COMMERCIAL LAW 1 A

CONTRACTUAL CAPACITY/ CAPACITY TO ACT

WEEK 5
 CONTRACTUAL CAPACITY (CAPACITY TO ACT) VS LEGAL CAPACITY

• Contractual capacity is the capacity to perform juristic acts vs legal capacity which is the
competence to have rights and duties and incur civil or criminal liability.
• Every legal subject, natural or juristic person, has legal capacity.
• Not every person who has legal capacity has capacity to act.
• Only natural persons have contractual capacity, however, not all natural persons (can be
limited).
• Juristic persons are only capable of performing juristic acts through human representation.
• In certain circumstances a person’s capacity can be limited this is determined by the
law’s view of that person’s ability to form and declare a will.
• One may also lose their capacity to act.
• Contractual capacity may also be limited by various factors.

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 FACTORS INFLUENCING CONTRACTUAL CAPACITY

1. AGE
2. MARRIAGE
3. MENTAL DEFICIENCY
4. INFLUENCE OF ALCOHOL OR DRUGS
5. PRODIGALS
6. INSOLVENCY
CONTRACTUAL CAPACITY
=
THE ABILITY TO UNDERSTAND THE NATURE OF THE CONTRACT AND
APPRECIATE THE LEGAL CONSEQUENCES OF CONCLUDING A CONTRACT!

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AGE AS A LIMITATION TO CONTRACTUAL CAPACITY
• 0 – 7 Years old
• No capacity to act, cannot conclude any contract whatsoever.
• Insufficient level of development to enable him or her to form sound judgment of contractual
obligations (CONTRACT IS VOID)

• 8– 17 years old
• Has limited capacity to act, may perform juristic acts with assistance of parent or guardian
(EFFECT ON CONTRACT DEPENDS ON CERTAIN SCENARIOS – TO BE DISCUSSED)
• Guardian’s assistance may take the form of assenting and being present at the conclusion of
the contract, or of its prior authorisation or subsequent ratification.
• Effect of the assistance is that the contract becomes enforceable by and against the minor
(guardian incurs NO personal liability or rights in that contract)

• 18 years and older (VALID CONTRACT) full contractual capacity with exceptions

AGE OF MAJORITY IN SA IS 18 YEARS AND NOT 21 YEARS 4

MINORS WITH LIMITED CAPACITY TO ACT
• IF A CONTRACT CONCLUDED ON BEHALF OF A MINOR IS TO HIS/HER DETRIMENT, THE MINOR
MAY APPLY WITHIN 1 YEAR AFTER REACHING MAJORITY TO THE HIGH COURT TO CANCEL THE
CONTRACT AND CLAIM RESTITUTION OF EVERYTHING THAT HAS BEEN PERFORMED.

• A MINOR IS ALLOWED TO CONCLUDE CONTRACTS WITHOUT ANY ASSISTANCE IF THE

CONTRACT IS EXCLUSIVELY TO HIS/HER BENEFIT (ONLY RIGHTS ARE ACQUIRED AND NO
OBLIGATIONS IMPOSED ON THE MINOR)

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AGE CONTINUED …
• A person will have full capacity to act at the age of 18 (age of majority), unless a
persons independent ability is flawed in some way such as a mental deficiency.
• There are several statutory exceptions to the rule that a minor is only contractually
liable if he/she concludes the contract with the required assistance: (this means in
these instances, a minor may conclude these types of contracts w/o the
assistance of a parent/guardian)
• A minor (+ 7 years) may withdraw monies deposited in his account (Post Office Act);
• A minor (+16 years) may make a valid will;
• A minor (+16 years) may make deposits with and withdrawals from a bank;
• Female minor may consent to the termination of pregnancy at any age;
• Children over 12 may consent to certain medical procedures (for operations,
child should be assisted by the guardian)
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 AGE CONTINUED…
• Special situations:
1. Contracts for which the guardian’s assistance is insufficient
• Selling of immovable property
• Master of High Court’s permission as well as the guardian’s consent is required where property is less than
R100 000. If the value is more – guardian + Judge of the High Court must give consent
2. Tacit Emancipation
• Guardian allows the minor Economically independent existence (granted some contractual freedom).
Indicated by living separately or owning a business.
• Does not terminate minority. Only has full contractual capacity in relation to the business or occupation.
3. Contracts which the minor or child concludes WITHOUT the necessary assistance in spite of a limited capacity to
act. With ratification = minor is bound. Without assistance = minor not bound. (Refer to next slide).
4. Fraudulent misrepresentation of majority
• If a minor poses as a major in a fraudulent manner and induces a 3rd party to contract with him/her, the
minor should be held liable on the contract as if s/he was in fact a major & had capacity to act – an
exception to the general rule that minors cannot be held contractually liable

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SPECIAL SITUATIONS CONTINUED
• A contract is binding (valid) on a minor where a guardian ratifies it on his/her behalf and the
contract will not be void. For example, a 16 year old enters into a 2 year gym contract for R299pm
without the consent of a guardian, but the guardian later ratifies the contract – contract is valid
and binding against the minor (minor responsible to pay the premium).
• If a minor acts without consent and a guardian has not ratified the contract/act = contract is
partially effective (called a ‘limping” contract). Minor does not incur liabilities towards the other
contracting party, however the other party does incur liabilities towards the minor. If the other
party has NOT performed, the minor can institute proceedings with the assistance of the
guardian against the other party (but then this means that the guardian has ratified the contract
and minor will also need to perform). If the other party has already performed and the minor has
not, the other party has no other option but to institute a claim for unjustified enrichment.
• Where neither party (minor or major) performs then the contract is technically void.
• If minor lies about his/her age = fraudulent misrepresentation of majority.

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MARRIAGE AS A LIMITATION TO CONTRACTUAL CAPACITY
• In Community of property
• Spouses are automatically married in community of property unless they
agree to the contrary.
• Patrimonial consequences:
• One common joint estate (each party has a separate estate before
the marriage and it becomes joined once married)
• The joint estate acquires the profits and bears the losses
• The general rule that each spouse has full capacity to bind the joint
estate is qualified with regard to certain assets and certain transactions
where the other spouse’s consent is required.
• Debts can be recovered from both or either spouse but are sued jointly.
Exception – debt incurred for necessities of the household may be sued
jointly or separately.(in terms of separation and fault).
• Each spouse owns a one half of the joint estate and is divided once the
marriage is dissolved. 9
IN COMMUNITY OF PROPERTY CONTINUED …

• GENERAL RULE – EACH SPOUSE CAN BIND THE JOINT ESTATE AND HAS FULL CAPACITY TO ACT.

• WRITTEN CONSENT - IMMOVABLE PROPERTY/INVESTMENTS (IN THE PRESENCE OF 2

WITNESSES)
- WITHDRAWAL OF MONEY FROM ACCOUNT OF OTHER SPOUSE
- INSTITUTE LEGAL PROCEEDINGS AGAINST THE OTHER SPOUSE OR
DEFENDS LEGAL PROCEEDINGS AGAINST THEM.

• VERBAL CONSENT – OTHER ACTS (DONATIONS THAT PREJUDICE THE OTHER PARTY OR MOVEABLE
PROPERTY OF THE COMMON HOUSEHOLD)
• RATIFICATION - APPROVAL (EXCEPT IMMOVABLE PROP OR ACTS AS A SURETY).
• WITHHOLDING CONSENT- APPLY TO HIGH COURT IF SPOUSE WITHHOLDS CONSENT UNREASONABLY
• ACTING WITHOUT CONSENT – IF THE THIRD PARTY DID NOT KNOW CONSENT WAS NEEDED,
CONTRACT IS DEEMED TO HAVE CONSENT.
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Out of Community of Property
Out of Community of property
• Requirements for an ANC:
1. Antenuptial contract must be concluded prior to the marriage
2. Notarially executed and
3. registered in a Deeds office within a specified time (3 months).

• Each spouse retains his/her separate estate and each has full
capacity to act only with his/her own estate
• Spouses can be held jointly and severally liable for necessities of the
common household
• ACCRUAL – NET value of a spouse’s estate AT the dissolution of
the marriage VS NET commencement value
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MENTAL DEFICIENCY AS A LIMITATION TO CONTRACTUAL CAPACITY
• Unable to understand or appreciate the nature or consequences of his or her conduct –
Can he/she manage his/her own affairs?
• Cannot form the necessary will to conclude a contract
• Presumption is that every person is normal - Court declares someone mentally deficient in
terms of the Mental Health Act
• The contract is void, no rights or duties are created by it
• A curator must be appointed when a person has been certified by a court as mentally deficient
• Factual test: whether the person was normal or mentally deficient at the time of conclusion of
the contract
• A mentally deficient person can be held liable if the contract was concluded during a moment of
normality (lucid interval)
• The person who alleges contractual incapacity must prove it

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INFLUENCE OF ALCOHOL OR DRUGS ON CONTRACTUAL CAPACITY
• A person who is in such a state of intoxication caused by alcohol or
drugs that he or she does not appreciate the nature and
consequences of his/her actions, or who is unable to control the
actions, is incapable of forming a will.
• Cannot legally perform juristic act.
• Void and unenforceable.
• Question of fact whether at the moment of concluding an
agreement, a person has the capacity to act.
• A person alleging incapacity must prove it.

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PRODIGALS AS A LIMITATION TO CONTRACTUAL CAPACITY
• A person’s propensity to squander his or her own money in an irresponsible or extravagant
manner and incapable of managing his/her own affairs
• The High Court may declare such a person a prodigal.
• Only when the court declares a person a prodigal then will that person be forbidden to act without
the consent of a curator appointed to him or her.
• Prodigal has limited capacity to act.
• Only agreements that benefit the prodigal without any obligations may be concluded without the
consent of the curator
• Unassisted contracts by the prodigal are voidable and can be ratified by the curator
• Prodigals limitation to contract can be set aside by the court.

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 INSOLVENCY AS A LIMITATION TO CONTRACTUAL CAPACITY

• If a person’s estate is sequestrated then a person’s capacity to

contract will be influenced by certain provisions of the Insolvency
Act. (Mere insolvency does not have an affect on capacity –
estate must be sequestrated)
• After sequestration the insolvent loses the capacity to act with
regard to the assets of the insolvent estate. Any agreement
attempting to dispose of such assets would be invalid.
• Permission of the trustee is required, therefore the insolvent has
limited capacity to contract.
• The contract is voidable at the option of the trustee.
• Insolvent has the capacity to enter into contracts that DO NOT
affect the sequestrated estate
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