(ii) Infancy
Before the enactment of the Minors’ Contracts Act 1987, contracts which were made with infants were void unless they involved the supply of necessities.348 Money which had been paid under a contract which was void for infancy could be recovered if the basis had totally failed.349 Similarly, other benefits which had been transferred under a contract made with an infant were recoverable on the ground of total failure of basis as well. This is illustrated by Pearce v Brain,3 0 where the claimant who was an infant contracted with the defendant to exchange his motor bike for the defendant’s car. The contract was void but it was accepted that the claimant could recover the bike if the basis for the transaction had failed totally. But since the claimant had used the car the basis had not totally failed.
(iii) Absence of Authority
A contract may also be void where one of the parties lacked authority to make it.351 A number of cases recognize that a restitutionary claim may succeed in respect of benefits which were transferred under such a contract, although the ground of restitution has never been specifically identified. In principle, a claimant who transfers benefits to the defendant under a contract which is void for want of authority should be able to obtain [1] [2] [3] [4] [5] [6] [7]
restitution on the ground of total failure of basis, but the two leading cases where restitutionary relief was awarded in respect of a contract which was void for want of authority cannot easily be explained with reference to this ground.
In Craven-Ellis v Canons Ltd[8] the claimant purported to enter into a contract with the defendant company whereby it was agreed that the claimant would act as managing director for the defendant which would pay the claimant for his services. After the claimant had done some work for the defendant he claimed his remuneration, but the defendant refused to pay him. The claimant was unable to sue the defendant on the contract because it was void for want of authority, since neither the claimant nor the other directors who made the agreement on behalf of the defendant possessed the requisite qualification shares which authorized them to make the agreement, as was required by the company’s articles of association. The claimant consequently sought to recover reasonable remuneration for the work he had done and his claim succeeded. Although the ground of restitution was never identified, it appears that for Greer LJ the relevant ground was mistake,[9] namely a mistaken belief that a valid contract had been made. This is dubious, however, because the mistake was surely one of law, which was not a recognized ground of restitution at the time. It might be considered that the ground of restitution could alternatively have been total failure of basis. Whether it would have been possible to establish this ground is a matter of some difficulty since the directors were not authorized to act for the defendant, so the defendant company was unaware of the basis which the claimant expected to receive for the provision of his services, save if the defendant’s contemplation of the claimant’s expectation could be assumed though an objective interpretation of the facts.[10]
The second case where restitution was awarded in the context of a contract which was void for want of authority is the decision of the House of Lords in Guinness plc v Saunders,[11] which causes even more difficulties in identifying a relevant ground of restitution. In Guinness the claimant company had paid the defendant ?5.2 million for his assistance in a successful takeover bid. This contract was void for want of authority under the company’s articles of association, and the claimant successfully recovered the money it had paid to the defendant. The ground of restitution was not specifically identified by the court, but it could not have been total failure of basis because the defendant had provided some beneficial services to the claimant. This would not have been an obstacle if absence of basis is recognized as a ground of restitution, since, as a matter of law, the services would not have been validly received because the defendant was not authorized to provide them. The ground of restitution could not have been mistake as to the existence of a valid contract, because the mistake was one of law which was not a recognized ground of restitution at the time,[12] although this would have been a relevant ground today. The preferable explanation of the case is actually that restitution was awarded by virtue of the defendant having breached his fiduciary duty as a director of the company. Consequently, restitution was not awarded to reverse the defendant’s unjust enrichment, but was simply a remedy arising from the commission of a wrong by the
defendant.357
- [1] By the Companies Act 2006, s 51(1) a pre-incorporation contract has effect as though it was made withthe person who purported to act for the company or as agent for it, who is consequently personallyliable on thecontract.
- [2] [1989] 1 WLR 912. See also Cotronic (UK) LtdvDezonie [1991] BCLC 721 where a restitutionary claimsucceeded in respect of building services which had been provided under a pre-incorporation contract.Although the ground of restitution was not identified, it could have been total failure of basis.
- [3] Although the mistake appears to have been a mistake of law which was not a ground of restitution atthe time.
- [4] Rover International Ltd v Cannon Film Sales Ltd (No 3) [1989] 1 WLR 912, 924.
- [5] See p 299, above.
- [6] As was effectively recognized in Valentini v Canali (1889) 24 QBD 166, although on the facts the basishad not failed totally.
- [7] [1929] 2 KB 310. 351 Guinness pic v Saunders [1990] 2 AC 663.
- [8] [1936] 2 KB 403.
- [9] Ibid, 413, where Greer LJ accepted that the contract was void because of the claimant’s mistake and sopresumably accepted that this constituted the ground of restitution.
- [10] See p 309, above. 4 [1990] 2 AC 663.
- [11] 356 PBH Birks, ‘Restitution Without Counter-Restitution’ [1990] LMCLQ 330, 332.
- [12] 357 See p 507, below.
