1. Chapter 9 Legal Capacity to Contract
11/17/2018
Chapter 9 Legal Capacity to Contract
9-1 Contractual Capacity of Individuals and Organizations
9-2 Limits on the Rights of Those Without Capacity
Chapter 9
LAW

2. 9-1 Contractual Capacity of Individuals and Organizations
GOALS
Identify parties who lack contractual capacity
Explain the role of capacity in organizations
Chapter 9

3. WHAT IS CAPACITY? Protections for those who lack capacity Minors
Those mentally incapacitated
The intoxicated
Chapter 9

4. What three classifications of individuals lack contractual capacity?
Chapter 9

5. WHO HAS CONTRACTUAL CAPACITY IN ORGANIZATIONS?
Scope of authority
Employer grants authority to employee
Assumption of authority based on job title
Chapter 9

6. In what two ways is capacity to contract on behalf of an organization created?
Chapter 9

7. 9-2 Limits on the Rights of Those Without Capacity
GOALS
Recognize the time frame during which a contract can be disaffirmed
Identify contracts that cannot be disaffirmed
Discuss the effects of misrepresentation of age on contractual responsibilities
Chapter 9

8. WHEN CAN DISAFFIRMANCE OCCUR AND WHAT MUST BE DONE AT THAT TIME?
Any time while still under the incapacity
Within a reasonable time after attaining capacity
Chapter 9

9. WHAT MUST BE DONE UPON DISAFFIRMANCE?
Loss of value
Obligations of party with capacity
Chapter 9

10. Disaffirmance Timeline
Chapter 9

11. When can a person who lacks contractual capacity disaffirm a contract?
Chapter 9

12. CONTRACTS THAT CANNOT BE DISAFFIRMED
Court-approved contracts
Major commitments
Banking contracts
Insurance contracts
Work-related contracts
Sale of realty
Apartment rental
Chapter 9

13. What contracts entered into by minors cannot be disaffirmed in any of the 50 states?
Chapter 9

14. CONTRACTUAL EFFECT OF MISREPRESENTING AGE
Other party to the contract may collect damages
Minor still may be able to disaffirm contract
Chapter 9

15. If minors lie about their age, what happens in most states with regard to their ability to disaffirm contracts for goods and services that are not necessaries?
Chapter 9

16. PREVENT LEGAL DIFFICULTIES
In making contracts . . .
Always observe and remember factors about the other person indicating whether or not they have full contractual capacity. If you are dealing with a representative of a business, ask questions about the person’s ability to bind the organization in contract.
When judging age, be skeptical. Ask for identification for anyone who looks like they are within a decade of the age of majority.
Continued on the next slide
Chapter 9

17. PREVENT LEGAL DIFFICULTIES
If the people you want to contract with have alcohol on their breath, watch for signs of drunkenness. If they display these symptoms and you still want to contract with them, be sure you have a witness or other proof of the fact that they know they are making a contract.
Remember the other party in a transaction is seldom primarily concerned with your best interest and generally is not obligated to volunteer information about their capacity.
Continued on the next slide
Chapter 9

18. PREVENT LEGAL DIFFICULTIES
When contracting with the elderly, be certain that they can understand the consequences of any contract you enter into with them.
If you are a minor, do not misrepresent your age. The consequences may hurt you more than not being allowed to contract.
Chapter 9