1. CHAPTER 10 10-1 Capacity Rights 10-2 Limitations on Capacity Rights
4/21/2018
Chapter 10
CHAPTER 10
Law of Capacity
Lessons
10-1 Capacity Rights
10-2 Limitations on Capacity Rights

2. Chapter 10
HOT DEBATE
Can Simon prevent Angela from carrying out the terms of the contract? Why or why not?
Can Angela be held liable for the magazine’s losses? Why or why not?

3. Capacity Rights GOALS LESSON 10-1
CHAPTER 10
4/21/2018
Chapter 10
LESSON 10-1
Capacity Rights
GOALS
Identify parties who have contractual capacity
Identify what contracts can be disaffirmed
Explain the role of capacity in organizations

4. Chapter 10
WHAT IS CAPACITY?
Minors are under the age of majority, which is 18 in most states.
Contractual capacity is the ability to understand that a contract is being made and its general meaning.

5. Chapter 10
CAPACITY RIGHTS
Necessaries-goods and services that are needed to maintain life and lifestyle.
Non-necessaries-things that are relative luxuries.
Disaffirmance-ending a contract when both parties give back the consideration.
Ratification-acting toward a contract as through one intends to be bound by it.

6. Why are some parties protected with special contractual rights?
Chapter 10
Why are some parties protected with special contractual rights?
(#13)A contract requires an offer, acceptance, mutual assent and consideration.
(#13)The law protects certain parties (minors, the mentally incapacitated, and the intoxicated) because they are assumed not to have contractual capacity, the ability to understand that a contract is being made and its general meaning.
(#13) Therefore, they cannot reasonably assent to a contract. The law assumes that these protected parties cannot protect their self-interests.

7. #16 Identify parties who have contractual capacity.
Chapter 10
#16 Identify parties who have contractual capacity.
Everyone has contractual capacity except minors, mentally incapacitated persons, and intoxicated persons.

8. Chapter 10
#14 What kinds of things are considered necessaries? Can a car be a necessary?
Necessaries are goods and services that are reasonably required to maintain a person’s lifestyle, including basic food, clothing, shelter, and transportation.
Some courts hold that an automobile is a necessary when it is essential for the party to earn a living.

9. MINORS Minority is the status of parties who are minors.
Chapter 10
MINORS
Minority is the status of parties who are minors.
Age Of Majority is the age at which a person can be legally bound to contracts.

10. MINORS In most states, people under the age of 18
Chapter 10
MINORS
In most states, people under the age of 18
In a few states, age of majority is 19 or 21
Also referred to as being in their minority or under the age of majority

11. Chapter 10
EMANCIPATION
Emancipation is the severing of the child-parent relationship.
Early emancipation
Formal emancipation occurs when a court decrees the minor emancipated.
Informal emancipation arises from the conduct of the minor and the parent.

12. EVIDENCE OF INFORMAL EMANCIPATION
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EVIDENCE OF INFORMAL EMANCIPATION
The parent and minor agree that the parent will cease support
The minor marries
The minor moves out of the family home
The minor joins the armed forces
The minor gives birth
The minor undertakes full-time employment

13. Chapter 10
MENTAL INCAPACITY
Mental incapacity is not having the ability to understand the consequences of contractual acts.
The test is whether the party understands the consequences of his or her contractual acts.

14. Chapter 10
INTOXICATION
Intoxication can arise from using alcohol, from using drugs, or inhaling products such as glue or aerosols.
Many courts are reluctant to allow disaffirmance for intoxication when it may injure another.

15. Chapter 10
WHAT’S YOUR VERDICT?
Can Susan get her money back?

16. WHICH CONTRACTS CAN BE DISAFFIRMED?
Chapter 10
WHICH CONTRACTS CAN BE DISAFFIRMED?
Necessaries are goods and services that are reasonably required to maintain a person’s lifestyle.
Non-necessaries are all other goods and services or relative luxuries.

17. #17 Under what conditions can a contract be disaffirmed?
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#17 Under what conditions can a contract be disaffirmed?
if a party without contractual capacity for a non-necessary made the contract.
A minor after entering majority if it is done within a reasonable length of time after majority is attained. Parties who are not in a protected class cannot disaffirm a contract.
A minor who is emancipated

18. Chapter 10
#17
A person who is declared insane by a judge has a complete lack of capacity and all this party’s contracts are void.
In many cases a court will not permit intoxication as a reason for disaffirmation because intoxication is a voluntary act.
Except in the case of insanity, only contracts for non-necessaries can be disaffirmed.

19. WHAT’S YOUR VERDICT? Could he hold the minors liable for the rent?
Chapter 10
WHAT’S YOUR VERDICT?
Could he hold the minors liable for the rent?

20. CAPACITY IN ORGANIZATIONS
Chapter 10
CAPACITY IN ORGANIZATIONS
Some people who work for organizations have the capacity to bind the organizations to contracts.
Scope Of Authority - Within the range of acts an organization has authorized a party to do.
Capacity to contract can be created when the employer tells an employee that he or she is authorized to bind the organization.
Capacity to contract can be created when an organization leads others to believe that a person has certain authority.

21. Chapter 10
#15 Why do both vendors and employees of an organization need to be concerned with scope of authority?
A vendor should be certain the employee has the authority to make the contract, as it will not be valid if the employee does not have such authority.
The employee should also be aware of the scope of authority because the employee may be held personally responsible for the consideration in the contract if he or she makes it outside the scope of authority.

22. #18 What is the role of capacity in organizations?
Chapter 10
#18 What is the role of capacity in organizations?
Capacity in an organization refers to what an employee or associate is authorized to contract for in the name of the organization.
An employee or associate cannot enter a valid contract for some consideration beyond his or her capacity.
Nor can the association be held responsible for such a contract if the employee or associate enters it.

23. WHAT’S YOUR VERDICT? Is the store bound by Caryn’s contract?
Chapter 10
WHAT’S YOUR VERDICT?
Is the store bound by Caryn’s contract?