1. Legal Capacity to Contract
Chapter 9

2. Contractual Capacity – the ability to understand the consequences of a contract
Does not require that a person understand the actual terms

3. Those parties who lack such capacity include (1)minors, (2)the intoxicated, and (3)the mentally ill/handicapped
All of these parties are said to be incapacitated or incapable

4. The Age of Majority
Minors (or the minority) are defined as individuals under the age of majority
Most states majority is 18 – Some 19 or 21

5. parties who lack capacity are considered voidable
The contracts of most
parties who lack capacity
are considered voidable

6. Disaffirmance – a refusal to be bound by a previous legal commitment
Protected party, generally, is to receive back whatever they have put in

7. What about Necessities?
Minors could be held liable for contracts made for necessities – things needed to maintain life
(ie. food, clothing and shelter)
Even if contract is disaffirmed, at least some, if not all, of the cost may still be required to be paid

8. Emancipation Severing of the child-parent relationship
Ends the duty of the parent to support a child and the duty of a child to obey the parent
** Minors may also find themselves bound to contracts if they are emancipated

9. Formal Emancipation
Occurs when a court decrees (declares) the minor emancipated

10. Informal Emancipation
Parent and minor agree to the ceasing of support
Minor marries
Minor moves out of the family home

11. 4. Minor becomes a member of the armed forces
5. Minor gives birth
6. Minor undertakes full-time employment

12. Mentally Incapacitated
Those people with severe mental illness, severe mental retardation, or severe senility (mental weakness from old age)

13. The Intoxicated
Those under the influence of alcohol, drugs or inhalant products
If a judge holds that a person is in a permanent state of alcoholism, that person’s contracts are considered void

14. Scope of Authority
A range of acts an organization has authorized an employee to do (ie. bind a company/ organization to a contract)
Capacity can come from a delegation or an apparent authority

15. Limits on the Rights of Those Without Capacity

16. When can Disaffirmance Occur?
Generally, a person lacking capacity can disaffirm a contract…
Any time while under the incapacity or..
Within a reasonable time after attaining capacity
UNLESS…
New promise or action is given after majority is reached

17. In most cases, minors must return everything received in a condition as good as it was when it was received!

18. Contracts That Can’t be Disaffirmed
Court-approved Contracts (all states)
Actors/actresses, professional athletes
Major Commitments (all states)
Armed forces, student loans, and marriage

19. 4. Insurance Contracts (most states)
3. Banking Contracts (most states)
4. Insurance Contracts (most states)
5. Work-related Contracts (most states)
6. Sale of Realty (some states)
7. Apartment Rental (few states)

20. Misrepresentation of Age
In most states, a minor who gives a false age may still disaffirm their contract
BUT…may be held liable for the tort of false misrepresentation