Chapter 3. Law of Obligations: Attacking the Contract

• Pages: 149-236

CHAPTER3

LAW OF OBLIGATIONS: ATTACKING THE

CONTRACT

CAPACITY

Legal ability

For a contract to be binding, it must be made by parties with the requisite capacity, that is, the

legal ability to make the contract. There are several factors that may adversely aect a person’s

ability to contract. Amentally ill person or a drunk may argue that they are not bound by a

contract made during a period of illness or drunkenness. This argument would be based on the

reasoning that, at the time of making the contract, they lacked the capacity to understand the

implications of the contract and, therefore, should not be bound by the contract. In the case of

minors, there may be no issue of the minor’s intelligence but the courts have expressed a desire

to protect those that have not yet attained the age of majority.

Reproduced with the permission of CartoonStock

150 Commonwealth Caribbean BusinessLaw

Minors

Where a minor enters into a contract with another person for the purchase or supply of necessar-

ies, the contract will bind the minor. The courts have considered it in the minor’s interest (as well

as that of the other party) that he should be able to enter into binding contracts for necessaries.

What constitutes necessaries will depend largely on the individual circumstances and require-

ments of the minor. Generally, necessaries include food, drink, clothing, medical aid, board and

lodging. There are, however, some interesting extensions to the concept of necessaries.

First Charter Financial Corp. Ltd. v Musclow 49 DLR (3d) 138 1974 (BCSC) (CA)

Facts: On 3 October1967 McLennan Motors Ltd sold a motor vehicle to the defendant

Musclow (who was not represented at the trial and whose whereabouts, apparently, were

unknown) under a conditional sales contract for a total price of CAN$4,274.06. To secure

payment of this amount, Musclow executed a promissory note payable in monthly instal-

ments of CAN$115. McLennan Motors Ltd then assigned the agreement in the promis-

sory note to the plainti. Following a payment which he made on 16 May1968, Musclow’s

indebtedness to the plainti was CAN$3,474.06.

Around this time, William H Butler, the manager of the plainti company, became

aware of the fact that Musclow had transferred, or was contemplating transferring his

interest in the motor vehicle to the defendant Alan MacDonald, who was then 20years of

age. Apparently MrButler informed Musclow that the plainti would not consent to the

transfer unless it approved the purchaser. Alan MacDonald then submitted a loan applica-

tion to the plainti, indicating that his net monthly income was CAN$440. On the evening

of 29 May1968 a meeting took place in the oces of the plainti in New Westminster.

MrButler said, so far as he recalled, he simply told MrsMacDonald that she would have

to guarantee her son’s financial commitment because her son could not be held financially

liable because he had not yet attained his majority (the age of majority then being 21years

of age in British Colombia).

On 19 October1968 Alan MacDonald telephoned the plainti company and advised

that the car had been stolen in September, that it had been subsequently found, but that

the car had been stripped of all parts. By letter dated 23 October1968 the plainti wrote

to the defendant Dorothy MacDonald stating her son’s position and demanding payment

of the balance owing, namely CAN$2,048.41 plus incidental costs.

Held: Craig,J

Whether goods are ‘necessaries’ is a question of mixed law and fact. The first consideration

is whether a good is capable of being a necessary. If it is so held to be, the next question is

whether in the particular circumstance, which is a question of fact, the goods are necessaries.

Obviously, the determination of what is ‘necessary’ must change with the times. What was

not a necessary 10years ago may very well be a necessary today. It seems to me in present-day

circumstances, many goods, which at one time clearly would be unnecessary, now must clearly

be a ‘necessary’. The ownership of a motor vehicle is a clear illustration of this proposition.

At one time the ownership of a motor vehicle was a luxury even for a small group of people.

Today in this country, ownership of a motor vehicle is a commonplace thing and many young

people from 26years and up not only drive motor vehicles regularly, but own a motor vehicle.

In this case, the defendant Alan MacDonald did not give evidence, but his mother testi-

fied that she had said on examination for discovery that her son was using the motor vehicle

to commute from his home to his employer’s place of business and that this answer was true.

Ido not think this evidence is sucient to bring the motor vehicle within the category of a

151Chapter3: Law of Obligations: Attacking the Contract

‘necessary’ ... Ido not agree with the decision of Oliver J in Coutts& Co. v Browne-Lecky et al.

Ithink it is wrong. In principle, to allow a person who has guaranteed an infant’s financial

obligation to contend successfully that he is not liable because the infant’s contract which he

guaranteed is void when he has made that guarantee knowing that the infant could not be

liable for the debt and knowing, too, that the other party would not have entered into the

contract unless the adult had guaranteed the debt. Even if there is a distinction between the

legal eect of a guarantee and an indemnity relating to a void contract, as Oliver, J suggests

in the Coutts& Co. case, Iam satisfied that on the facts of this case, MrsMacDonald was giv-

ing an indemnity ... Accordingly, MrsMacDonald’s defence on this aspect of the case fails.

Education will also be deemed a necessary where it is likely to lead to the future profit of

the infant.

Norman Aviation Flight Training Academy Inc. Claimant/Respondent v Leroy Smith, Dulani Smith

Defendants/Applicants (2014) Claim No. ANUHCV 2013/0523 (AG)

Facts: The respondent operates a flight training institution for profit. By way of an agree-

ment dated September5, 2009 (hereinafter the agreement), the second applicant enrolled

to obtain ‘flight and academic/ground school training’. The agreement states the cost of

the training at USD$68,500.00. The first applicant signed the said agreement as guar-

antor. The applicants also signed two promissory notes (hereinafter the notes); the first

note predates the agreement being signed on August31, 2009. The second note is dated

September5, 2009, the date of the agreement. While the obligations are the same in both

notes, they list dierent dates for payment of the sums due for the tutelage oered to the

second applicant. As is the case with the agreement, the first applicant signs as guarantor

on the notes[.]

On August8, 2013 the respondent filed a claim form and statement alleging breaches

of both the agreement and the notes by the applicants. The respondent claims that the

applicants only paid the sum of (E.C) $10,000.00 and a balance of (E.C) $174,950.00

remains outstanding[.]

The applicants filed a defence on October16, 2013 in which they denied that the first

applicant contracted with the respondent to provide flight training to the second applicant.

The first applicant contended that he only signed the notes and he did so in the capacity

of a guarantor. The applicants also plead that the notes were conditional on the respond-

ent providing flight training to the second applicant to the value of $174,950. This was

not done and as such the respondent was only entitled to the sum of $9500.00 which had

already been paid. Additionally, there was no presentment or demand made to either of

the applicants and as such the notes cannot be enforced against the applicants. The second

applicant also makes the point that at the time of contracting, he was a minor and the

agreement, not being one for necessaries, could not be enforced against him. In any event,

having attained the age of majority, he specifically repudiated the agreement in the defence.

Held: Glasgow, M (Ag)

The agreement

The applicants strenuously maintain in both their pleadings and their submissions that the

first applicant was not a party to the agreement. The evidence contradicts that assertion.

The agreement is attached to the statement of claim as ‘exhibit GN 1’. This document is

signed by both applicants; the first applicant signed as guarantor[.]