Capacity To Contract

Front 1

What is capacity?

Back 1

the ability to incur legal obligations and acquire legal rights

Front 2

What are the primary classes of people who are considered to lack capacity?

Back 2

- minors ( in legal terms infants)

- persons suffering from mental illness or defects

- intoxicated persons.

Front 3

How does this effect contract law when abiding people with lack of capacity?

Back 3

contract law gives the right to avoid (escape) contracts that they have entered during INCAPACITY.

Provides a means of protecting people who, because of mental impairment, intoxication, or youth and inexperience, are disadvantaged in the normal give-and-take of the bargaining process.

Front 4

Is having lack of capacity voidable?

Back 4

yes by the legally incapicated party.

Front 5

What makes the contract void on the basis of lack of capacity?

Back 5

it is void if a party is adjudicated (or decreed) to be mentally incompetant or so impaired that he could not manifest asset.

Front 6

What are a minors rights?

Back 6

Courts granted minors the right to avoid contracts to protect them from their own improvidence and adult overreaching.

their exercise of right to avoid a contract is called disaffirmance.

Front 7

Who can disaffirm?

Back 7

the minor, and a legal representative such as a guardian or parent.

Front 8

is there formal acts or written statements required to make the disaffirmance valid?

Back 8

no, any words effectively communicate the minors desire to cancel the contract can constitute disaffirmance.

Front 9

What is the purpose of disaffirmance?

Back 9

to discourage adults from dealing with minors.

Front 10

What are exceptions to the minors right to disaffirm?

Back 10

In most states, a minor cannot disaffirm:

marriage

agreements to support their children

Educational loans

Life and Medical insurance contracts

contracts for transportation by common carriers

contracts to employ child actors

Front 11

What is the age of majority for contracting purposes?

Back 11

In most states, the period is up to the age of 18,

Front 12

What is emancipation?

Back 12

The terination of a parents right to control a child and recieve services and wages from him.

Front 13

What are the requirements of emancipation?

Back 13

none, it can occur by the parents express or implied consent,

OR

by the occurrence of some events such as marriage of the child.

Front 14

Does emancipation consider a minor the capicity to a contract?

Back 14

no, in most states, the mere fact that a minor is emancipated DOES NOT ive him capacity to contract.

a person younger than the legal age of majority is GENERALLY held to lack capacity to enter a contract, even if he is married and employed full time.

Front 15

What is the Reasonable time of Disaffirmance?

Back 15

A minor may disaffirm at any time while a minor plus a reasonable time after reaching majority.

Front 16

What is the exception of dissaffirming in a reasonable time?

Back 16

The exception is for contracts concerning real estate which cannot be disaffirmed until majority.

THE RULE: is based on the special importance of real estate and on the need to protect a minor from improvidently disaffirmation a transaction (such as mortgage or conveyance) involving real estate.

All other contracts is formed does not end on the day he reaches the age of majority. It continues for a period of time after he reaches majority.

Front 17

How long after reaching majority does a person retain the right to disaffrim the contracts he made while a minor?

Back 17

A few states have statutes that prescribe a definite time limit on the power of avoidance.

In most states however, there is no set limit on the time during a person may disaffirm after reaching majority.

Front 18

What if the adult relied on the contract with something in value?

Back 18

If an adult relied on the contract or has given something in value to the minor, the minor must disaffirm within reasonable time after reaching majority

Front 19

How can the child ratify his right to disaffirm?

Back 19

If he delays longer than a period of time that is considered to be reasonable under circumstances, he will run the risk of ratifying the contract.

Front 20

What is the exception to being on the contract longer with a minor?

Back 20

If the adult has neither performed nor relied on the contract, however, the former minor is likely to be accorded to a longer period of time in which to disaffirm, sometimes even years after reaching majority.

Front 21

When can ratification be done?

Back 21

As soon as the minor becomes majority, ratification is then done either an oral or written statement!

Or

Is often implied by Conduct on the part of the former minor.

E.g a former minors acceptance or retention of benifits given by the other party for an unreasonable time after he has reached majority can constitute ratification.

Front 22

In duties to return consideration, what happens if neither party has performed his part of the contract?

Back 22

The parties relationship will simply be canceled by disaffirmance.

Front 23

What if the minor has paid money to the adult and the adult has given property to the minor?

Back 23

Then each party has the duty to return to the other any consideration that the other has given.

Front 24

What if the minor is unable to return the consideration?

Back 24

Most states will permit him to disaffirm the contract

The minor also has the right to recover some property that has been transferred to third parties.

Front 25

What applies to returning consideration under the Ucc from a minor?

Back 25

A minor can't recover goods that have been transferred in good faith purchaser.

E.g minor sells a car to adult A, and Adult A sells the car to adult B, the minor can't disaffirm the contract and have the car returned.

Front 26

If the consideration given by the adult party has been lost, damaged, destroyed, or simply has depreciated in value, is the minor required to make restitution to the adult for the loss?

Back 26

in some states,The minor is traditionally not obligated to pay the adult for the benifits she has received or to compensate the adult for loss or depreciation of the consideration

In some states require minors who disaffirm their contracts and seek refunds of purchase price to reimburse adults for the use or depreciation of their property.

Front 27

What is the minors obligation to pay reasonable value of necessaries?

Back 27

disaffirming minors are required to pay the reasonable value of items that have been furnished to them that are classified as necessaries.

Front 28

What is the minors liability according to reasonable value of the necessaries?

Back 28

Minor’s liability is quasi contractual –liable for the reasonable value of the necessaries actually received.

Front 29

What are the effects on misrepresentation of age?

Back 29

Traditionally, a minor’s misrepresentation of his age does not affect his right to disaffirm a contract.

State law in many states the minor is estopped from asserting his infancy as a defense if he misrepresented his age.

Front 30

What are the effects of contracting with a mentally incompetent person?

Back 30

The contracts of mentally incompetent persons are either:

void (if there is a prior adjudication of mental incompetence)

OR

voidable (if there is no such prior adj.).

Front 31

What is considered mental illness?

Back 31

The mental illness has to be so severe as to negate one’s capacity to understand.

Front 32

How will the courts rule someone with mental incompetence?

Back 32

THE COGNITIVE TEST

Traditionally, the court asks whether the person had sufficient mental capacity to understand the nature and effect of the contract.

Front 33

What is the volitional test?

Back 33

The Restatement (Second) approach is to ask whether he is UNABLE TO ACT in a REASONABLE manner concerning the transaction and did the OTHER PARTY KNOW OR HAD REASON to know this.

Front 34

What is the effect of incapacity caused by mental impairment with no prior adjudication?

Back 34

that individual’s mental state is judged on a contract-by-contract basis.

Front 35

How do the courts judge the case involving contracting with incapacity if mental impairment?

Back 35

The court zooms in on the individual’s mental state at the time that they entered the particular contract that they now wish to disaffirm.

Front 36

What are the exceptions of someone rescinding the contract if mentally impaired?

Back 36

If that individual entered into the contract while lucid (clear-minded), that particular contract cannot be rescinded.

if there is prior adjudication, the contract is VOID.

Front 37

What are some cases that the contract with mental impairement is to be void?

Back 37

Is adjudicated incompetent at time of contracting.

Front 38

How can the mentally impaired victim receive his/her right to disaffirm?

Back 38

To avoid the contract, the formerly incapacitated person must disaffirm the contract once he regains his capacity.

•Failure to disaffirm constitutes ratification.

Any consideration given by the otherparty must be returned.

The formerly incapacitated person has quasi contractual liability for necessaries.

Front 39

What happens when a contract is formed with someone that was intoxicated?

Back 39

a contract formed by an intoxicated person is voidable if the intoxication was so extreme as to make them lack capacity.

The other party to the contract must know (or have reason to know) that the intoxicated person is unable to understand the nature, purpose, and effect of his actions;

OR

that he is unable to act reasonably because of it.

Front 40

Do intoxicated victims have the same rights of disaffirmance?

Back 40

The rules governing disaffirmance and necessaries are similar to those for minors or the mentally impaired.

Front 41

Are courts just as sympathetic to intoxication then to minors or mentally incompetent

Back 41

Courts traditionally have been less sympathetic with persons who are intoxicated at the time of contracting than with minors or those with mental defects.