Chapter 10 Contractual Capacity BUSINESS LAW/MUSOLINO

10-2 Learning Objectives 1. Describe the legal presumption regarding capacity 2. Explain why the law allows minors to void contracts 3. Differentiate between the age of minority and the age of majority 4. Explain how the Constitution affects the age of majority 5. Distinguish between emancipation and abandonment

10-3 Learning Objectives 6. Assess the liability of a minor who lies about his or her age 7. Describe the legal liability of minors in contracts involving necessaries 8. Identify exceptions to the general rule about minors and contracts 9. Explain the effects of mental impairment on contractual capacity 10. Discuss the contractual capacity of drugged or intoxicated persons

10-4 Question? What is the legal ability to enter into a contractual relationship? A. Capacity B. Contractualability C. Affirmation D. Competence

10-5 Minors’ Rights and Obligations Capacity  the legal ability to enter into a contractual relationship Rebuttal presumption Disaffirm

10-6 Minors’ Rights and Obligations When a minor indicates by a statement or act an intent not to live up to a contract, that minor is entitled to a return of everything given to the other party

10-7 Question? What term describes persons who have not yet reached the age of 21 years? A. Majority B. Minority C. Mainstream D. Competent

10-8 Definition of Minority Minority  under common law, was a term that described persons who had not yet reached the age of 21 years In some states, a person becomes an adult at the beginning of the day before his or her 18th birthday

10-9 Question? Minors who become _________ are no longer under the control of their parents. A. Competent B. Considerate C. Emancipated D. Open

10-10 Emancipation and Abandonment In some jurisdictions, minors who become emancipated, that is, no longer under the control of their parents, are responsible for their contracts This responsibility means that they cannot void a contract, despite their apparent minority

10-11 Misrepresentation of Age Minors sometimes lie about their age when making a contract Despite this misrepresentation of age, most states will allow the minor to disaffirm or get out of the contract

10-12 Contractual Capacity of Minors Executory contracts, those that have not been fully performed by both parties, may be repudiated by a minor at any time A promise to deliver goods or render services at some future time need not be carried out by the minor who decides not to do so

10-13 Question? ____________ are those goods and services that are essential to a minor’s health and welfare. A. Needs B. Wants C. Requirements D. Necessaries

10-14 Contracts for Necessaries Necessaries  those goods and services that are essential to a minor’s health and welfare

10-15 Other Contracts Not Voidable Minors may not:  disaffirm a valid marriage  repudiate an enlistment contract in the armed forces based on a claim of incapacity to contract  repudiate payments for inoculations and vaccinations required for attendance at a university or college or required in securing a visa for travel in certain foreign lands

10-16 Other Contracts Not Voidable Shield or Sword Doctrine Voidable Contracts and Innocent Third Parties

10-17 Question? What is the willingness to abide by contractual obligations? A. Ratification B. Authorization C. Confirmation D. Authentication

10-18 Ratification of Minors’ Contracts Ratification  the willingness to abide by contractual obligations  Also called affirmance

10-19 Question? What is an example of a capacity problem? A. Persons Mentally Impaired B. Persons Legally Insane C. Persons Drugged or Intoxicated D. All of the above

10-20 Other Capacity Problems Persons Mentally Impaired Persons Legally Insane Persons Drugged or Intoxicated