capacity to contract

A contract entered into by a drunkard is binding on him unless he shows that at the time of making the contract he was wholly incapable of understanding what he was doing and that the other party knew his condition. It does not suffice to say that he did not know what he was doing as at when he entered into the contract. He must show further that the person with whom he entered the contract knew him to be intoxicated as at when they entered into the contract. IMPERIAL LOAN CO. v. STONE (1891-94) All ER Rep. 412, 413.

For one to be able to enter into a binding contract. The person must be a juristic personality. The following are juristic persons: (1) natural persons who have attain the age of majority (2) companies incorporated under the Companies and Allied Matters Act (3) Incorporated Trustees of organizations (4) other artificial juristic personalities such as social clubs, co-operatives registered under relevant laws, registered trade unions, partnerships, sole proprietorship etc. IYKE MEDICAL MERCHANDISE v. PFIZER, INC. (2001) FWLR (PT. 53) 62 at 64.

A contract entered into by a mentally ill person is binding on him unless he unless he shows that at the time of making the contract he was wholly incapable of understanding what he was doing and that the other party knew his condition. It does not suffice to say that he did not know what he was doing as at when he entered into the contract. He must show further that the person with whom he entered the contract knew him to be so insane as at when they entered into the contract. Contracts of necessaries entered into by mentally depraved persons are legally binding them. Contracts also entered during their lucid period is also binding on them. Contracts entered into when they are not in the normal state of mind, that is when they do not know what they are doing cannot be binding on them. IMPERIAL LOAN CO. v. STONE (1891-94) All ER Rep. 412, 413.

Infants or persons who are yet to attain the age of majority cannot enter into normal contract or a general business transaction. If he does, the contract shall not be binding on him, but where an infant enters into a contract for his necessaries, and beneficial contracts of service, it shall be binding on the infant. Section 1 of the Infants Law Vol.4 Cap. 69 Laws of Rivers State, 1999

Organizations and other bodies registered under Part C of the Companies and Allied Matters Act are clothed with legal personality and can enter into contracts that are geared towards the promotion and development of their objects. Sections 823, 830 of the Companies and Allied Matters Act, 2020.

Under the Trade Union Act, Cap. T14, laws of the Federation of Nigeria, 2004, Trade Unions possesses the characteristics of a legal personality. It can sue and be sued in its name and therefore can enter into contracts except that Section 23 of the Trade Union Act, 2004 wherein it is stated that direct enforcement of certain agreements made between members are forbidden.

Yes. Companies registered under the Companies and Allied Matters Act can enter into a legally binding agreement as they are termed as artificial persons who functions through its members. Companies can acquire properties in its name, sue and be sued, and it has perpetual succession. But contracts entered into by a company that is outside of its objects as stated in the company’s Memorandum and Articles of Association are void as it is deemed ultra vires except where the company did not restrict its object. Section 35 of the Companies and Allied Matters Act, 2020 (Act No. 3).