Contractual Capacity

1
Chapter 7

• Contractual Capacity

2
Capacity

• The legal ability to enter a contract.
• Rebuttable Presumption a person is permitted to
  presume that the other party has capacity
• Can be challenged in court.

3
Definition of Minority

• Majority when you reach legal age of
  adulthood
• Minor (Infancy, minority) not yet reached
  legal age
• Legally, you reach your next age at the beginning
  of the day before your birthday.
• For hundreds of years the age of majority was 21
  In 1972, it was lowered to 18.

4
Emancipation

• When minors are no longer under the control of
  their parents
• Occurs when someone marries or leaves home
• Minors then abandon the protection afforded them
  as minors

5
Misrepresenting Age

• If a minor claims to be of age, they committed
  fraud and are responsible
• The other party may sue for damages, but must
  prove the 5 elements of fraud
• Some states do not allow minors to be sued unless
  they are buying an age restricted product
  (alcohol)

6
Voidable Contracts

• Contracts made by minors are voidable
• Minors may disaffirm (avoid) their contracts
• This is to protect against immaturity,
  inexperience, lack of education, or naiveté.

7
Returning the Merchandise

• If a minor disaffirms the contract, they are
  obligated to return the merchandise received.
• In some cases, even if the minor does not have
  the merchandise, they may receive a refund.

8
Disaffirming the Whole Contract

• Must disaffirm all or none of the contract

9
Disaffirming Contracts With Other Minors

• Both parties have the right to disaffirm the
  contract
• Contracts between minors and adults the adult
  may not disaffirm the contract

10
Ratification of Minors Contracts

• After reaching legal age, a person can ratify
  (approve) contracts made as a minor
• They can do this orally, in writing, or through
  their actions
• Does not have to be done formally

11
Contracts for Necessaries

• A minor is held responsible for the fair value of
  necessaries (necessities)
• i.e. food, clothing, shelter, medical care
• Under common law it depended on your station in
  life

12
Specialty Statutory Rules

• Many states give minors capacity to enter into
  contracts for car or life insurance
• Married minors might be treated as
  adults

13
Mentally Impaired Persons

• Are considered unable to make sound judgments
• Their contracts are voidable
• If declared insane or incompetent by the courts,
  they are assigned a guardian and their contracts
  are absolutely void.

14
Intoxicated Persons

• May be from drugs or alcohol
• Must be so intoxicated that they did not
  understand the purpose, nature, or effect of the
  transaction

15
Other Limitations

• Aliens people who are living in this
  country, but owe allegiance to another
• May be changing circumstances in times of war or
  peace
• See p. 157 Last