Capacity to Contract: Understanding Legal Competence in Nigerian Contract Law

The freedom to contract is a fundamental principle of commercial law. However, not everyone possesses the legal capacity to enter into binding contracts. The law recognizes that certain categories of persons—by reason of age, mental condition, intoxication, illiteracy, or legal status—require protection from their own contractual undertakings or from exploitation by others.

Consider these scenarios: A 15-year-old purchases a luxury car on credit. An illiterate farmer thumbprints a complex loan agreement he cannot read. A severely intoxicated person signs away property rights. A company director purports to bind the corporation to a contract outside its constitutional objects. Which of these contracts are enforceable? The answer lies in understanding contractual capacity.

Capacity to contract refers to the legal competence to enter into a binding agreement. While the general presumption is that all persons have capacity, the law creates special rules for five main categories: infants (minors), illiterates, corporations, persons of unsound mind, and intoxicated persons. Each category reflects different policy considerations—protecting the vulnerable, ensuring informed consent, defining corporate powers, or preventing unfair advantage-taking.

This article examines contractual capacity under Nigerian law, exploring the rules governing each category of potentially limited capacity, the rationale behind these rules, and their practical application. As you learned in your studies of contract formation, capacity constitutes one of the essential elements of a valid contract. Understanding its nuances is crucial for legal practice.

General Principles of Capacity

The Presumption of Capacity

Nigerian law presumes that all persons possess contractual capacity unless proven otherwise.¹ This presumption reflects the principle of freedom of contract and places the burden of proving incapacity on the party alleging it.

The presumption means that in litigation, a party seeking to avoid a contract on grounds of incapacity must adduce evidence establishing their lack of capacity at the time of contracting. Mere assertion is insufficient.

Policy Considerations

The law’s approach to capacity balances competing interests:

Protection: Shielding vulnerable persons from exploitation, improvident bargains, and their own inexperience or impairment.

Certainty: Providing commercial certainty so that contracting parties can rely on agreements without fearing subsequent capacity challenges.

Autonomy: Respecting individual freedom to manage one’s affairs and make decisions.

Restitution: Ensuring fair treatment where capacity is lacking—neither allowing unconscionable advantage-taking nor permitting unjust enrichment by the incapacitated party.

These competing considerations explain why capacity rules vary between categories and why certain contracts by incapacitated persons remain valid while others are void or voidable.

Categories of Persons with Limited Capacity

Nigerian law recognizes five main categories requiring special treatment:

1. Infants (Minors): Persons under the age of majority
2. Illiterates: Persons unable to read or write
3. Corporations: Artificial legal persons with capacity defined by incorporating documents
4. Persons of Unsound Mind: Those suffering mental incapacity
5. Intoxicated Persons: Those whose contractual capacity is impaired by alcohol or drugs

Each category operates under distinct rules reflecting different protective rationales and practical considerations.

Part One: Infants (Minors)

Age of Majority

An infant (also called a minor) is a person who has not attained the age of majority. In Nigeria, the Age of Majority Act² provides that the age of majority is 18 years, except where another law specifies a different age.

Before 1970 and the enactment of the Age of Majority Act, the common law rule applied, setting majority at 21 years. The reduction to 18 years reflects modern social understanding of maturity and brings Nigerian law into line with international standards.

A person attains majority at the first moment of the day preceding the 18th anniversary of their birth.³ Thus, someone born on June 1, 2006, attains majority at the beginning of May 31, 2024.

General Rule: Contracts by Minors

The general rule at common law, applicable in Nigeria, is that a minor’s contracts are voidable at the minor’s option. This means:

• The contract binds the adult party from the outset
• The minor may choose to be bound or to avoid the contract
• The minor may avoid (repudiate) the contract during minority or within a reasonable time after attaining majority
• If the minor does not avoid the contract within a reasonable time after attaining majority, the contract becomes binding
• The adult party cannot avoid the contract on grounds of the other party’s minority

This asymmetric approach reflects the protective purpose: shielding minors from their inexperience while not allowing them to perpetrate fraud.

Exceptions to the General Rule

Several significant exceptions modify the general rule that minors’ contracts are voidable.

1. Contracts for Necessaries

Contracts for necessaries bind minors. This exception ensures minors can acquire essential goods and services while protecting suppliers who provide them.

Definition of Necessaries

“Necessaries” are defined in section 3 of the Sale of Goods Act⁴ as:

goods suitable to the condition in life of the minor or other person concerned and to his actual requirements at the time of the sale and delivery.

This definition contains two elements:

Suitability to Condition in Life: Necessaries are relative, not absolute. What constitutes necessaries depends on the minor’s social position, economic circumstances, and way of life. Luxuries for one minor might be necessaries for another.

In Nash v Inman,⁵ a Cambridge undergraduate (whose father was wealthy) ordered 11 fancy waistcoats from a tailor. The court held these were not necessaries because the undergraduate already had adequate clothing. The goods must be necessary to the particular minor’s circumstances.

Actual Requirements at the Time: The minor must actually need the goods when supplied. If the minor already possesses adequate items of the type supplied, the new items are not necessaries even if they would otherwise be suitable.

Categories of Necessaries

Necessaries typically include:

• Food, clothing, and lodging appropriate to the minor’s station
• Medical treatment and healthcare
• Education and vocational training
• Legal services in certain circumstances
• Employment contracts beneficial to the minor

Liability for Necessaries

Under section 3 of the Sale of Goods Act, a minor must pay a reasonable price (not necessarily the contract price) for necessaries sold and delivered. This provision protects both parties:

• The supplier receives reasonable compensation
• The minor avoids exploitation through excessive pricing

The onus is on the supplier to prove:

1. The goods supplied were suitable to the minor’s condition in life
2. The goods met the minor’s actual requirements at the time
3. The price claimed is reasonable

If these elements are not established, the minor is not liable.

2. Beneficial Contracts of Service

Contracts of employment, apprenticeship, education, and training that are substantially for the minor’s benefit bind the minor.⁶

Rationale: These contracts enable minors to develop skills, earn income, and establish careers. Refusing to enforce them would prejudice minors by discouraging employers and trainers from engaging them.

The Benefit Test: The contract must be beneficial to the minor when viewed as a whole. Courts examine the entire agreement, not isolated clauses. A contract containing some disadvantageous terms may still bind the minor if, overall, it benefits them.

In Doyle v White City Stadium,⁷ a minor boxer agreed to a contract containing a clause requiring forfeiture of prize money if disqualified. He was disqualified and sought to avoid the contract on grounds of minority. The court held the contract bound him because, viewed as a whole, it was for his benefit—it allowed him to pursue boxing professionally under regulated conditions.

Mixed Beneficial/Onerous Terms: Where a contract contains both beneficial and onerous terms, courts assess the net effect. If the beneficial elements substantially outweigh the onerous ones, the entire contract binds the minor.

3. Contracts Not Wholly Void

Certain contracts are neither binding nor wholly void but rather voidable at the minor’s option. These include:

Contracts for Land: A minor’s contracts concerning land (leases, purchases, mortgages) are voidable. The minor may repudiate during minority or within a reasonable time after attaining majority.

Partnership Agreements: A minor may be a partner, but the partnership agreement is voidable at their option.

Shares in Companies: A minor’s subscription for shares is voidable. If not repudiated within reasonable time after majority, it becomes binding.

These contracts involve ongoing obligations or acquisition of property interests. The law permits minors to engage in such transactions but allows repudiation to prevent being bound to unsuitable long-term commitments.

Repudiation: To avoid such contracts, the minor must clearly communicate repudiation during minority or within a reasonable time after attaining majority. What constitutes “reasonable time” depends on circumstances but generally means a relatively short period—weeks or months, not years.

If the minor fails to repudiate within reasonable time, the contract becomes fully binding. This encourages commercial certainty while giving minors adequate opportunity to reassess commitments made during minority.

Wholly Void Contracts

Some contracts by minors are wholly void—they have no legal effect from the outset and cannot be ratified even after the minor attains majority.

Trading Contracts: Contracts whereby a minor engages in trade or business are void.⁸ The law considers trading inappropriate for minors and refuses to enforce such agreements.

This includes:

• Contracts to buy goods for resale
• Business loans and commercial credit
• Partnership where the minor assumes trading obligations
• Guarantees and suretyship by minors

Loans: Loans to minors (other than for necessaries) are void. The lender cannot recover the loan amount even after the minor attains majority.

In Cowern v Nield,⁹ the plaintiff lent money to a minor. After attaining majority, the defendant promised to repay. The court held this promise was unenforceable because it related to a loan made during minority, which was void.

This rule protects minors from accumulating debts during their years of inexperience. However, it creates a corresponding risk for lenders, who should verify borrowers’ ages.

Restitution and Unjust Enrichment

When a minor avoids a contract, difficult questions arise regarding restitution. Can goods or money be recovered? Must the minor return benefits received?

The General Rule: A minor who avoids a contract need not restore non-necessary goods received, even if they retain them.¹⁰ This seemingly harsh rule prevents circumventing minority protection through restitutionary claims.

Fraud Exception: If the minor obtained goods through fraudulent misrepresentation of age, equity may compel restitution to prevent unjust enrichment.¹¹ The minor cannot use minority as a shield for fraud.

However, a minor cannot be made to pay for goods by describing the claim as restitutionary rather than contractual. The substance of the claim matters, not its form.

Money Paid: Where a minor pays money under a void contract, they may recover it provided there has been total failure of consideration.¹² If the minor received some benefit, recovery may be barred.

Beneficial Contracts: For contracts binding the minor (necessaries, beneficial service contracts), normal restitutionary principles apply. Both parties must account for benefits received.

Ratification

Generally, a voidable contract can be ratified when the minor attains majority. Ratification may be:

Express: The former minor explicitly confirms the contract after attaining majority.

Implied: The former minor’s conduct after attaining majority indicates acceptance of the contract (e.g., continuing to make payments, accepting benefits, treating the contract as binding).

However, wholly void contracts (trading contracts, loans) cannot be ratified. Even express promises to honor such contracts after attaining majority are unenforceable.¹³

Liability in Tort

A difficult question arises when a minor commits a tort: can they be held liable? And can liability in contract be circumvented by suing in tort instead?

General Tort Liability: Minors are generally liable for torts they commit. The law does not exempt minors from responsibility for wrongful acts.

The Limitation: However, where an action in tort is essentially an action in contract dressed up differently, the minor’s contractual immunity prevails.¹⁴ Courts will not allow claimants to circumvent capacity protections by recasting contractual claims as tortious ones.

In Jennings v Rundall,¹⁵ a minor hired a horse, promising to take care of it. Through negligent riding, the minor injured the horse. The owner sued in negligence. The court held the action failed because it was essentially an action to enforce the contractual obligation to take care of the horse.

Independent Torts: Where the tort is independent of any contract and does not arise from contractual obligations, the minor is liable. For example, if a minor assaults someone or negligently causes injury in circumstances unrelated to any contract, they are liable.

Practical Implications

For Minors:

• Most contracts are voidable, providing protection against improvident bargains
• Contracts for necessaries and beneficial employment bind the minor
• Avoid fraudulent misrepresentation of age, which removes protections
• Repudiate unsuitable contracts promptly after attaining majority

For Those Contracting with Minors:

• Verify the age of contracting parties, especially for significant transactions
• Recognize the risk that contracts may be avoided
• For necessaries, ensure goods/services are suitable to the minor’s circumstances and actually needed
• Document that goods supplied are necessaries
• Consider requiring guarantees from adults (parents/guardians) for valuable contracts
• Be aware that trading contracts and loans are wholly void

For Legal Practitioners:

• Always inquire about age when advising on contract disputes
• Where a client contracted as a minor, assess whether repudiation is still possible
• Consider whether contracts fall within binding categories (necessaries, beneficial service)
• Evaluate restitution possibilities based on nature of benefits exchanged
• Be alert to attempts to circumvent minority protection through tort claims

Part Two: Illiterates

Special Significance in Nigeria

The treatment of illiterate contracting parties holds particular importance in Nigeria, where significant portions of the population cannot read or write. Nigerian courts have developed specific principles to protect illiterates while maintaining commercial certainty.

Literacy rates in Nigeria, while improving, mean that many contracts—particularly in rural areas and traditional commercial settings—involve parties unable to read written agreements. The law must balance protecting illiterates from exploitation against enabling them to participate in commerce and avoiding excessive paternalism.

The General Rule

An illiterate person possesses full contractual capacity. Inability to read does not automatically invalidate contracts. However, the law provides special protections where illiterates enter written contracts.

The seminal Nigerian authority is Iloabuchi v Agha,¹⁶ where the Supreme Court held that when a literate person seeks to enforce a written contract against an illiterate, the literate party must prove:

1. The document was read over and explained to the illiterate
2. The illiterate understood it
3. The illiterate approved its contents

The Rule in Karimu v Tinko Ltd

The Supreme Court in Karimu v Tinko Ltd¹⁷ expanded on these principles, holding that the burden of proof lies on the literate party to establish that the illiterate understood what they were signing or thumbprinting.

This reverse burden reflects the law’s protective approach. While illiterates can contract, those dealing with them must ensure genuine consent was obtained.

Explanation and Understanding

Adequate Explanation: The explanation must be adequate to enable the illiterate to understand the document’s nature, purpose, and effect. A perfunctory or technical explanation may be insufficient.¹⁸

The explanation should:

• Be in a language the illiterate understands
• Cover all material terms
• Explain consequences of the agreement
• Be given before execution, not after
• Allow the illiterate opportunity to ask questions

Proof of Understanding: It is not enough to show the document was read to the illiterate. The literate party must prove the illiterate understood it. This may be established through:

• The illiterate’s conduct and responses during explanation
• Questions asked by the illiterate
• Independent evidence (e.g., from interpreters or witnesses present)
• The illiterate’s subsequent conduct consistent with understanding

Language Considerations: Given Nigeria’s multilingual character, explanation must often be in local languages. Where the contract is in English but the illiterate speaks only a Nigerian language, proper translation and explanation in that language is essential.

The Role of Witnesses

It is good practice (and often required for certain documents) to have independent witnesses present when illiterates execute written agreements. Witnesses can attest to:

• The document being read to the illiterate
• The illiterate’s apparent understanding
• The voluntary nature of the illiterate’s assent

For documents requiring attestation (wills, land documents), specific formalities must be observed regarding witnesses.¹⁹

Documents Requiring Special Formalities

Certain documents involving illiterates require statutory formalities:

Illiterates Protection Ordinance: In some states, legislation requires specific endorsements on documents signed by illiterates, certifying that the contents were explained.²⁰

Land Documents: Instruments affecting land interests often require certification that illiterate parties understood the document.²¹

Deeds: Where an illiterate executes a deed, particular care must be taken to ensure all formalities are observed and understanding is established.

Thumbprinting vs. Signature

Many illiterates execute documents by thumbprint rather than signature. The legal effect is identical provided:

• The thumbprint is genuine
• Proper explanation and understanding requirements are met
• Witnesses attest to the thumbprinting

Courts have consistently held that a thumbprint has the same legal effect as a signature.²²

Fraud and Misrepresentation

Where a literate person misrepresents the contents of a document to an illiterate, several causes of action may arise:

Misrepresentation: If false statements were made about the document’s contents inducing execution, standard misrepresentation remedies (rescission, damages) apply.²³

Non est factum: In extreme cases where the illiterate was fundamentally mistaken about the nature of the document, the non est factum defense may apply (discussed below).

Fraud: Criminal fraud charges may be appropriate in cases of deliberate deception.

Unconscionable Dealing: Equity may refuse to enforce contracts where illiterates were exploited, particularly where there is gross inadequacy of consideration combined with procedural unfairness.²⁴

Practical Guidance

For Illiterates:

• Where possible, have a trusted literate friend or relative present during explanation
• Ask questions about anything unclear
• Do not be rushed into signing or thumbprinting
• Insist on explanation in your own language
• Consider seeking legal advice for significant transactions

For Those Contracting with Illiterates:

• Provide thorough explanation in a language the illiterate understands
• Use interpreters if necessary
• Have independent witnesses present
• Document the explanation process (e.g., statement in the document or separate affidavit)
• Allow adequate time for questions and reflection
• For valuable transactions, consider requiring the illiterate to obtain independent legal advice
• Keep detailed records of the explanation and understanding process

For Legal Practitioners:

• When drafting documents for illiterates, include certification clauses
• Ensure adequate witnesses are present during execution
• Consider providing explanation yourself rather than leaving it to the other party
• Prepare affidavits of explanation and understanding where appropriate
• Advise illiterate clients carefully, ensuring genuine comprehension
• In litigation, carefully investigate compliance with explanation requirements

Part Three: Corporations

Nature of Corporate Capacity

Corporations are artificial legal persons created by law. Unlike natural persons, whose capacity is presumed unlimited (subject to the specific exceptions already discussed), corporate capacity is defined and limited by:

1. The incorporating statute
2. The company’s constitution (memorandum and articles of association)
3. Specific legislation regulating particular types of corporations

A corporation can only do what its constitution permits. Acts beyond its powers are said to be ultra vires (beyond the powers) and are, in principle, void.

Sources of Corporate Powers

Incorporating Legislation: In Nigeria, the Companies and Allied Matters Act (CAMA)²⁵ governs the incorporation and operation of companies. CAMA defines the basic powers and limitations of companies.

Memorandum of Association: The memorandum is the company’s charter, setting out (among other things) the company’s objects—the purposes for which it was formed and the activities it may undertake.

Historically, the objects clause strictly limited corporate capacity. Any act outside the stated objects was ultra vires and void.

Articles of Association: The articles contain internal rules governing the company’s operation, including directors’ powers. While ultra vires problems can arise from limitations in the articles, these typically involve issues of directors exceeding their authority rather than the company lacking capacity.

The Ultra Vires Doctrine

Traditional Position: At common law, contracts ultra vires the company’s objects were absolutely void. Neither party could enforce them, and even subsequent ratification by shareholders could not validate them.²⁶

This strict rule protected shareholders and creditors by ensuring companies operated only within their stated purposes. However, it created commercial uncertainty and could produce harsh results where third parties dealt with companies in good faith, unaware of constitutional limitations.

The Modern Position: CAMA has substantially modified the ultra vires doctrine to protect third parties dealing with companies.

Section 39(2) of CAMA 2020 provides that the validity of an act done by a company cannot be questioned on the ground of lack of capacity by reason of anything in the company’s constitution.

This means that third parties need not concern themselves with whether a contract falls within the company’s objects. Even if a transaction is ultra vires, the company cannot escape liability by pleading lack of capacity.

Internal Consequences: While third parties are protected, ultra vires acts may have internal consequences:

• Directors may be personally liable to the company for ultra vires transactions
• Shareholders may seek injunctions to prevent threatened ultra vires acts
• The transaction may be ratified by special resolution of shareholders (for certain types of ultra vires acts)

Statutory Companies

Companies created by specific statutes (statutory corporations) derive their powers from their establishing legislation. Such companies have only the powers conferred by statute, and ultra vires principles apply strictly.

Examples include:

• Nigerian National Petroleum Corporation (NNPC)
• Central Bank of Nigeria
• Various state-owned enterprises

Third parties dealing with statutory corporations must verify the corporation’s powers under its establishing legislation.

Directors’ Authority

Even where a company has capacity for a transaction, directors must have authority to bind the company. Issues can arise where:

• Directors exceed powers granted by the articles
• Directors act in breach of fiduciary duties
• Required internal procedures (board resolutions, shareholder approval) are not followed

Actual Authority: Directors have actual authority when they act within powers expressly granted by the articles or necessarily implied from their position.

Apparent (Ostensible) Authority: Where directors lack actual authority, the company may still be bound if the directors had apparent authority. Apparent authority arises where:

• The company represents (by words or conduct) that the directors have authority
• The third party relies on this representation
• The third party has no notice of the lack of actual authority²⁷

The Indoor Management Rule: Third parties dealing with companies are entitled to assume internal procedures have been properly followed.²⁸ They need not inquire whether board resolutions were passed, meetings properly convened, or other internal formalities observed.

However, this rule does not assist third parties who have actual or constructive notice of irregularities.

Practical Implications

For Companies:

• Ensure objects clauses in memoranda are sufficiently broad
• Verify that significant transactions fall within constitutional powers
• Maintain proper corporate records (board resolutions, minutes)
• Ensure directors understand the limits of their authority
• Consider taking legal advice before unusual or ultra vires transactions

For Those Contracting with Companies:

• Under CAMA, generally no need to verify objects clauses
• For statutory corporations, verify powers under establishing legislation
• Ensure persons purporting to bind the company have appropriate authority
• Consider requiring board resolutions for significant transactions
• Check public records (memorandum, articles) available at Corporate Affairs Commission where appropriate

For Legal Practitioners:

• Advise on whether proposed transactions fall within corporate objects
• Draft objects clauses broadly to minimize ultra vires issues
• Ensure proper board and shareholder authorizations for transactions
• Investigate authority when representing parties contracting with companies
• Consider personal liability of directors for ultra vires transactions

Part Four: Persons of Unsound Mind

Definition and Test for Capacity

A person of unsound mind lacks contractual capacity if, at the time of contracting:

1. They were incapable of understanding the nature and effect of the transaction, and
2. The other party knew or should have known of their incapacity²⁹

Both elements must be present. If a person of unsound mind makes a contract while lucid, or if the other party reasonably believed them to have capacity, the contract may be valid.

The Knowledge Requirement

Unlike minority (where capacity is judged objectively by age), mental incapacity requires subjective knowledge or constructive notice by the other party.

This requirement reflects several considerations:

• Protecting innocent third parties who contract in good faith
• Avoiding disputes over internal mental states
• Promoting commercial certainty
• Recognizing that many mentally impaired persons function adequately in routine transactions

The other party has constructive notice if circumstances would lead a reasonable person to inquire about capacity and inquiry would reveal the incapacity.

Types of Mental Impairment

Various conditions may affect contractual capacity:

Mental Illness: Severe psychiatric conditions (schizophrenia, psychosis, severe depression with impaired cognition) may negate capacity during acute episodes.

Dementia: Progressive cognitive decline may gradually erode contractual capacity.

Intellectual Disability: Severe developmental disabilities may result in permanent incapacity.

Temporary Impairment: Acute confusional states, delirium, or temporary mental disturbance may temporarily negate capacity.

The key question is always whether the particular condition prevented understanding the specific transaction at the relevant time.

Standard of Proof

The person alleging incapacity bears the burden of proving:

1. Incapacity at the time of contracting
2. The other party’s knowledge (actual or constructive)

Medical evidence is typically essential, though not always sufficient. Courts will examine:

• Medical diagnoses and expert testimony
• The person’s behavior at the time of contracting
• Witness observations
• The complexity of the transaction
• Whether the contract was improvident or unusual

Lucid Intervals

Many persons of unsound mind experience lucid intervals—periods when their capacity returns. Contracts made during lucid intervals are valid provided the other party had no knowledge of incapacity.³⁰

This doctrine recognizes that mental capacity can fluctuate and allows persons with episodic impairment to conduct affairs during periods of lucidity.

Proving a lucid interval requires evidence that:

• The person understood the transaction at the relevant time
• The interval was genuine and sufficiently sustained
• The person’s understanding was not merely superficial

Effect of Incapacity

Contracts by persons of unsound mind (where the knowledge requirement is met) are voidable at the option of the incapacitated person or their representatives.

The incapacitated person may:

• Ratify the contract during a lucid interval or after recovery
• Avoid the contract and seek restitution
• Have the contract set aside by their representative or the court

Necessaries: Like minors, persons of unsound mind must pay a reasonable price for necessaries supplied during incapacity.³¹ This ensures they can obtain essential goods and services without suppliers refusing to deal with them.

Persons Under Court-Ordered Management

Where a person has been declared by court order to be of unsound mind and their affairs are under court management:

• They lack capacity to contract
• Contracts made are void (not merely voidable)
• Third parties are deemed to have constructive notice of the incapacity³²

Court orders are public records, placing third parties on notice. However, in practice, few third parties check court records before routine transactions.

Practical Implications

For Persons of Unsound Mind and Their Families:

• Consider applying for court-ordered management of affairs if incapacity is significant and ongoing
• Appoint attorneys under powers of attorney while still capable
• Seek to avoid contracts during periods of incapacity
• Keep medical records documenting incapacity
• Have trusted persons present during important transactions

For Those Contracting with Potentially Impaired Persons:

• Be alert to signs of incapacity (confusion, irrationality, inability to understand)
• For significant transactions, consider requiring medical certification of capacity
• If doubt exists, delay transaction and encourage the person to seek advice
• Document the person’s apparent understanding and rational behavior
• Avoid taking advantage of apparent impairment

For Legal Practitioners:

• Assess clients’ capacity, particularly elderly clients or those with known mental health issues
• Consider capacity assessments by medical professionals for significant transactions
• Document observations of capacity
• Advise on powers of attorney and court-ordered management
• In disputes, gather evidence of capacity (medical records, witness testimony, contemporaneous behavior)

Part Five: Intoxicated Persons

The General Rule

A contract made by an intoxicated person is voidable at their option if:

1. They were so intoxicated that they did not know what they were doing (could not understand the transaction), and
2. The other party knew of their intoxication³³

These requirements mirror those for mental incapacity, reflecting similar policy considerations.

Degree of Intoxication Required

Mere intoxication is insufficient. The person must have been so intoxicated that they could not understand the nature and consequences of the transaction.³⁴

Social drinking or moderate intoxication does not negate capacity. The intoxication must be severe enough to deprive the person of comprehension.

Courts have stated the test as whether the person was “so drunk as not to know what he was doing.”³⁵ This is a high threshold, requiring substantial impairment.

Knowledge Requirement

As with mental incapacity, the other party must have known of the intoxication. If the intoxication was not apparent, the contract remains valid.

The requirement that the other party knew of the intoxication protects innocent third parties and prevents intoxicated persons from too easily avoiding contracts.

Ratification

Upon sobering, the intoxicated person may:

• Ratify the contract (expressly or by conduct)
• Repudiate it

If the person does not repudiate within a reasonable time after sobering, they will be deemed to have ratified.³⁶

This rule prevents intoxicated persons from enjoying the benefits of favorable contracts while repudiating unfavorable ones after the fact.

Necessaries

An intoxicated person must pay a reasonable price for necessaries supplied during intoxication.³⁷ The same principles apply as for minors and persons of unsound mind.

Drugs and Other Intoxicants

The same principles apply to intoxication by drugs (whether legal or illegal) or other intoxicating substances. The key question is always whether the person’s understanding was negated and whether the other party knew.

Voluntariness

Self-induced intoxication is treated no differently from involuntary intoxication for capacity purposes. Whether the person deliberately got drunk or was intoxicated without their knowledge, the test remains the same.

However, in practice, courts may be less sympathetic to persons who deliberately intoxicated themselves to the point of incapacity and then seek to avoid contracts.

Practical Implications

For Potentially Intoxicated Persons:

• Avoid making significant decisions while intoxicated
• If a contract was made while intoxicated, repudiate promptly upon sobering
• Gather evidence of intoxication (witnesses, blood alcohol tests if available)
• Seek legal advice quickly

For Those Contracting with Others:

• Refuse to contract with visibly intoxicated persons
• For significant transactions, ensure the other party is sober
• Document apparent sobriety where later disputes might arise
• If doubt exists about sobriety, delay the transaction

For Legal Practitioners:

• Investigate circumstances of contracting when incapacity is alleged
• Gather evidence of degree of intoxication and other party’s knowledge
• Advise on prompt repudiation if contracts were made while intoxicated
• Consider whether medical evidence (e.g., expert testimony on blood alcohol effects) is needed

Comparative Analysis and Interactions

Common Themes

Certain themes run through all capacity categories:

Protection: The law protects vulnerable persons from their own limitations and from exploitation.

Certainty: Protection must be balanced against commercial certainty and the interests of innocent third parties.

Restitution: The law seeks to prevent unjust enrichment while not allowing capacity defenses to be used as swords rather than shields.

Necessaries: All categories recognize obligations for necessaries, ensuring that limited capacity does not prevent acquiring essential goods and services.

Differences

Key differences exist:

Objectivity: Minority is determined objectively (by age). Mental incapacity and intoxication require proving subjective mental states.

Knowledge: For mental incapacity and intoxication, the other party’s knowledge is essential. For minority, it is generally irrelevant (though fraud may affect remedies).

Permanence: Minority is temporary and ends automatically at a fixed age. Mental incapacity may be permanent or fluctuating. Intoxication is typically temporary.

Corporations: Corporate capacity issues involve different considerations (protecting shareholders and creditors, defining organizational purposes) than protection of vulnerable individuals.

Illiterates: Illiteracy involves cognitive capacity but creates different issues—ensuring informed consent where comprehension is limited by inability to read.

Multiple Categories

A person may fall into multiple categories simultaneously:

• A minor may be illiterate
• A person may be both mentally ill and intoxicated
• An illiterate person may be of unsound mind

Where multiple categories apply, the most protective rules govern. For example, a contract with a minor who is also intoxicated is subject to both sets of rules, and either may provide grounds for avoidance.

Modern Developments and Reform

Trends in Capacity Law

Several trends characterize modern developments:

Functional Approach: Modern law increasingly adopts functional assessments—focusing on whether the person understood the particular transaction rather than categorical capacity determinations.

Enhanced Protection for Vulnerable Persons: Expanding recognition of unconscionable dealing and undue influence doctrines protects vulnerable persons beyond traditional capacity categories.

Balancing Autonomy and Protection: The law seeks to respect individual autonomy while providing necessary protection—enabling persons with some limitations to participate in commerce where possible.

Consumer Protection: Statutory consumer protection measures increasingly supplement common law capacity rules.

Potential Reforms

Several reforms might improve capacity law:

Unified Mental Capacity Legislation: Comprehensive legislation addressing all forms of mental incapacity (as enacted in some jurisdictions) could provide clearer, more consistent rules.

Enhanced Illiteracy Protection: Given Nigeria’s illiteracy rates, stronger procedural protections for illiterates in specific transaction types might be beneficial.

Capacity Assessment Procedures: Formalized procedures for assessing and certifying capacity in significant transactions could reduce disputes.

Registration Systems: Public registers of persons under court-ordered management would give third parties clearer notice.

Technology and Capacity

Modern technology creates new capacity issues:

Electronic Contracts: How do capacity rules apply to online transactions where parties never meet? How can illiteracy protections be implemented for electronic documents?

Vulnerable Adults Online: Elderly or impaired persons may be particularly vulnerable to online fraud and exploitation.

Artificial Intelligence: As AI agents increasingly conduct transactions, capacity concepts may require adaptation.

These issues will require ongoing legal development.

Conclusion

Contractual capacity represents a critical limitation on freedom of contract, protecting vulnerable persons while maintaining commercial certainty. Understanding capacity rules is essential for legal practice because capacity issues arise frequently and can void otherwise valid agreements.

Several key principles emerge:

1. Presumption and Proof: Capacity is presumed; those alleging incapacity bear the burden of proof.

2. Category-Specific Rules: Each category (minors, illiterates, corporations, mentally impaired, intoxicated persons) operates under distinct rules reflecting different protective rationales.

3. Balance: All capacity rules balance protection of vulnerable parties against commercial certainty and third-party rights.

4. Necessaries: Obligations for necessaries transcend capacity limitations, ensuring vulnerable persons can obtain essentials.

5. Knowledge Matters: For mental incapacity and intoxication, the other party’s knowledge is critical. For minority and corporate incapacity, knowledge is generally less significant.

6. Restitution: Capacity defenses interact complexly with restitutionary claims, preventing unjust enrichment by either party.

For second-year law students, mastering capacity requires understanding both doctrinal rules and their policy foundations. Problem questions frequently involve determining whether capacity exists, whether contracts can be avoided, what restitutionary obligations apply, and how to advise clients in capacity disputes.

The topic also illustrates broader themes in contract law: balancing freedom and protection, reconciling legal principle with commercial reality, and adapting established rules to social change. Nigeria’s particular circumstances—high illiteracy rates, extended family structures affecting minors’ independence, diverse corporate forms—give distinctive dimensions to capacity questions.

Your understanding of capacity builds upon your prior study of contract formation—capacity being one essential element of valid contract formation—and connects to contract contents (particularly regarding necessaries and beneficial contracts). Together, these topics provide a comprehensive foundation for understanding how contracts work in Nigerian law.

The study of capacity also reinforces lessons from Legal Method about balancing competing interests, interpreting statutory provisions, and applying precedent to new situations—skills essential to legal practice.

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Footnotes

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This article is part of the Contract Law series for 200L students at learningthelaw.org. For foundational concepts, see our articles on Nature of Contract, Formation of Contract, Privity of Contract, and Contents of Contract. For related legal method concepts, review Legal Reasoning and Approach to Problems.

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Word Count: Approximately 10,500 words

Footnotes

1. This presumption reflects common law principles adopted in Nigerian law. ↩

2. Age of Majority Act (Cap A7 LFN 2004). ↩

3. Following common law principles on calculation of age. ↩

4. Sale of Goods Act (Cap S1 LFN 2004), s 3. ↩

5. Nash v Inman [1908] 2 KB 1. ↩

6. See Doyle v White City Stadium [1935] 1 KB 110. ↩

7. Doyle v White City Stadium [1935] 1 KB 110. ↩

8. This principle derives from Cowern v Nield [1912] 2 KB 419 and related cases. ↩

9. Cowern v Nield [1912] 2 KB 419. ↩

10. Stocks v Wilson [1913] 2 KB 235. ↩

11. Equitable fraud principles allow recovery where minority was used as instrument of fraud. ↩

12. Corpe v Overton (1833) 10 Bing 252. ↩

13. Following Cowern v Nield [1912] 2 KB 419. ↩

14. Jennings v Rundall (1799) 8 Term Rep 335. ↩

15. Jennings v Rundall (1799) 8 Term Rep 335. ↩

16. Iloabuchi v Agha [1991] 5 NWLR (Pt 194) 337. ↩

17. Karimu v Tinko Ltd (1998) 3 NWLR (Pt 541) 131. ↩

18. Nigerian courts have emphasized the need for genuine understanding in numerous decisions. ↩

19. Specific requirements vary by state based on applicable land law legislation. ↩

20. Some states retain Illiterates Protection Ordinances or similar legislation. ↩

21. Under various state land laws and the Land Use Act (Cap L5 LFN 2004). ↩

22. Nigerian courts consistently recognize thumbprints as equivalent to signatures when properly executed. ↩

23. Standard misrepresentation principles apply as discussed in previous articles. ↩

24. Unconscionable dealing principles derive from equity and have been applied in Nigerian courts. ↩

25. Companies and Allied Matters Act 2020 (CAMA 2020). ↩

26. Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653. ↩

27. Freeman & Lockyer v Buckhurst Park Properties (Mangal) Ltd [1964] 2 QB 480. ↩

28. The indoor management rule derives from Royal British Bank v Turquand (1856) 6 E & B 327. ↩

29. Imperial Loan Co v Stone [1892] 1 QB 599. ↩

30. Common law principles recognize lucid intervals for persons of unsound mind. ↩

31. Sale of Goods Act (Cap S1 LFN 2004), s 3 applies to persons of unsound mind. ↩

32. Where court orders exist, constructive notice applies to third parties. ↩

33. Gore v Gibson (1845) 13 M & W 623. ↩

34. The test requires substantial impairment, not mere intoxication. ↩

35. This formulation appears in various common law authorities on intoxication. ↩

36. Matthews v Baxter (1873) LR 8 Exch 132. ↩

37. Sale of Goods Act (Cap S1 LFN 2004), s 3 includes intoxicated persons. ↩