Capacity to Contract

• Author: Carolyn MacLean/Alex Colangelo
• Pages: 191-206

191

Introduction ........................... 192

Minors ................................ 192

Contract Rights and Obligations

Generally ....................... 192

Enforceable Contracts: Purchases of

Necessaries ..................... 193

Enforceable Contracts: Employment ...... 194

Contracts for Non-Necessaries .......... 196

Effect of Reaching the Age of Majority on

Minors’ Contracts ................ 196

Voidable Ongoing Benefit Contracts for

Non-Necessaries: Valid Unless

Repudiated ..................... 196

Voidable One-Time Benefit Contracts

for Non-Necessaries: Void Unless

Ratified ........................ 197

Void Contracts ...................... 198

Law Affecting Minors in British

Columbia ....................... 199

Capacity of Parties Under Impairment

and Persons Under Mental Illness to

Contract ........................... 200

Drunkenness ....................... 200

Mental Illness ....................... 203

Chapter Summary ...................... 205

Key Terms ............................. 205

Review Questions ...................... 205

Exercises .............................. 205

Learning Outcomes

After completing this chapter, you should be able to:

• Understand why the law requires that contract parties

have capacity.

• Explain at least three factors that could limit a party’s

capacity.

• Understand the legal status of a minor’s contract.

Capacity to Contract

12

© [2023] Emond Montgomery Publications. All Rights Reserved.

192 PART II CONTRACT LAW

Introduction

In Chapter 11, you learned about two contract elements: legalities and formalities. In

this chapter, we examine the concept of legal capacity to contract. In general, and

with very narrowly defined exceptions, it is essential that the parties to a contract have

the capacity to enter into a contract at the time the contract is made. If there are issues

with a contracting party’s capacity, the contract may be set aside or other remedies

may apply.

Not everyone is legally able to enter into a contract. Some persons, because of their

status, are presumed not to have the ability to enter into contracts or have limited

rights to contract. The purpose here is to protect the weaker party from the stronger,

more able party. This class of persons who lack or have limited capacity to contract

includes minors and persons under mental illness.

Minors

The general rule is that contracts with minors are not enforceable against the minor.

At common law, a minor is an individual who is under 21 years of age. The common

law definition of age has been replaced by statutory definitions in most provinces and

territories, where, as in Ontario, the age of majority is now 18 years for the purposes

of entering into contracts.1 Minors are presumed to be naive, inexperienced, and easily

taken advantage of, so some protection is required.

Contract Rights and Obligations Generally

While the general rule is that contracts with minors are not enforceable against min-

ors, contracts for “necessaries of life” made by a minor are enforceable, but other

contracts are not if the minor repudiates them. The reason for enforcing contracts for

necessaries of life is that some minors may have to meet some of their basic needs

themselves. If a seller could not enforce a contract against a minor in these circum-

stances, the seller would have a disincentive to contract with minors, which might

create a situation that could hinder a minor’s ability to purchase food or shelter.

A minor contracting for things that are not necessaries of life is another matter. The

law classifies the contract into one of two types when a minor makes a contract for

something that is not a necessity:

1. contracts that are void ab initio, or

2. contracts that are voidable at the option of the minor.

1 In some provinces, the age of majority is 19 years. There are also other statutes that grant rights on the basis of age.

For example, an individual in Ontario can enter into contracts as someone of full age and capacity at 18 years old

but cannot buy alcoholic beverages until the age of 19 years. See the Age of Majority and Accountability Act, RSO

1990, c A.7 (Ontario); Age of Majority Act, RSNS 1989, c 4 (Nova Scotia); Age of Majority Act, RSA 2000, c A-6

(Alberta); Age of Majority Act, RSBC 1996, c 7 (British Columbia); Age of Majority Act, RSY 2002, c2 (Yukon); Age

of Majority Act, RSNWT 1988, c A-2 (Northwest Territories); Age of Majority Act, SNL 1995, c A-4.2 (Newfoundland

and Labrador); Civil Code of Québec, CQLR c CCQ-1991, art 153; The Age Of Majority Act, CCSM cA7 (Manitoba);

The Age of Majority Act, RSS 1978, c A-6 (Saskatchewan).

capacity

the ability or power

to do, experience, or

understand something

minor

at common law, an individual

under the age of 21; minority

status has also been defined

by statute law, lowering the

age of majority to 18 or 19 in

most provinces and territories

person under mental

illness

a person with mental health

issues or mental disorders that

affect their capacity to contract

necessaries of life

necessaries for the

maintenance of life and

continuation of health

repudiate

to reject or disown as having

no force or authority

© [2023] Emond Montgomery Publications. All Rights Reserved.