Chapter 7 Contractual Capacity

Capacity The legal ability to enter a contract. Rebuttable Presumption: a person is permitted to presume that the other party has capacity Can be challenged in court.

Definition of Minority Majority ~ when you reach legal age of adulthood Minor (Infancy, minority) ~ not yet reached legal age Legally, you reach your next age at the beginning of the day before your birthday. For hundreds of years the age of majority was 21 In 1972, it was lowered to 18.

Emancipation When minors are no longer under the control of their parents Occurs when someone marries or leaves home Minors then abandon the protection afforded them as minors

Misrepresenting Age  If a minor claims to be of age, they committed fraud and are responsible  The other party may sue for damages, but must prove the 5 elements of fraud  Some states do not allow minors to be sued unless they are buying an age restricted product (alcohol)

Voidable Contracts Contracts made by minors are voidable Minors may disaffirm (avoid) their contracts This is to protect against immaturity, inexperience, lack of education, or naiveté.

Returning the Merchandise  If a minor disaffirms the contract, they are obligated to return the merchandise received.  In some cases, even if the minor does not have the merchandise, they may receive a refund.

Disaffirming the Whole Contract Must disaffirm all or none of the contract

Disaffirming Contracts With Other Minors Both parties have the right to disaffirm the contract Contracts between minors and adults: the adult may not disaffirm the contract

Ratification of Minors’ Contracts After reaching legal age, a person can ratify (approve) contracts made as a minor They can do this orally, in writing, or through their actions Does not have to be done formally

Contracts for Necessaries A minor is held responsible for the fair value of necessaries (necessities) i.e. food, clothing, shelter, medical care Under common law it depended on your “station in life”

Specialty Statutory Rules Many states give minors capacity to enter into contracts for car or life insurance Married minors might be treated as adults

Mentally Impaired Persons Are considered unable to make sound judgments Their contracts are voidable If declared insane or incompetent by the courts, they are assigned a guardian and their contracts are absolutely void.

Intoxicated Persons May be from drugs or alcohol Must be so intoxicated that they did not understand the purpose, nature, or effect of the transaction

Other Limitations Aliens ~ people who are living in this country, but owe allegiance to another May be changing circumstances in times of war or peace See p. 157: Last ¶