Capacity to contract: Beware the traps of the law

Amos Vilakazi (Director)

Wepener J (Judge Wepener) said the following in Standard Bank of South Africa v Jwara and Others, Case No. 19765/2011 (High Court, Johannesburg):

“Legal disability is the English for the Afrikaans ‘regsonbevoeg’.  Persons are under legal disability when, by law, their capacity or ability to relate, as legal subjects, to the legal system, is curtailed. Examples are minors and insolvents that are not permitted (‘regsonbevoeg’) to perform certain juristic acts. In our law, ‘legal disability’ relates to situations where there is an impediment in law (impendimentum iuris) without narrowing or limiting it to specific circumstances.” 

The court referred to Boberg, Law of Persons and the Family 2nd Edition which states as follows:

‘The etymology of the word “status”, they say is a good indication of its meaning.  Derived from the Latin stare (to stand) it is used in jurisprudence to connote a person’s overall legal position (regsposisie) or standing in law.  An important aspect of a person’s status is his or her ability or capacity to relate to the legal system.  This ability which varies from one person to another, embraces three specific capacities or “kompetensies” (also called “bevoegdhede”).  They are:

(a)  legal capacity, that is, the capacity to be the bearer of (i.e. to have) rights and duties (regsbevoegdheid);

(b)  capacity to act, that is, the capacity to perform juristic acts (handelingsbevoegdheid); and

 (c)  capacity to litigate, that is, the capacity to appear in court as a party to a law suit (verskyningsbevoegdheid)’.

 As Du Bois et al in Wille’s Principles of South African Law (9th Ed) at p 146 – 147 state, a person’s status may be described as his or her legal position or ‘standing’ in relation to his or her fellow-person and the wider community: “the aggregate of his or her various rights, duties and capacities”.  The status of a person determines to what extent he or she has the ability to participate as a legal subject in the life of the law. This ability (legal capacity in the broad sense) embraces four main constituent capacities or competencies, one of which is the capacity to perform juristic acts, i.e. voluntary human acts to which the law attaches at least some of the legal consequences willed by the party or parties performing the act (active legal capacity, in Afrikaans “handelingsbevoegdheid”). This is the arena of contracting.

Not all persons have capacity to contract. So, for example persons suffering from mental disability; and in some cases company officials have no capacity to perform juristic acts such as concluding contracts on behalf of the company they purport to represent. For example, a company does not have hands, mind, feet, and can only act legally through the instrumentality of resolutions of empowered structures, such as boards of directors. Absent such empowering resolution, no official can validly transact business on behalf of the company.

In short, the law is full of technical traps. Are you able to navigate it on your own?

The critical question is: does the person you are concluding that important contract with have legal capacity to conclude a valid and binding contract? If you do not check this, you may walk into a costly trap. Be warned!

Please note that our blogs do not constitute legal advice. Should you require legal advice on a specific topic or specific facts, you are free to contact our office for a consultation.