Limitations on Capacity Rights Chapter 10 LESSON 10-2 Limitations on Capacity Rights GOALS Identify the time when a contract cannot be disaffirmed Identify contracts that cannot be disaffirmed Explain the consequences of misrepresenting age

Chapter 10 TIME OF DISAFFIRMANCE A person lacking contractual capacity can disaffirm a contract for non-necessaries: Any time while still under the incapacity Within a reasonable time after attaining capacity

RATIFICATION (#1)Ratification may consist of either of the following: Chapter 10 RATIFICATION (#1)Ratification may consist of either of the following: Giving a new promise to perform as agreed Any act that clearly indicates the party’s intention to be bound

#5 Identify the time when a contract cannot be disaffirmed. Chapter 10 #5 Identify the time when a contract cannot be disaffirmed. A party lacking capacity cannot disaffirm a contract after attaining capacity if the party has ratified the contract after attaining capacity.

Chapter 10 WHAT’S YOUR VERDICT? Can Beach do this?

RETURN OF GOODS OR SERVICES Chapter 10 RETURN OF GOODS OR SERVICES In all states, when a minor disaffirms, anything of value the minor received and still has must be returned. Loss of value In Most States: If minors are unable to return exactly what was received under the contract they can still get back everything they gave. Even if the minor returns used or damaged goods or nothing because the goods have been lost, consumed or destroyed. In Some States: A minor must return everything received in a condition as good as it was when it was received. If not the minor must pay the difference in value, or deduct the difference from the amount to be refunded. Obligations of party with capacity

#2 What must a minor return when a contract is disaffirmed? Chapter 10 #2 What must a minor return when a contract is disaffirmed? A minor must return anything of value received and still in his or her possession, even if used or damaged. If the goods have been lost, consumed, or destroyed, the contract may still be disaffirmed and the consideration of the minor returned.

Chapter 10 WHAT’S YOUR VERDICT? Can Lamon return the ring to the jeweler and receive a refund for the ring and necklace?

WHAT CONTRACTS CANNOT BE DISAFFIRMED? (#6) Chapter 10 WHAT CONTRACTS CANNOT BE DISAFFIRMED? (#6) Court-approved contracts Major commitments Banking contracts Insurance contracts Work-related contracts Sale of realty Apartment rental

#3 Can a minor disaffirm a school loan? Explain. Chapter 10 #3 Can a minor disaffirm a school loan? Explain. No, a school loan is considered a major commitment in all states and cannot be disaffirmed.

Chapter 10 WHAT’S YOUR VERDICT? Must Muller do so?

MISREPRESENTING YOUR AGE Chapter 10 MISREPRESENTING YOUR AGE In most states minors who lie about their age may disaffirm their contracts. (#4) If a minor enters a contract by giving a false age, the minor may still disaffirm the contract but be liable for the tort of false representation.

#7 What are the consequences of misrepresenting age? Chapter 10 #7 What are the consequences of misrepresenting age? A minor who misrepresents age may be liable for a tort of false representation and although still having capacity rights to disaffirm a contract may also be liable for damages in the tort.

Chapter 10 WHAT’S YOUR VERDICT? Must the store return the money?