Capacity

Question 1

§12. Capacity to Contract.

Answer 1

(1) No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances.

(2) A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby unless he is
(a) under guardianship, or
(b) an infant, or
(c) mentally ill or defective, or
(d) intoxicated.

Question 2

§14. Infants.

Answer 2

Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person’s eighteenth birthday.

Question 3

§15. Mental Illness or Defect.

Answer 3

(1) A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect
(a) he is unable to understand in a reasonable
manner the nature and consequences of the
transaction, or
(b) he is unable to act in a reasonable manner in
relation to the transaction and the other party has
reason to know of his condition.

(2) Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance under Subsection (1) terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case a court may grant relief as justice requires.

Question 4

§16. Intoxicated Persons.

Answer 4

A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication
(a) he is unable to understand in a reasonable manner the nature and consequences of the transaction, or

 (b) he is unable to act in a reasonable manner in relation to the transaction.

Question 5

§175. When Duress by Threat Makes a Contract Voidable.

Answer 5

(1) If a party’s manifestation of assent is induced by

 1. an improper threat by the other party that leaves the victim
 
 2. no reasonable alternative, 

 3. the contract is VOIDABLE by the victim.

Question 6

§174. When Duress by Physical Compulsion Prevents Formation of a Contract.

Answer 6

If conduct that appears to be a manifestation of assent by a party who does not intend to engage in that conduct is physically compelled by duress, the conduct is not effective as a manifestation of assent.

Question 7

Undue Influence

Answer 7

Un natural disposition
susceptibility
confidential relationship
intelligence and sophistication
lack of representation
opportunity