years: Afg Art 40 CC; Aut § 865 CC (but see also § 21(2) CC); Deu § 104 no 1 CC; Irn Arts 211–13 CC; Mng Art 18 CC; Twn Art 7 CC; 10 years: Chn Art 12 GPCL; 12 years: Mar Attar, p 139, Safi, pp 147, 148; 13 years: Tun Art 5 CO; Pol Art 12 CC; 14 years: Arg Art 127 CC; Arm Art 309 CC; Aze Art 344 CC; Blr Art 173 CC; Chl Art 26 CC; Col Art 34 CC; Ecu Art 21 CC; Kaz Art 159 CC; Kgz Art 190 CC; Rus Art 172 CC; Slv Art 26 CC; Tjk Art 197 CC; Ukr Art 221 CC; Ury Art 91 CC; Uzb Art 117 CC; 16 years: Bra Art 3(I) CC; Per Art 43 CC.

8  Afg Art 39 CC; Aut § 21(2) CC; Bhr Art 10 CC; Blr Art 20(1) CC; Bra Art 5 CC; Che Art 14 CC; Chl Art 26 CC; Chn Art 11 GPCL; Col La Ley 27 de 1977; Cze Art 8(2) CC; Deu § 2 CC; Ecu Art 21 CC; Fra Art 388 CC; Irq Art 106 CC; Ita Art 2 CC; Jor Art 43(2) CC; Khm Art 17 CC; Lao Art 7 CL; Lbn Art 215 CO; Mac Art 111 CC; Mex Art 646 CC; Mng Art 15 CC; Nor § 1 Guardianship Act (1927); Qat Art 49 CC; Rus Art 21(1) CC; Slv Art 26 CC; Svk Art 8(2) CC; Syr Art 46 CC; Ury Art 280(2) CC; Ven Art 18 CC; Vnm Art 18 CC; Yem Art 23 CC; Zaf s 17 Children’s Act (2005).

9  Bfa Art 554 Fam C; Jpn Art 4 CC; Kor Art 4 CC; Mar Attar, p 14; Nga ss 7(2), 109(2) of the Constitution; Tha Art 19 CCC; Tun Art 7 CO; Twn Art 12 Civil Law.

10  Are Art 85(2) CC; Arg Art 127 CC; Bfa Art 554 Fam C; Cmr Art 388 CC; Egy Art 44 CC; Jor Arts 11(1)(a), 15 Com C; Kwt Art 96 CC, Art 18 Com C; Lby Art 44 CC; Nga Labinjoh v Abake (1924) 5 NLR 33, Furmston, p 548; Sagay, p 475; Sen Art 276 Fam C; Tgo Art 265 Fam C.

11  Aus (Vic) s 3 Age of Majority Act (1977); Can (18 years: Alb, Man, Ont, PEI, Qué, Sk; 19 years: BC, NB, Nl and Lab, NT, NS, Nun, Yuk); Eng s 1(1) Family Law Reform Act (1969); Ind s 3 Majority Act (1875); Irl s 2(1) Age of Majority Act (1985), 18 years; Isr s 3 Capacity and Guardianship Law (1962); Nzl s 2(1) Minors Contract Act (1969); Png Tennant, para 60; Tza s 3(1) Age of Majority Ordinance (1970); Uga s 3(2) Contract Act; USA 18 years in most states: Williston, § 9:3; 19 years in Al: s 26-1-1 Code of Alabama; Ne: 43-2101 Revised Statute; see also Restatement (2d) Contracts, § 14; Wal s 1(1) Family Law Reform Act (1969). The common law definition of a minor may still be relevant in some Commonwealth countries (Sgp Halsbury’s Laws of Singapore/Koh, para 80.375) and those that still draw much of their law from England, eg Nru see Care/Paterson, pp 239 et seq (also describing the relevant law of other South Pacific nations).

12  Irn Art 1210 CC (boys 15 years, girls 9 years); Sco s 1 Age of Legal Capacity (Scotland) Act (1991) (16 years), Gloag/Henderson, para 44.02; Yem Art 50 CC (15 years).

13  See eg Alb Art 6 CC; Arm Art 24 CC; Bfa Art 622 Fam C; Blr Art 20 CC; Can (Qué) ss 175, 176 CC; Che Art 45a PIL; Esp Art 16 CC; Fra Art 413-1 CC; Khm Art 21(2) CC; Phl Art 397(1) CC; Rus Art 21(2) CC; Sen Art 335(1) Fam C.

14  See eg in the USA § 62(a), (b) California CC.

15  See eg Deu § 113(1) CC which states that the minor has legal capacity for all legal transactions connected to or associated with the employment contract, including becoming a member of a union, see MünchKommBGB/J Schmitt, § 133, para 24.

16  See eg Arm Art 24 CC; Blr Art 26 CC (referring to working under an employment contract or conducting an entrepreneurial activity); Rus Art 27 CC.

17  See eg Deu § 112(1) CC although this provision limits the legal capacity of the minor to contracts typically in the course of the enterprise; Geo Art 65 CC.

18  Afg Arts 40, 545 CC; Aut § 21(1) CC; Blr Arts 172, 177 CC; Che § 17 CC; Chn Art 13 GPCL; Deu §§ 104 no 2, 105(1) CC; Dza Art 79 CC; Egy Art 113 CC; Irn Art 1207 CC; Irq Arts 94, 95 CC; Jor Art 128(2) CC; Kwt Arts 85, 98 CC; Lby Art 113 CC; Mar Attar, p 144, Safi, pp 171–9; Mng Art 18.2 CC; Rus Arts 171, 177 CC; Syr Art 114 CC; Twn Art 15 CC; UK Mental Capacity Act (2005); Vnm Art 22 CC.

19  See Afg Arts 40, 545 CC; Alb Art 94 CC; Are Art 169 CC; Arm Art 311 CC; Aut § 865 CC, Koziol et al/Bollenberger, § 865, para 2; Aze Art 346 CC; Bhr Art 78 CC; Blr Art 172 CC; Che Art 16 CC; Deu § 104 no 2 CC; Egy Art 45 CC, Al Sanhuri/Al Maraghy, p 104; Esp Art 200 CC; Fra Art 425 CC; Jor Art 44(1) CC; Kaz Art 159 CC; Kgz Art 193 CC; Lby Art 45 CC; Ltu Art 1.89; Mar Attar, p 144; Mda Art 225; Qat Art 50 CC; Rus Art 171 CC; Syr Art 47 CC; Tjk Art 202 CC; Ukr Art 225 CC; Uzb Art 121 CC; Ven Art 393 CC; Yem Art 51 CC.

20  Common Law Treitel on Contract, para 12-062 citing references but also observing that habitual drunkenness does not deprive a person of contractual capacity. See for Aut OGH, 12 January 1966, 2Ob424/65; Blr Art 177 CC; Che Art 16 CC; Deu § 105(2) CC, Staudinger/Knothe, § 105, para 13; Rus Art 177 CC.

21  See eg Shari’a (Sau) Rayner, p 126; Deu § 105(2) CC; Egy Art 114 CC, Al Sanhuri/Al Maraghy, p 103; Kwt Art 98(2) CC; Lby Art 114 CC; Syr Art 115 CC.

22  Aus (NSW only) Minors (Property and Contracts) Act (1970), where a minor is presumptively bound to a contract for its benefit even if it also incurs some obligations; Isr s 6 Capacity and Guardianship Law (1962).

23  Sco s 2(1) Age of Legal Capacity (Scotland) Act (1991), Gloag/Henderson, para 44.02.

24  eg Arm Art 308 CC; Aze Art 343 CC; Blr Art 25 CC; Chn Art 12 GPCL, Art 47 PRC CL, Zhang, p 158; Fra Art 389-3 CC: minors have a limited capacity to contract wherever provided by law or customs (eg disposition of goods relating to daily life); Jpn Art 5 CC; Kgz Art 192 CC; Khm Art 18 CC; Kor Art 5 CC; Ltu Art CC; Mac Art 113 CC; Mng Art 16.2 CC (slightly different); Rus Art 26 CC; Tjk Art 201 CC; Twn Art 77 CC; Uzb Art 120 CC; Vnm Art 20 CC.

25  Section 3

  • . . .

  1. (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.

  2. (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.

See also Aus (Vic) s 7 SGA; Can (BC) s 7 SGA; Hkg s 4 SGA; Nzl s 4 SGA; Png s 4 SGA; Sgp s 3 SGA. Similar Ind s 68 Contract Act (1872).

29  Common Law (Eng) Nash v Inman [1908] 2 KB 1.

30  USA Valencia v White, Ariz Ct App, 8 June 1982, 654 P 2d 287, 289.

31  For example Common Law Treitel on Contract, paras 12–43 et seq, the contract itself could not be enforced but remedies in equity or statute may be available; Fra Art 1307 CC denies a minor who fraudulently lied about their majority the right to seek rescission of the contract for lack of capacity; USA Nicholas v People, Colo Sup Ct, 11 January 1999, 973 P 2d 1213, Daniel, 43 Gonzaga L Rev (2007), 242, but noting this is not the case in Colorado.

32  See paras 16.25 et seq.

33  Arg Art 1048 CC; Bol Supreme Court, Sala Civil, Rosalina Rodríguez Vega de Villarroel v Félix Tapia Villarroel y otros reported by Munoz, pp 202 et seq; Bra Art 177 CC; Chl Art 1684 CC; Col Art 1743 para 1 CC; Ecu Art 1727 CC; Esp Art 1302 CC; Gtm Arts 1309, 1310 CC; Mex Art 2230 CC; Per Art 222 CC; Slv Art 1554 CC; Ven Art 1.146 CC.

34  Alb Art 94 CC; Arm Arts 308–10 CC; Aze Arts 344, 345 CC; Blr Arts 173, 176, 178 CC; Chl Art 1447(3) CC; Col Art 1504(3) CC; Ecu Art 1490 CC; Fra Art 1125 CC (voidable in as much as the law seeks to protect the minor); Geo Art 63 CC; Hnd Art 1555(3) CC; Kaz Art 159 CC; Ltu Arts 1.84, 1.88 CC; Mda Art 224 CC; Per Art 221(1) CC; Pol Art 18(3); Rus Arts 171, 172, 175, 176 CC; Slv Art 1318(3) CC; Tjk Arts 197, 200, 201 CC; Ukr Art 221 CC; Ury Art 1560(3) CC; USA Williston, § 9:9 citing numerous sale of goods cases; Uzb Arts 117, 118, 120 CC.

35  In the common law jurisdictions which follow English law there are only four categories of minors’ contract which are considered voidable, none of which are relevant to the sale of goods. The four categories are (i) contracts concerning law, (ii) shares in companies, (iii) partnerships, and (iv) marriage settlements; Treitel on Contract, paras 12-017 et seq; while the sale of shares may fall under the purview of the sale of goods in some jurisdictions, shares are not considered within the definition of goods in common law jurisdictions. For a discussion of the definition of goods see Ch 7.

36  See eg USA Farnsworth, vol I, § 4.7 who notes the effective similarity to minors.

38  For the transfer of title generally, see Ch 39.

39  Alb Arts 108, 109 CC; Arm Art 307 CC; Aze Arts 344, 342 CC; Blr Art 172 CC; Fra Arts 1308, 1312 CC; Geo Art 63 CC; Kaz Art 157 CC; Ltu Arts 1.80, 1.88 CC; Mda Art 224 CC; Rus Art 171 CC; Tjk Art 196 CC; Ukr Art 221 CC; Uzb Art 117 CC.

42  Are Arts 86(2), 158 CC; Aut OGH, 20 September 1972, 7Ob169/72, Koziol et al/Bollenberger, § 865, para 3; Bhr Art 110 CC; Blr Art 173(1) CC; Che Art 18 CC; Chl Art 1447 CC; Chn Arts 12, 13 GPCL; Col Art 1504 CC; Deu §§ 104 no 1, 105(1) CC; Ecu Art 1490 CC, Valdivieso Bermeo, p 28 who comments on the Civil Code; Egy Art 45 CC; Hnd Art 1555 CC; Idn Art 1467 CC; Irq Arts 96, 97(2) CC; Jor Arts 44(1), 117 CC; Kor Arts 12, 13 CC; Kwt Art 86 CC; Lbn Art 216 CO; Lby Art 110 CC; Mng Art 18 CC; Per Art 219(2) CC, Castillo/Horna, p 42; Qat Art 110 CC; Rus Art 172(1) CC; Slv Art 1318 CC; Syr Arts 46, 111 CC; Twn Arts 13, 15 CC; Ury Arts 1560, 1279 CC; Vnm Arts 21, 22 CC.

43  Are Art 169 CC; Afg Arts 40, 545 CC; Aut OGH, 20 September 1972, 7Ob169/72, Koziol et al/Bollenberger, § 865, para 3; Bhr Art 78 CC; Blr Art 172(1) CC; Che Art 18 CC; Deu §§ 104 no 2, 105(1); § 105(2) CC; Egy Art 45 CC, Al Sanhuri/Al Maraghy, p 104; Idn Art 1467 CC; Jor Art 44(1) CC; Lby Art 45 CC; Mar Attar, p 144; Qat Art 50 CC; Rus Art 171(1) CC; Syr Art 47 CC; Yem Art 51 CC.

44  Ury Art 1561 CC.

45  Aus (Vic only) s 49 Supreme Court Act (1986); see for commentary Carter/Penden/Tolhurst, para 15-23.

46  Jpn Oda, p 123, suggesting that although there is no statutory provision stating such a contract concluded with a person suffering a serious mental disease but who has not yet been declared incompetent by the court would be void.

47  (Guardian only) Arm Arts 308–10 CC; Aut § 865, sentence 2 CC; Aze Arts 344, 345 CC; Blr Arts 172, 173, 176–8 CC; Deu § 107 CC; Geo Art 63 CC; Kaz Art 159 CC; Ltu Arts 1.84, 1.88 CC; Mda Art 224 CC; Rus Arts 171, 172, 175–7 CC; Tjk Arts 197, 200, 201 CC; Uzb Arts 117, 118, 120 CC.

48  Chn Zhang, p 163; Deu § 109 CC allows a co-contractant who was unaware of the fact that it was dealing with a minor to withdraw from the contract prior to ratification. Where the co-contractant was aware of the fact that it was dealing with a minor, it may withdraw from the contract only where the minor lied about the consent of its legal representative. In Che the situation is disputed, but the majority view does not allow for such withdrawal; see BaslerKommZGB/Bigler-Eggenberger, Art 19 ZGB, para 21.

49  Jpn Art 20(1) CC.

50  Aut § 865 CC; Che Art 410 CC; Chn Arts 47, 48 PRC CL, Zhang, p 163; Deu § 108(2) CC; Pol Art 18(3) CC.

52  See eg Sgp s 3(2) The Minor’s Contracts Act (1994).

54  See eg Deu § 181 CC. See also Ch 13.

55  See eg Fra Art 1597 CC (judicial officers, bailiffs, notaries).

56  See eg Fra Art 1596 CC (guardians, property managers, public officers).

57  See eg OHADA Arts 8, 9 AUDCG; Fra Art 1125-1 CC (hospital and psychiatric institution employees); Ind s 11 Contract Act (1872), ‘and is not disqualified from contract by a law to which he is subject’; Rom Arts 810, 1307 CC (between husband and wife); Dincă, para 163.

58  See eg Fra Art 1596 CC (voidable by the buyer or the seller), Civ 1, 29 November 1988, Bull civ I, no 341, D 1989, somm 231, obs J-L Aubert.

60  See eg Afg Art 341 CC; Are Art 93 CC; Aut Koziol et al/Koch, § 26, para 1; Bhr Art 18 CC; Deu Staudinger/Weick, Einl zu §§ 21 et seq, para 28; Egy Art 53 CC; Isr s 4 Companies Law (1999); Jor Art 51 CC; Lby Art 53 CC; Qat Art 54 CC; Sgp s 23 Companies Act (1994); Syr Art 55 CC; Yem Art 88 CC.

61  Arg Art 35 CC; Art 11(3) Comp C, Salermo, p 113; Bhr Art 26(iii) Comp C; Col Art 99 Com C; Egy Art 19(a) Comp C; Isr s 55(a) Comp C (1999); Jor Art 11(a)(5) Comp C; Kwt Art 5(iii) Comp C; Lbn Art 49(3) Com C; Mar Arts 5(iii), 8 Comp C; Qat Art 22(1) Comp C; Sau Art 22(1) Comp C; Slv Art 354 Com C; Syr Arts 8(5), 26(b) Comp C.

62  See eg Aus s 125 Corporations Act (2001); Guernsey s 11 Comp C (1994); Irl s 8 Companies Act (1963); Isr ss 4, 18(2), 32(1), 55, 56 Comp C (1999); Jersey Art 18 Comp C (1991); Mys s 20 Companies Act (1965); Nzl s 17(1) Companies Act (1993); Sgp ss 23(1), 25, 36 Companies Act (1994); Gbr ss 31, 39 Companies Act (2006); Zaf Companies Act (1973).

63  See eg Aus s 124(1) Corporations Act (2001); Can s 15(1) Business Corporations Act (1985); Nzl s 16 Companies Act (1993).

64  See generally eg Whincup, pp 121, 122; Arg Art 58 LC; Arm Art 314 CC; Aze Art 349 CC; Bra Art 47 CC; Chn Art 50 PRC CL; Ecu Valdivieso Bermeo, p 30; Egy Arts 53, 55 Comp C; Geo Art 25 CC; Hrv Art 274 CO; Isr ss 19, 32 Comp C (1999); Kgz Art 194 CC; Kwt Art 15 Comp C; Lbn Art 58 Com C; Art 887 CO; Ltu Art 1.82 CC; Mar Art 6 Comp C; Rus Art 173 CC; Syr Art 34(5) Comp C; Tjk Art 198 CC; Tkm Art 49 CC; Ukr Art 227 CC; Ury Art 79 Comp C; Uzb Art 125 CC.

65  Aze Art 350 CC; Blr Art 174; Fra Cass Com, 9 March 1999; Mda Art 226 CC; Rus Art 174 CC; Ukr Art 92 CC.

66  Jpn Oda, p 125.

67  Chn Ma/Yu, p 123.

68  See para 16.12.

69  Arg Arts 6, 7 CC; Bra Art 7 CC; Che Art 35 PIL; Col Art 19(1) CC; Mex Art 13(II) CC; Per Art 2070 CC, however a contract cannot be avoided on the grounds of lack of legal capacity if such was concluded in Peru and the parties have legal capacity under Peruvian law; Ven Art 16 PIL.

70  Are Art 11 CC; Aut §§ 12, 9, 10 PIL; Deu Art 7(1) PIL; Dza Art 10 CC; Egy Art 11 CC (but see Art 11(2) Com C which denies capacity to anyone under that age of 18 to engage in commercial activity irrespective of nationality); Esp Art 9(1) CC; Grc Arts 7, 8 CC; Irq Art 18 CC; Jor Art 12 CC; Kwt Arts 33, 34 of Law no 5 (1961) Regulating the Legal Relationships with a Foreign Element; Lby Art 11 CC; Prt Arts 25, 31(1) CC; Qat Art 11, 12 CC; Syr Arte_SNbS12 CC; Yem Art 24 CC.

71  Common Law various case authority has applied various laws, see further Collier, p 209; USA Lamar v Micou, 1 December 1884, Supreme Court, 112 US 452, 470; Scudder v Union National Bank of Chicago, October Term 1875, Supreme Court, 91 US 406; Jones v Dressel, 16 March 1978, Colorado Court of Appeals (Div I), 40 Colo App 459. The court will not apply the lex loci contractus if it believes the application of such law to be against public policy.

72  EU Art 1(2)(a) Rome I Regulation.

75  Arg Arts 6, 7 CC; Bra Art 7 CC; Che Art 35 PIL; Col Art 19(1) CC; Deu Palandt/Thorn, Anhang zu EGBGB 12 (IPR), para 2 citing numerous references; Mex Art 13(II) CC; Per Art 2070 CC, however a contract cannot be avoided on the grounds of lack of legal capacity if such was concluded in Peru and the parties have legal capacity under Peruvian law; Ven Art 16 PIL.

76  OAS Art 2 Inter-American Convention on Personality and Capacity of Juridical Persons in Private International Law; Art 2 Inter-American Convention on Conflicts of Laws Concerning Commercial Companies; Bra Art 11 CC; Esp Art 9 (11) CC (but foreign companies domiciled in Spain are treated as having Spanish nationality); Isr Einhorn, para 371; Per Art 2073 CC; Ury Art 2394; Ven Art 20 PIL.

77  See Daniel, 43 Gonzaga L Rev (2007), 243, although not providing any statistical data.

79  See para 16.19.

80  Selick, Bank Fin L Rev (2000), 30.