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

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What You’ll Learn How to explain the legal concept of 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 Legal Terms capacity (p. 147) rebuttable presumption (p. 147) majority (p. 148) minor/minority (p. 148) emancipated (p. 148)

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Legal Terms abandoned (p. 148) ratify (p. 154) necessaries (p. 156) guardian (p. 157) aliens (p. 157)

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 4. 4.How can a person ratify a contract made in minority? Section 7.1 Assessment

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 Reviewing What You Learned 5. 5.Name two other classes of persons who are able to avoid contracts. Section 7.1 Assessment

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Mentally impaired persons and intoxicated persons. 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?

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Critical Thinking Activity Misrepresenting Your Age Answer Answers may vary, but should compare the elements of fraud with the misrepresentation of age if you are a minor.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Legal Skills in Action What Is a Good Age? Over the past 30 years, the voting age, the age of majority, and the age at which a person could buy alcoholic beverages has changed.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Legal Skills in Action What Is a Good Age? Conduct additional research, if necessary, and with a partner debate your position on the ages for voting, majority, and buying alcoholic beverages.

Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Legal Skills in Action Answer What Is a Good Age? Debates will vary, but should include information that supports their positions.

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