Pre-Learning Question What is capacity?

The Requirement of Capacity 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.

Pre-Learning Question How would you define a minor?

Minor’s Rights and Obligations 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 This presumption, known as a rebuttable presumption, can be challenged in court.

Minor’s Rights and Obligations 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 The court has established specific standards regarding who is considered a minor and what the term minority means.

Definition of Minority 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.

Legal Age 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 For many years, the age of majority was also the age at which a person could begin to buy alcoholic beverages.

Legal Age Now, however, the age of majority is 18 nationwide, but most states have raised the legal drinking age to 21.

Legal Age For legal purposes, people turn 18 at the beginning of the day before their 18th birthday.

Emancipation and Abandonment 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 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.

Misrepresentation of Age 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 Some states allow the other party to sue a minor who has misrepresented his or her age for fraud.

Misrepresentation of Age However, it is illegal to lie about your age in order to buy age-restricted products, such as alcohol.

Pre-Learning Question Why would the contracts of minors be different from the contracts of adults?

Contracts of Minors The law shields minors when they make contracts to protect them from unscrupulous adults. Minors may be vulnerable because of immaturity inexperience lack of education naïveté

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.

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.

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.

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.

Disaffirming the Whole Contract A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts.

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.

Why does the law shield minors when making contracts?

ANSWER To protect the minor from an unscrupulous adult who might take advantage of him or her.

Ratification of Minors’ Contracts After reaching the age of majority, a person can ratify, or approve, contracts made during minority.

Ratification 7.1 1 2 3 4 Offer Acceptance Reaching Majority A business advertisement in a newspaper can constitute an offer of sale, even if the advertisement is aimed toward minors. 1 If a minor agrees to the terms of an offer, then a voidable contract is created. 2 Reaching Majority Ratification When a minor reaches the age of majority, his or her contracts can be ratified. 3 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. 4

Contracts for Necessaries A minor is held responsible for the fair value of necessaries. Necessaries, or necessities, include food, clothing, shelter, and medical care.

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.

Pre-Learning Question What other classes of persons may be able to avoid contracts? Why?

Other Contractual Capacity Rules Other classes of persons are also able to avoid contracts. mentally impaired persons intoxicated persons

Mentally Impaired Persons Mentally impaired persons also have the right to disaffirm contracts because they are considered unable to make sound judgments.

Mentally Impaired Persons Before a guardian is appointed to look after the affairs of a mentally impaired person, his or her contracts are voidable.

Intoxicated Persons Persons who are intoxicated by alcohol or drugs at the time they enter a contract are sometimes able to disaffirm those contracts.

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.

Other Capacity Limitations Other classes of persons lack the capacity to enter into certain types of contracts. convicts—people convicted of a crime

Other Capacity Limitations aliens—people who are living in this country but owe their allegiance to another country enemy aliens—certain foreign-born persons designated as such during time of war

End of Section 7.1