1. Law For Personal And Business Use
Chapter 10
Law Of Capacity

2. What Is Capacity?
Offer, acceptance, genuine assent and consideration satisfy major requirements of contract
Contractual capacity
Ability to understand contract being made and its general meaning
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3. What Is Capacity?
Certain parties to contract assumed by law to lack maturity, experience or capacity
Minors
Mentally incapacitated
Legally insane can’t understand consequences of acts
Intoxicated
Stricter standards used because intoxication is voluntary
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4. What is Capacity? If minor, may become emancipated
Minors are under 18 in most states, 19 or 21 in some others
Emancipation
Severing of child-parent relationship
Ends duty
Naturally occurs at age of majority
May formally be done by courts
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5. What is Capacity? Emancipation may be informal
Parent or minor agree parent will cease support
Marry
Move out of family home
Join armed forces
Gives birth
Full-time employed
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6. Which Contracts Can Be Disaffirmed?
Two basic protections granted to those who lack capacity when purchasing—
Necessaries
Protected parties need pay only fair market value
Must not already possess those
goods or services
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7. What Is Capacity?
Two basic protections granted to those who lack capacity when purchasing—
Non-necessaries (luxuries)
Must pay contracted price but have right to disaffirm
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8. Capacity In Organizations
Scope of authority
Range of acts organization authorized a person working for it to do
Capacity to contract can be created when employer tells employee authorized to bind organization
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9. Capacity In Organizations
Scope of authority (cont.)
Important that person signing contract have scope of authority to bind organization
People acting outside scope of authority may be held personally liable
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10. Review Think About Legal Concepts, page 146
Think Critically About Evidence, page 146
Label and include in notebook
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11. Time Of Disaffirmance And Ratification
Protected parties can disaffirm contract for non-necessaries
Any time while still under the incapacity
Within a reasonable length of time after attaining capacity
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12. Time Of Disaffirmance And Ratification
For minor, must occur after achieving majority
May consist of:
Giving new promise to perform as agreed
Any act that clearly indicates party’s intention to be bound
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13. Return Of Goods or Services
In most states, if minor unable to return exactly what received under contract, minor can still get back everything gave
Reason merchants have adults, not minors contract
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14. What Contracts Cannot Be Disaffirmed?
Court-approved
Major commitments
Educational loans, enlisting in military
Banking contracts
Insurance contracts
Work-related contracts
Sale of realty
Apartment rental
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15. Misrepresenting Your Age
Minor who lies may still disaffirm
Minor may be sued for misrepresentation
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16. Review Think About Legal Concepts, page 149
Think Critically About Evidence, page 149
Label and include in notebook
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