SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity Chapter 5: Contract Capacity & Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to explain the legal concept of minority (p. 148) How to identify the rights of minors in relation to contracts (p. 150)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to identify contracts that are voidable by a minor (p. 151) How a person can ratify a contract made in minority (p. 154)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to identify others, besides minors, who can rescind contracts (p. 157)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why It’s Important Understanding the rights afforded to minors in contract law will enable you to exercise your rights and help others.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The Requirement of Capacity Section Outline Minor’s Rights and Obligations Definition of Minority Misrepresentation of Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Contracts of Minors Section Outline Voidable Contracts Ratification of Minors’ Contracts Contracts for Necessaries Special Statutory Rules

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Other Contractual Capacity Rules Section Outline Mentally Impaired Persons Intoxicated Persons Other Capacity Limitations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question What is capacity?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Capacity, one of the six elements of a contract, is the legal ability to enter a contract. Capacity relates directly to the involvement of minors in contracts. The Requirement of Capacity

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract When people enter into contracts, they are permitted by law to presume that the other party or parties have the capacity to contract. Minor’s Rights and Obligations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract This presumption, known as a rebuttable presumption, can be challenged in court. Minor’s Rights and Obligations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The presumption of capacity plays a key role in contracts made by minors because the law permits minors, within certain limits, to rescind or void their contracts. Minor’s Rights and Obligations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The court has established specific standards regarding who is considered a minor and what the term minority means. Minor’s Rights and Obligations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question How would you define a minor?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The age of legal adulthood is known as the age of majority. A person who has not yet reached majority is considered a minor and is still in his or her minority. Definition of Minority

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract In 1972 the voting age was lowered from 21 to 18. At this time many states lowered the age of majority from 21 to 18. Legal Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract For many years, the age of majority was also the age at which a person could begin to buy alcoholic beverages. Legal Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Now, however, the age of majority is 18 nationwide, but most states have raised the legal drinking age to 21. Legal Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract For legal purposes, people turn 18 at the beginning of the day before their 18 th birthday. Legal Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Some states have declared that minors who are no longer under the control of their parents are emancipated. This means they are responsible for their contracts. Emancipation and Abandonment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract A minor who marries or leaves home, giving up all rights to parental support, is considered emancipated and is said to have abandoned the protection afforded him or her as a minor. Emancipation and Abandonment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract If a minor claims to be over the age of majority, then he or she has committed fraud. Fraud is a wrongful act, and minors are responsible for their wrongful acts. Misrepresentation of Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Some states allow the other party to sue a minor who has misrepresented his or her age for fraud. Other states do not. Misrepresentation of Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract However, it is illegal to lie about your age in order to buy age-restricted products, such as alcohol. Misrepresentation of Age

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question Why would the contracts of minors be different from the contracts of adults?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Contracts of Minors The law shields minors when they make contracts to protect them from unscrupulous adults. Minors may be vulnerable because of ImmaturityInexperience Lack of education Naïveté

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Voidable Contracts Contracts made by minors are voidable by the minor. This means that minors may disaffirm, or avoid, their contracts if they so choose.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Voidable Contracts To disaffirm a contract means to show the intent not to live up to the contract by a statement or some other act.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Voidable Contracts By permitting minors to have the privilege of disaffirming contracts, the law provides young people with a second chance when they use poor judgment.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Returning the Merchandise If a minor still has the merchandise he or she received upon entering a contract, that merchandise must be returned when the contract is disaffirmed.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disaffirming the Whole Contract A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disaffirming Contracts Made with Other Minors When two minors enter into a contract with each other, both parties have the right to disaffirm the contract.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why does the law shield minors when making contracts?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract ANSWER To protect the minor from an unscrupulous adult who might take advantage of him or her.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Ratification of Minors’ Contracts After reaching the age of majority, a person can ratify, or approve, contracts made during minority.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 7.1 Ratification A business advertisement in a newspaper can constitute an offer of sale, even if the advertisement is aimed toward minors. Offer If a minor agrees to the terms of an offer, then a voidable contract is created. Acceptance Reaching Majority When a minor reaches the age of majority, his or her contracts can be ratified. Ratification Using or selling an item obtained by contract for a reasonable time after reaching the age of majority has the effect of ratifying the contract. Ratification can also be accomplished orally or in writing.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Contracts for Necessaries A minor is held responsible for the fair value of necessaries. Necessaries, or necessities, include food, clothing, shelter, and medical care.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Special Statutory Rules There are many differences in state statutes regarding minors. Minors should check the statutes of their own state to find out about special contractual capacities that they may be allowed.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question What other classes of persons may be able to avoid contracts? Why?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Other Contractual Capacity Rules Other classes of persons are also able to avoid contracts. Mentally impaired persons Intoxicated persons

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Mentally Impaired Persons Mentally impaired persons also have the right to disaffirm contracts because they are considered unable to make sound judgments.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Mentally Impaired Persons Before a guardian is appointed to look after the affairs of a mentally impaired person, his or her contracts are voidable.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Intoxicated Persons Persons who are intoxicated by alcohol or drugs at the time they enter a contract are sometimes able to disaffirm those contracts.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Intoxicated Persons To disaffirm a contract for this reason, a person must have been so intoxicated at the time of the contracting that he or she did not understand the purpose, nature, or effect of the transaction.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Other Capacity Limitations Other classes of persons lack the capacity to enter into certain types of contracts. 1.Convicts—people convicted of a crime.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 2. Aliens—people who are living in this country but owe their allegiance to another country. 3.Enemy aliens—certain foreign-born persons designated as such during time of war. Other Capacity Limitations

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 1. 1.What does it mean to be a minor? Section 7.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned A minor is a person who has not yet reached the age of legal adulthood. Section 7.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 2. 2.What rights do minors have in relation to contracts? Section 7.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Minors may disaffirm, or avoid, the contracts if they so choose. Section 7.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 3. 3.What contracts are voidable by a minor? Section 7.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned In essence all contracts are voidable by a minor; however, minors may still have some responsibilities when avoiding contracts and some states may have special statutory rules regarding minors and contracts. Section 7.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Upon reaching majority, a person can ratify a contract by approving of the contract orally, in writing, or by some action. Section 7.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Critical Thinking Activity Misrepresenting Your Age Should the act of misrepresenting your age if you are a minor be considered fraud? Why or why not?

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity End of Section 7.1

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity Section 8.1

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to explain the legal concept of consideration (p. 164) How to explain the types of consideration (p. 166)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to identify certain problems regarding consideration (p. 169) How to identify the principles that apply to consideration in everyday life (p. 172)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why It’s Important By understanding the concept of consideration, you will be able to avoid problems that frequently result when agreements lack this important contractual element.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Requirements of Consideration The Legal Concept of Consideration The Characteristics of Consideration Section Outline

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Types of Consideration Section Outline Money as Consideration Property and Services as Consideration A Promise Not to Sue Charitable Pledges

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Problems with Consideration Section Outline Disputed Amounts Undisputed Amounts Consideration in Your Everyday Life

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question Why is consideration one of the six elements of a legally binding contract?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The law has always refused to enforce most gratuitous, or free, agreements. Parties to an agreement must surrender something of value in exchange for something else of value. Requirements of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract This exchange, or the promise to exchange things of value, is what binds the parties to each other in a contractual relationship. This binding element is known as consideration. Requirements of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Consideration distinguishes a legally binding agreement from other types of agreements, such as social agreements that contain an offer and an acceptance. Requirements of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Consideration is the exchange of benefits and detriments by parties to an agreement. The Nature of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract A benefit is something that a party was not previously entitled to receive. A detriment is any loss suffered. The Nature of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 8.1 Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract There are three types of consideration. The Nature of Consideration 1.Giving up or promising to give up something that you have the legal right to keep.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 2.Doing something or promising to do something that you have the legal right not to do. 3.Not doing something that you have the legal right to do, which is known as forbearance. The Nature of Consideration

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Consideration must involve these key characteristics: The Characteristics of Consideration 1.Bargained-for exchange 2.Something of value 3.Legal benefits and detriments

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What is the difference between a benefit and a detriment?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract ANSWER A benefit is something that a party was not previously entitled to receive, and a detriment is any loss suffered.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract An agreement involves a bargained- for exchange when a promise is made in return for another promise, an act, or a promise not to act. Bargained-for Exchange

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Something of Value The law has no specific value requirements on consideration. All that matters is that the parties agreed freely on the value and the price.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Something of Value Usually the courts will not even consider whether the value of the consideration is adequate. However, a contract may be deemed unconscionable, when the courts believe the consideration is completely out of line.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Legality of Consideration The courts require that the consideration involved in an agreement be legal. If the consideration is illegal, the contract is invalid.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Types of Consideration These include: MoneyPropertyServices Promises not to sue Charitable pledges

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Money as Consideration Unless price limits have been placed on certain transactions by administrative regulations, legislative fiat, or executive ruling, parties to a contract are free to exchange any amount of money that they negotiate.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Property and Services as Consideration Before money was accepted as a medium of exchange, it was common to use property and services as consideration.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Property and Services as Consideration Some parties still prefer to engage in barter agreements that involve goods and services.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract A Promise Not to Sue If one party has the right to sue another party but gives up that right in exchange for something of value, the court will generally uphold the exchange as valid consideration.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract A Promise Not to Sue Pending lawsuits are frequently settled in this manner. When a person accepts an offer and agrees not to sue, he or she is asked to sign an agreement, which is called a release.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Charitable Pledges Charitable organizations and nonprofit institutions often depend upon contributions. This dependency has led the court to enforce charitable pledges just as if they were contracts.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question What do you think happens when the parties to a contract cannot agree as to the actual amount of money owed?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Problems with Consideration When parties disagree about the amount of money that the debtor owes the creditor, a problem has arisen over the consideration involved.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disputed Amounts If the parties to a contract cannot agree as to the actual amount owed, the amount is said to be in dispute.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disputed Amounts A dispute can be settled by accord and satisfaction if the creditor accepts a payment that is less than the amount due as full payment.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disputed Amounts The acceptance by the creditor of less than what has been billed to the debtor is accord. The agreed-to settlement as contained in the accord is the satisfaction.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disputed Amounts The dispute must be real, must occur in good faith, and must not be trivial.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Undisputed Amounts If the parties have mutually agreed to a set amount of money in the contract, then the amount cannot be disputed.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Consideration in Your Everyday Life Consideration distinguishes a legally binding agreement from all other types of agreements. Consideration must be legal.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Consideration in Your Everyday Life Paying a debt in advance is consideration for settling the debt for a lesser amount. To be consideration, the act or promise must be bargained for.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 1. 1.What is consideration? Section 8.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Exchange or the promise to exchange things of value in a contract; binds parties to each other in the contractual relationship. Section 8.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 2. 2.What are the types of consideration? Section 8.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Money, property, services, promises not to sue, and charitable pledges. Section 8.1 Assessment Answer

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity End of Section 8.1

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity Section 9.1

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to explain what makes a contract illegal (p. 186) How to identify the consequences of illegality in relation to contract law (p. 186)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to identify contracts that are illegal by statutory law (p. 188) How to identify different types of licenses (p. 191)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why It’s Important By understanding the concept of illegality in contract law, you will be able to avoid problems that might arise when you consider entering a contract.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The Nature and Consequences of Illegality Illegality in Entire Agreement In Pari Delicto and Divisible Contracts Section Outline

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section Outline Agreements that Violate Statutes Civil and Criminal Statutes Usury Statutes Gambling Statutes Sunday Statutes Licensing Statutes

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question What are the consequences of being party to an illegal contract?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Legality is the last of the six elements that make up a valid contract. Even if a contract has all the other elements, it may still be invalid if it lacks a legal purpose. The Nature and Consequences of Illegality

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract A contract can be made illegal in many ways. It may be illegal if it involves an agreement to do something that violates statutory law. The Nature and Consequences of Illegality

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Making the agreement itself could be illegal. For example, individuals who agree to commit crimes for a promised consideration are involved in what criminal law calls conspiracy. The Nature and Consequences of Illegality

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Illegality in Entire Agreement If it’s impossible to separate a contract into isolated promises and acts, each of which can be performed independently of the others, then the entire contract is rendered illegal.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Illegality in Entire Agreement If any part of the agreement is contaminated by illegality, a valid contract cannot result.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract In Pari Delicto and Divisible Contracts If certain promises and actions in a contract can be successfully performed by themselves, then the contract is said to be divisible.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract In Pari Delicto and Divisible Contracts In such cases, the courts may enforce those parts of the agreement that are legal and revoke the parts that are not.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract In Pari Delicto and Divisible Contracts Parties are said to be in pari delicto (in equal fault) if they both know that the agreement is illegal. In such cases, the court will aid neither party.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract In Pari Delicto and Divisible Contracts However, if one of the parties is unaware of wrongdoing, then the parties are not in pari delicto and courts may grant relief to the innocent party.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question What type of agreements do you think would violate state statutes?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Agreements that Violate Statutes State legislatures pass laws declaring that certain types of agreements are illegal and void because they violate: Civil and criminal statutes Usury statutes

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Agreements that Violate Statutes Gambling statutes Licensing statutes Sunday statutes

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Civil and Criminal Statutes Agreements that require one party to commit a tort or a crime are illegal. Agreements to protect one party from the consequences of torts or crimes committed are also illegal.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What does in pari delicto mean and how does it relate to illegal contracts?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract ANSWER It means “in equal fault” and refers to both parties of a contract who know that an agreement is illegal.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Usury Statutes Each state sets a maximum interest rate that lenders can charge for loans by statute. Interest is the fee the borrower pays to the lender for using the money.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Usury Statutes The interest rate the lender and borrower agree upon must not exceed the maximum rate allowed by state law. Charging more than the maximum legal interest rate is usury.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Gambling Statutes State statutes also prohibit gambling agreements—agreements in which one party wins and another party loses, even if some skill may be involved.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Gambling Statutes Gambling agreements include: Playing cards for money. Money wagers or bets on elections or sports events. Buying tickets in a sports pool.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Gambling Statutes In the past, most states prohibited gambling. Recently, however, many states changed their laws to allow some regulated gambling, such as

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Gambling Statutes Betting at racetracks. Certain forms of off-track betting. State-run lotteries.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Gambling Statutes A lottery is a game that consists of drawing lots, typically tickets with different combinations of numbers printed on them, in which prizes are distributed to the winners among persons buying a chance.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Sunday Statutes In some states, it is illegal to make or perform contracts on Sunday. These are called Sunday statutes or blue laws. The statutes vary greatly from state to state.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Licensing Statutes A license is a legal document stating that the holder has permission from the proper authorities to carry on a certain trade or profession.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Licensing Statutes All states have statues that require persons to have a license to practice certain trades or professions and engaging in such a trade or profession without a license is illegal.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Licensing Statutes Some licenses are designed to protect the public from dealing with unqualified persons. Some state statutes require licenses simply to raise revenue.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Licensing Statutes In most states the following trade and professional workers must be licensed: NursesSurveyors Funeral directors BarbersPlumbers

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 1. 1.What makes a contract illegal? Section 9.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Illegal contracts may be created in many ways. A contract may be illegal if it involves an agreement to do something that violates statutory law. Section 9.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 2. 2.What are the consequences of illegality in relation to contract law? Section 9.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned If the contract cannot be separated into isolated promises and acts that can be performed independently, the entire contract is rendered illegal. If any part of the agreement is illegal, a valid contract cannot result. Section 9.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned If the contract is divisible the court may enforce the legal parts of the agreement and revoke the illegal parts. Section 9.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 3. 3.What contracts are illegal by statutory law? Section 9.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Contracts that violate a state’s civil or criminal statutes, usury statutes, gambling statutes, licensing statutes, or Sunday statutes. Section 9.1 Assessment Answer

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 4. 4.What are the different types of licenses? Section 9.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Some licenses raise revenue, other are designed to protect the public. Section 9.1 Assessment Answer

SECTION OPENER / CLOSER: INSERT BOOK COVER ART Contractual Capacity End of Section 9.1