Texas Real Estate Contracts 4 th Edition © 2015 OnCourse Learning

Chapter 4: Capacity of the Parties © 2015 OnCourse Learning

Capacity, in general The purpose for requiring parties to the contract to be legally competent centers around the notion that we as a society should protect individuals who may not be capable of understanding the nature of a contractual relationship. © 2015 OnCourse Learning

Minors Minors can be defined as individuals (1) who are under the age of eighteen, (2) who have never been married, and (3) who have not had their disability of minority removed by a court order. © 2015 OnCourse Learning

General Rule A contract entered into by a minor is voidable at the option of the minor. The minor at any time during his or her minority or within a reasonable time after majority may terminate the contract without liability for breach of the contract. © 2015 OnCourse Learning

Exceptions Necessaries Misrepresentation © 2015 OnCourse Learning

--Necessaries Necessaries are defined as "board, lodging, wearing apparel, medicine, medical attendance, and education." Where a contract for necessaries is involved, the contract can be enforced against the minor. © 2015 OnCourse Learning

--Misrepresentation A misrepresentation is an untrue statement of material fact. Unfortunately, before an individual can raise this exception, he or she must show that he or she was actually misled by the minor and that the misrepresentation induced the making of the contract. © 2015 OnCourse Learning

Mentally Incapacitated Parties A person is considered mentally incapacitated where he or she is incapable of reasoning or acting with discretion in his or her personal affairs. Mental capacity refers to the ability of a person to understand the nature and effect of the acts in which he or she is engaged and the business that he or she is transacting. © 2015 OnCourse Learning

Two Types A mentally infirm individual is a person of weak mental health. An intoxicated individual is a person who is under the influence of an intoxicant. © 2015 OnCourse Learning

General Rule When a mentally incapacitated individual enters into a contract, the contract is voidable at the option of the incapacitated individual. If the individual has been judicially declared incompetent, the contract is void. © 2015 OnCourse Learning

Guardianships and Durable Powers of Attorney © 2015 OnCourse Learning

Guardianships A guardianship is a legal arrangement whereby one person, the guardian, is given the legal right and duty to care for another, the ward, and the ward's property. © 2015 OnCourse Learning

Powers of Attorney A power of attorney is a written instrument whereby one person, the principal, appoints another, the attorney in fact, as his or her agent and gives the agent authority to perform certain acts on behalf of the principal. © 2015 OnCourse Learning

--General Power of Attorney A general power of attorney gives the attorney in fact full power to handle his or her assets. © 2015 OnCourse Learning

--Special Power of Attorney A special power of attorney gives the attorney in fact limited power to handle his or her assets. © 2015 OnCourse Learning

--Durable Power of Attorney The authority under a durable power of attorney continues while the principal is alive and even if the principal becomes incompetent. © 2015 OnCourse Learning