Contract Law in Hong Kong

6: Contractual Capacity

6 Contractual Capacity 1. Though a minor cannot be granted specic performance, under the principle of “mutuality”, since it cannot be awarded against him: see n28 and n29. 2. Although these contracts are described as “enforceable” the minor can only be required to pay a reasonable price for necessaries rather than the contract price. Specic performance can never be awarded against a minor. 3. Per Parke B. in Peters v Fleming (1840) 6 M. & W. 42 at 46–47. OVERVIEW The general rule of contract is that any person has the capacity to make a contract. Exceptions exist in relation to mental patients, drunkards, corporations and minors. Of these, only the last two are signicant and the rules on corporations are more suitably dealt with in the context of Company Law. The law on minors, previously referred to as infants, is now similar in England and Hong Kong, having once been rather different. The Infants Relief Act, 1874, which incorporated rules not enacted in Hong Kong, has now been abolished and similar common law and statutory rules are now found in both jurisdictions. Threecategoriesofcontractsmadewithminorsarerecognised:contractsenforceable against the minor, voidable contracts and “other contracts”. Before proceeding it should be stressed that all three categories are enforceable by the minor;1 the common law and statutory rules exist to protect the minor not the adult who contracts with him. “Enforceable”2 contracts comprise contracts for necessary goods and services, and benecial contracts of employment or service. When dealing with “necessaries” it should be remembered that this includes far more than the basic necessities of life. Any item necessary to maintain a particular minor in the “station of life in which he moves”3 is within the denition. Thus, although courts might identify some items as “mere luxuries”, incapable of being necessary, the usual question will be one of fact: is this item necessary for this particular minor? Those dealing with minors will, therefore, be at a disadvantage since no general denition exists; what may be necessary for a rich undergraduate may not be necessary for a poor, unemployed minor. Further, even the rich minor will not be liable where he is already well supplied with goods of the type for which he has contracted. 120 Contract Law in Hong Kong The minor’s liability to pay for necessaries may be seen as being not strictly contractual at all, but “quasi-contractual”, since liability is not to pay the agreed contract price but to pay a “reasonable” price. Further, it appears that the minor has to pay not because he has promised to do so but because he has received a benet. Thus, the minor is not liable to pay for necessary goods which he has ordered but delivery of which he has refused to accept. There is some authority for the proposition that necessary services must be paid for, having been requested, even though the minor subsequently refuses the services. Contracts of service or employment are enforceable against a minor if they are substantially for his benet. Of course, contracts may contain a mixture of terms, some favouring the minor and others not. The test is whether the contract is benecial overall. Voidable contracts comprise a variety of agreements which have little in common except that they confer a permanent, or at least long-standing, interest. Thus, contracts for the purchase of shares, partnership contracts and contracts for a lease are all voidable. The effect of voidability is that the minor may cancel, or repudiate, these agreements at any time during his minority or within a reasonable time after attaining majority. When the minor has repudiated he has no further liabilities under the contract. However, obligations which accrued before repudiation may have to be honoured.4 All “other contracts” are unenforceable against the minor though, again, the minor may enforce them. Within this category are minors’ trading contracts and loans to minors. Both English and Hong Kong law now permit the possibility of the minor acknowledging or “ratifying” such contracts after reaching majority. Where ratication occurs the contract becomes enforceable against the minor. The minor’s immunity from liability for most types of contract does not extend to tort, where minors are generally liable. This might, potentially, provide an alternative form of action for the adult dealing with a minor. However, the courts have made clear that a tort action will not be permitted against a minor if the action would, in effect, amount...