Capacity to Contract and Express/Implied Terms, Exams of Remedies

Download Capacity to Contract and Express/Implied Terms and more Exams Remedies in PDF only on Docsity! CAPACITY TO CONTRACT …ability to make an agreement that can be enforced by the other party Mental Disorder Contract voidable if: As a result of mental incapacity they are unable to understand the nature of the contract AND the other party knew this (or ought to have).  Contract need not be unfair (unfairness may show lack of capacity)  S 7 Sale of Goods Act 1923 (NSW) - A person lacking mental capacity to contract must still pay for necessities they purchase o Gibbons v Wright (1954) 91 CLR 423 – Gibbons and two sisters-in-law become owners of land as joint tenants [if one died others would obtain interest in the land] – sisters executed a document converting the joint tenancy to a tenancy in common [on death estate would inherit the proportionate share of the person who died]. After death of sisters Gibbons claimed the documents for tenancy in common were ineffective because the sisters lacked mental capacity. Claim failed – mental capacity refers to only a capacity to understand the nature of that transaction when it is explained. o Hart v O’Connor [1985] 1 AC 1000 – Vendor and trustee of state sold trust property (farm) to Hart – Vendor was 83 and of unsound mind. Hart did not know this and negotiated fairly though vendor’s solicitors. Found sale was not unconscionable. Contract could not be set aside. Intoxicated Contract voidable if: Contract party is so intoxicated (or affected by drugs) that cannot understand what they are doing AND this was known to the other party AND the other party took advantage of this to conclude an unfair agreement. o Blomley v Ryan (1956) 99 CLR 362 – Blomley entered into contract to purchase farm from Ryan (significantly below market price) – Ryan was 78 y/o suffering effects of prolonged alcoholism + in bout of heavy drinking + incapable of forming rational judgement about transaction. Contract set aside – specific performance out the question. Minors  Anyone under 18  Minors lack capacity and cannot judge what is in their best interests o Nash v Inman [1908] 2 KB 1 – Nash entered into contract to supply Inman with 11 fancy waistcoats – Inman was a minor and already well supplied with clothes – Inman sought to avoid contract on ground of lack of capacity. Buckley LJ held minor has capacity to contract for necessities which must be reasonably necessary to support station in life and must not already have sufficient supply.  Minors (Property and Contracts) Act 1970 (NSW) – contract may be made by minor if it was for minor’s benefit when entered into (s19) and minor knew they were making legally binding agreement (s18). Minor can repudiate contract (s31). Bankrupts  Limited capacity to contract S 269 of Bankruptcy Act 1966 (Cth) makes it an offence for a bankrupt to enter into certain types of contract without disclosing their bankruptcy (non-compliance makes the contract voidable by the other party) Companies  Corporations Act 2001 (Cth) – company has same legal capacity as individual (s124) Making agreement through common seal or through an agent having authority to act on company’s behalf. The Crown  Crown cannot contract in a manner that disables itself from performing a statutory duty or from exercising a discretionary power Express and implied terms Express terms: that the parties articulate either orally, in writing or referred to in a statement, ticket or sign containing terms 1) Term that creates contractual obligations between the parties- breach if a term means breach of contract (contractual damages/equitable remedies) 2) Collateral contract to the main contract made between the parties – breach of collateral contract does not necessarily mean a beach of the main contract 1) Misrepresentation that may amount to mislead or deceptive conduct under the Competition and Consumer Act 2010 (Cth) or misrepresentation at common law – Remedies under CCA s 18 2) A sales puff – reasonable person would recognise this as merely exaggerated sales talk o Ellul and Ellul v Oakes (1972) 3 SASR 337 – Purchasor of land saw a form issued by seller via agents giving details of property. A mark indicating “yes” appeared opposite the word “sewer”. Issue: Did the statement in the form, form part of the contract for sale? Common law remedies for breach of contract are usually superior to remedies for misrepresentation. Important to distinguish whether a pre-contractual statement is a term or a misrepresentation. Held: FFC found that a reasonable person would conclude from the form that the seller was warranting that the property was sewered. Main test: contractual intention – objective reasonable person test