LWZ118 Lecture Notes - Lecture 3: Bankruptcy Act, Corporations Act 2001, Consideration
Lecture 3.2
Contracts
MINORS - Rule (applicable everywhere except NSW): a minor lacks contractual capacity in most
circumstances and, if a contract is made with a minor, then it is voidable at the minor’s option unless it is
(1) a contract for ‘necessaries’ or (2) a beneficial contract of service.
‘Necessaries’ includes things essential to sustaining the minor’s life such as food, clothing and
shelter (Bojczuk v Gregorcewicz [1961] SASR 128)
‘Necessaries’ is defined in sale of goods legislation to mean ‘goods suitable to the condition in life
of the minor...and his actual requirements at the time of the sale and delivery’ (see e.g. Sale of
Goods Act 1972 (NT), s 7)
Instruction in art, trade, intellect, morals and religion would ordinarily constitute necessaries
(Chapple v Cooper (1844) 153 ER 105).
Contracts involving the minor receiving tuition or instruction have been held to be binding on the
minor, as such benefits have been seen to be necessaries (Roberts v Gray [1913] 1 KB 520 – billiard
players’ case)
Contracts for things collateral to necessaries may be contracts for necessaries (McLaughlin v Darcy
(1918) 18 SR (NSW) 585 – boxer / passport case)
A contract for necessaries must not contain ‘onerous’ terms (Sultman v Bond [1956] St R Qd 180)
Employment Agreements with Minors
Minors can be bound where the contract is to the minor’s advantage and as long as the contract
does not contain unusual or prejudicial clauses outweighing the overall benefit: De Francesco v
Barnum (1890) 45 Ch D 430.
Proform Sports Management v Proactive Sports Management [2007] 1 All ER 542
Minors can be bound to even a disadvantageous contract where they affirm the contract upon
reaching their majority. Hamilton v Lethbridge (1912) 14 CLR 236:
Minors may become involved in contracts to buy or sell property and shares. With respect to land
agreements, it is arguable that at common law a minor should ratify such contracts upon reaching
their majority: Orakpo v Manson Investments Ltd [1978] AC 95 at 106-7.
Persons Suffering a Mental Disability A contract with a person who has been legally declared insane is
void. Where a person has not been declared insane (more common) contract is voidable:
Courts will not enforce a contract against a party who ‘lacks such soundness of mind as to
be capable of understanding the general nature of what [he/she] is doing’ where the other party
knows of the lack of mental capacity: Gibbons v Wright (1954) 91 CLR 423
Must prove not merely incapacity, but also the other party’s knowledge of that fact:
Imperial Loan Co v Stone [1892] 1 QB 599.
Knowledge of incapacity need not be actual knowledge: Gibbons v Wright (1954) 91 CLR 423
It does not matter that the contract is unfair or unreasonable: Hart v O’Connor [1985] 2 All
ER 880
As with all voidable contracts, will continue to be effectual until election is made to avoid it:
Gibbons v Wright (1954) 91 CLR 423
Drunkenness that deprives a party of his or her reason and not merely his or her business sense will
constitute incapacity: Kurt v McGavin [2007] 3 NZLR 614
However, the drunken condition must be known to the other party at the time the contract was
made: Irvani v Irvani [2000] 1 Lloyd’s Rep 412
BANKRUPTS –
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Document Summary
Necessaries" includes things essential to sustaining the minor"s life such as food, clothing and shelter (bojczuk v gregorcewicz [1961] sasr 128) Necessaries" is defined in sale of goods legislation to mean goods suitable to the condition in life of the minorand his actual requirements at the time of the sale and delivery" (see e. g. sale of. Instruction in art, trade, intellect, morals and religion would ordinarily constitute necessaries (chapple v cooper (1844) 153 er 105). Contracts involving the minor receiving tuition or instruction have been held to be binding on the minor, as such benefits have been seen to be necessaries (roberts v gray [1913] 1 kb 520 billiard players" case) Contracts for things collateral to necessaries may be contracts for necessaries (mclaughlin v darcy (1918) 18 sr (nsw) 585 boxer / passport case) A contract for necessaries must not contain onerous" terms (sultman v bond [1956] st r qd 180)
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