South African law dictates that in order for an agreement to be recognized as a valid and binding contract, it must meet certain requirements. These requirements are as follows:
- There must be consensus between the parties
- The parties must have intended for the agreement to result in terms which can be enforced
- The necessary formalities must be observed
- The agreement must be lawful
- The contractual obligations must be possible to perform
- The parties must have the capacity to act
Whilst all the requirements are essential to the validity of any contract, the purpose of this article is to expand on the capacity of an individual to enter into a valid contract.
The importance of this is due to the consequence of contracting with someone who does not have capacity to act, which is that the entire contract may be invalid. An individual’s ability to act in appreciation of the consequences of their actions is of utmost importance. South African law, therefore, places different limitations on a person’s ability to enter into a contract.
The first limitation relates to age. A person under 7 years of age has no capacity to act, this is because they would not be able to appreciate the possible consequences of their actions. Such person would need to have a parent or guardian acting on their behalf.
When someone is between the ages of 7 and 18 years, they are regarded as a minor. The limitation placed on this age group is that, although persons in this age category would have capacity to enter into a contract they would have to be duly assisted by a parent or guardian in this instance.
The age of majority in terms of the Children’s Act 38 of 2005 is 18 years. Thus, a person who is over the age of 18 years is able to enter into contractual agreements on their own behalf.
There are certain instances whereby a major person would not be able to contract on their own behalf. One such instance is when a person is declared insolvent, in such an instance the appointed Trustee would make all the decisions pertaining to that person’s estate.
Another such instance would be where a person is declared a prodigal. In this instance such person is declared to be incapable of managing their own affairs and any agreement entered into by such a person would have to be ratified by the Curator of their estate.
A person who is mentally ill also does not have the capacity to enter into an agreement.
Lastly, in an instance where a person is married in community of property and enters into a contract, the non-contracting spouse would have to ratify the said agreement as the obligation arising out of such agreement attaches to that spouse by virtue of the matrimonial regime between the spouses. Therefore, one would need to obtain the signatures of both the spouses when contracting with persons who are married in community of property.
It is clear from the abovementioned limitations that when entering into any agreement, one needs to be fully cognizant of the status of the other party in order to ensure that the agreement is valid and binding in order that their interests may always be protected.