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Consensus continued... Contractual Capacity

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Presentation on theme: "Consensus continued... Contractual Capacity"— Presentation transcript:

1 Consensus continued... Contractual Capacity

2 Factors influencing Consensus
Parties reached consensus in a situation where they would not have concluded the contract had they been aware of the real circumstances. In such cases the contract is null and void or voidable if the prejudiced party elects do so. If the contract is null and void – no legal obligation is created. Factor which influence consensus are: Error Misrepresentation Duress Undue influence

3 Error This is a misunderstanding / misconception by one or more of the parties regarding certain facts, events or circumstances. Error in motive (reason for conclusion of the contract: Party errors regarding the reason which motivated the conclusion of the contract. This does not influence the validity of the contract. If error was caused due to misrepresentation by the other party – such a contract is voidable due to misrepresntation and not error.

4 Error as to the contents / existence of the contract
Error regarding the person with whom the contract is concluded eg. Employment contract. Error nullifies the contract. Error regarding the name of the person with whom the contract is concluded eg. Pete vs Peter. Error is irrelevant and contract remains valid. Error regarding the nature of the contract eg. Sale vs Lease. Error nullifies the contract. Error regarding the performance Error regarding the contents of the contract influences consensus. Eg. Siver vs copper. This type of error nullifies the contract provided it is also iustus error.

5 The Iustus-error approach
We have to determine if the error was a reasonable and fair mistake / error before consensus will be set aside. The person claiming error must prove that error was both material and reasonable. Material = substantial enough to influence consensus. Reasonable = if it could objectively be excused in law.

6 Misrepresentation A false statement of fact made either expressly or tacitly. This can be done intentionally or negligently. Contracts = voidable if the misrepresentation has influence upon the motive or reason for the conclusion of the contract. Misrepresentation must be material and persuade the other party to conclude the contract. A person claiming misrepresentation must prove that a false statement was made. A mere expression of opinion however is not a misrepresentation. Puffing does not constitute misrepresentation.

7 Remedies If the prejudiced party decides to elects to avoid the contract no contractual remedies are available. Restitution and Delictual damages can be claimed. Damages can be claimed for intentional and negligent misrepresentations, but not innocent misrepresentations. Eg. Contract of Sale: Actio quanti minoris – price reduction is claimed for damaged due to misrepresentation. If buyer wished to continue with the contract. Actio redhibitoria – prejudiced party claims full restitution and damages.

8 Duress Duress can cause a person to do something which they would normally not have done. It could be so serious that he acts without being aware of what he is doing – vis absoluta (loses contractual capacity temporarily, thus contract null and void) In less serious situations a person is influenced to do something he would not have done if he was not under duress. vis compulsiva (contractual capacity is retained , thus contract voidable) Requirements: Other party to the contract must be responsible for the duress. Duress must have caused the conclusion of the contract. Duress must consist of a wrongful threat of damage / harm. Contract must be prejudicial to party under duress. Threat must be of an imminent or inevitable evil.

9 Undue influence Consensus was improperly obtained. Requirements:
One contracting party must have obtained influence over the other party. Influence must have weakened the prejudiced party’s resistance and rendered his will pliable and open to manipulation. Influence must have been used in an unconscionable manner. Influence must have convinced the prejudiced party to reach consensus to his own detriment. Prejudiced party reached consensus which he would not have done had there not been undue influence.

10 Contractual Capacity Legal capacity:
Capable of bearing legal rights and duties. Eg. Infans has legal capacity, but not contractual capacity. Contractual capacity: The competence to perform a juristic act. 2 components of contractual capacity: The ability to form a will The ability to act with sound judgement in accordance with such a will.

11 Natural and Juristic persons
All human beings are natural persons, but their legal capacity / status may differ. Status is determined by a persons qualities (age, sex, etc.) and circumstances (marriage, insolvency, etc.) Status determines contractual capacity. Person’s without contractual capacity Person’s with limited contractual capacity Person’s with full contractual capacity Juristic persons are artificial persons created by law eg. Company, CC, etc. A separate legal identity with its own legal personality is awarded to such a juristic person. A juristic person is established with certain aims and objectives in mind and must act within the authorised powers given (intra vires vs ultra vires) A juristic person acts through a representative or organs, which are always natural persons.

12 Persons without Contractual Capacity
These persons cannot perform any jusristic act. Persons under the age of 7: Infans has legal capacity but no contractual capacity. A parent / guardian may act on his behalf for the purpose of administration of the estate and for his maintenance and support. Mentally incapacitated persons: Every person is presumed to be sound of mind, unless the contrary is proven. Mentally deficient persons =certified and declared to be unsound of mind by the High Court. Contracts concluded by these persons are null and void unless at the time of conclusion they had all their mental faculties. These persons have legal capacity and can aquire rights / duties by juristic acts performed by his curator on his behalf.

13 Persons in a state of automatism or under the influence of medication or alcohol:
Person is unable to form intent and realise the consequences of his actions due to the influence of eg. Epilepsy, alcohol, medication, etc. No contractual capacity exists while this state persists. Juristic acts performed in such a condition is null and void. Performance delivered must be returned or if that is not possible he is liable in terms of unjustified enrichment. The person claiming contractual incapacity must prove it.

14 Persons with limited Contractual capacity
These persons can only perform juristic acts with the assistance of another person. The assistance supplements the inadequate powers of judgement of the person with limited contractual capacity. Minors: All natural persons between 7 an 18 years. Majority can be obtained by turning 18; conclusion of a valid marriage (majority status remains in case of devorce); through an order of court. A minor must be assisted by a parent / guardian when performing a juristic act, or obtain consent before / after (ratification) he acts.

15 Contracts binding upon minors
Where minor has full contractual capacity: Only rights and no duties are obtained. If any duties are obtained the assistance of the parent / guardian is required. If contract is not to the benefit of the minor – restitutio in integrum. Where minor acts with consent or assistance of parent / guardian: Supplement the minor’s lack of capacity and advise him at the time of performance of the juristic act. Juristic acts by minors can be ratified by parent / guardian. Where guardian acts on behalf of the minor: Rights and duties are obtained by the minor due to act of the parent / guardian. Act may only be to the benefit of the minor – if not restitutio in integrum.

16 Minor pretends to have attained majority:
Where additional consent above and beyond consent of the parent / guardian is required: Consent of the Master of the Supreme Court is required for eg. Sale of immovable property < R100000; >R consent of High Court required. Prohibited acts: Eg. Marriage. Emancipation: Consent to act independantly, this may revoked at any time. Majority not obtained. Minor pretends to have attained majority: Minor is bound as if he has majority status, and a claim for restitution not available.

17 Restitutio in integrum
A contract concluded on behalf of a minor which is prejudicial to the minor - Restitutio in integrum can be claimed. Contract is set aside and parties placed in the position they were in before conclusion of the contract. Minor cannot claim restitution: Minor acted fraudulently. Minor ratifies contract after majority is obtained. Action has prescribed.

18 Contracts not binding upon minors
Where parent / guardian exceeds authority: The minor will not be held liable. Where minor acts as representative of parent / guardian: Principles of Agency apply. The agent will not be held liable. Where minor acts without consent or assistance: Minor liable if ratification takes place. If minor already performed – restitution is claimed, unless ratification takes place. Performance delivered by other party – no counter performance can be claimed, minor returns performance with possibility of claim in terms of unjustified enrichment.

19 Married Persons Marriages before 1 November 1984:
In community of property: One joint estate, owned equally in undivided shares. Before 1 December 1993 – husband still retained marital power, thus wife had limited contractual capacity. Out of community of property – community of property excluded: 3 estates formed. Out of community of property – community of property and profit and loss excluded: 2 estates existed. Before 1 December 1993 – husband still retained marital power, unless excluded by an antenuptial agreement.

20 Marriages after 1 November 1984:
In community of property: Both spouses have equal capacity to manage the joint estate. Consent required in some instances to protect spouse. Out of community of property: 2 seperate estates with accrual system.

21 Other persons with limited contractual capacity
Prodigals: Habit or inclination to dissipate away his finances. Placed under curatorship by court and limitation on contractual capacity can only be lifted by an order of court. Persons under curatorship: Unable to manage own affairs due to disability, illness, etc. Curator assists in handling of the affairs, contractual capacity not affected in any way. Insolvency: Contractual capacity limited regarding acts such as selling assets without consent of trustee. Contractual capacity regarding eg. Marriage is not affected.

22 Persons with full contractual capacity
Has full contractual capacity to perform juristic acts.

23 END

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