ELEMENTS OF CONTRACT

CAPACITY

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LEGAL CAPACITY

– Introduction• Sec. 10(1) - a contract is void if one or both

parties lack the legal capacity to contract.• Sec. 11 - Every person is competent to

contract if he is:– Age of majority– Sound mind– Not disqualified from contracting by any law

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AGE OF MAJORITY• Person of the age of majority • (1) Meaning of age of majority - Age

of Majority Act 1971• Sec.2 - the age of majority is 18 years• (2) General rule: contracts made by

minors are void • Mohori Bibee v Dharmodas Ghose

(1903) ILR 30 Cal 539– Tan Hee Juan v Teh Boon Kiat [1934] MLJ 96

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EXCEPTIONS TO GENERAL RULE- CONTRACT BY MINOR

• a. Contracts of agency• Contract Act 1950, Sec. 137 – any

person (including a minor) may become an agent

• b. Contracts for necessities• Contract Act 1950, Sec. 69 – a minor is

liable on contract for ‘necessaries’.• Contracts for ‘necessaries’ mean

contract for goods and services reasonably necessary to the particular minor and to the minor’s actual requirements 4

CONTRACT OF NECESSITY• Examples – food, clothing, education,

legal advice, medical services & accommodation– Under Sec 69 - minor is obliged to pay if he

has property. • Illustration (a)• A supplies B, a mentally disordered

person, with necessaries suitable to his condition in life.

• A is entitled to be reimbursed from B's property.

• In Government of Malaysia v Gurcharan Singh, a minor was liable to pay a reasonable sum for necessaries

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• Contracts for scholarships• Contracts (Amendment) Act 1976, S.

4(a) - the scholarship agreement is valid even though the scholar entering into such agreement is a minor.

• d. Contract of service or apprenticeship

• The Employment Act 1955 & The Children And Young Persons (Employment) Act 1966 enable a minor to enter into a contract of service or apprenticeship

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• Contract of insurance • Insurance Act 1996, Sec 153 -

Capacity of minor to insure.• - A minor (10 – 17 years) may

enter into a valid contract of life insurance

• - 10 – below 16 years - need written consent of his parents or guardian

• - 16 – below 18 years – can contract on his own capacity

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Sound Mind

• Person of sound mind • (1) Meaning of sound mind –

Sec. 12(1)• A person is said to be of sound

mind for the purpose of making a contract if at the time of making a contract, he is capable of understanding it and forming a rational judgment as to its effect upon his interest. 8

Cont.

• Sec. 12(2) - an unsound mind person may make a contract when he is of sound mind

• (3) Sec. 12(3) - A sound mind person may not make a contract when he is of unsound mind

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