CONTRACTUAL CAPACITY

WHO HAS FULL CC?

WHAT LIMITS CC?

Age (minors)MarriageInsolvency; Mental Illness; Intoxication.

3. MARRIED PERSONS

ICOPb) OCOP with accrualc) OCOP without accrual

MinorsWho are minors?

CC minors?0-7 = NO CC7-18 = Limited

Effect contract with assistance?= Bound unless inherently prejudicial

Effect contract without assistance?CLCPA

Limping Voidable at option =minor (s 39 CPA)Major bound BUTMinors parents have election:

RatifyRepudiate

Married personsTypes of marital property regimes (x2):

1) In community of property (all marriages without ANC)

2) Out of community of property (with ANC)i) excluding accrualii) including accrual

Accrual = gains made during marriage.

Default = ICOP: applicable ALL marriages (including customary marriages and civil unions not applicable religious marriages)

Two issues:

Property division on termination marriageContractual capacity of spouses during marriage

ICOPPROPERTY

Joint ownership assets + Joint liability debts!

On termination (death or divorce): 50/50 split, excluding damages awarded one spouses for non-financial loss; inheritance/donations excluded from joint estate by testator/donor.

Insolvency: both spouses assets fall into insolvent estate!!!

B) CONTRACTUAL CAPACITY

Both spouses have full CC iro joint estate.BUT: Permission needed for some contractsTypes of permission: verbal, written, written + 2 witnesses. NB = s15 Matrimonial Property Act!

ICOP

VERBALSell or pledge furniture or other effects common householdReceive any money, income, pension due to other spouse by virtue profession, trade or businessReceive proceeds insurance policy or annuity ifo other spouse

WRITTENSell or pledge jewellery, coins, stamps, paintings or other assets held mainly as investmentsSell, cede or pledge shares, stocks, debentures, insurance policies *

WRITTEN + 2 WITNESSESSell/mortgage/grant servitude/other real right over immovable propertyBuy immovable property in instalments *Buys goods on credit under National Credit Act *Stand surety for third party *

EXCEPTIONSa) No permission needed if * contract entered into by one spouse in ordinary course trade, profession or occupation

EFFECT LACK OF CONSENT?Contract VOIDException: S 15(9) MPA

ICOP

NB to remember

IF CONTRACT NOT LISTED IN S 15 MPA, NO PERMISSION NEEDED!!!

EXAMPLES: is permission necessary for the following?

Sell car?Resign from job?Enter into contract of employment?Sell jewellery given as a present by mother?Buy R10 000 couch on instalments from House n Home?Buy R20 000 flat-screen TV for cash?Buy R100 000 car for cash?Enter into a 2-year cellphone contract?Buy air-tickets to fly to Thailand using credit card?

0COP

PROPERTY

NO joint estate. Assets and debts = individual!

On termination (death or divorce):

OCOP without accrualNO division

OCOP with accrualDivision of accrual ONLY!Accrual excludes inheritance, legacies, donations, damages for non-financial loss.

B) CONTRACTUAL CAPACITY

Full CC iro OWN assets.No CC over other spouses assets.

0COP

Calculating the accrual:

Calculate growth of each estate: spouse with less growth entitled to half the difference in growth respective estates

HW

M1 000 0003 000 000D5 000 0004 000 0004 000 0001 000 000

Difference in growth: 3 000 000W entitled to the difference in growth: = R 1 500 000

Mental IllnessPresumption: all persons presumed to be sane (full mental capacity) until contrary proven.

Onus on person alleging incapacity (i.e. on person seeking to avoid the contract).

Exception: if person declared mentally ill by Act then onus on person alleging capacity (i.e. on person seeking to uphold the contract).

Whether have necessary mental capacity at time contract concluded therefore a question of fact in each individual case.

Lack capacity if incapable of properly understanding the nature of the contract and appreciating the rights and obligations created by the contract. (i.e. full legal implications of actions).

Effect of contract concluded by mentally ill person: = VOID.

Insolvency and IntoxicationInsolvency: A question of law (not of fact). Not insolvent unless High Court has made an order declaring you to be insolvent.

Contractual capacity then limited iro certain contracts:Insolvent may not enter into any contract to dispose of any property in insolvent estate.May not enter into any contract which will adversely affect insolvent estate, or trade as general dealer or manufacturer, without written consent trustee.Effect of such a contract: voidable at instance Trustee.

Intoxication: If so intoxicated that dont realise entering into a contract at all or have no idea of any of the terms of the contract, then contract VOID. But if merely so intoxicated that conclude contract that normally wouldnt conclude, or as a result more reckless or easily influenced, contract valid.