Capacity Flashcards
What is capacity under RS 12?
(1) No one can be bound by a contract who has no legal capacity to incur at least voidable contractual duties.
(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
(b) An infant
(c) Mentally Ill or defective
(d) Intoxicated
Capacity
What is the rule for a contract entered into by an infant?
Minors contracts are voidable at law, except for necessaries.
Capacity
What are necessaries?
These are held to the objective standard. But they are often considered to be food, shelter, etc. Anything that would be required to ensure a minor maintains status in life.
Capacity
How long are contracts voidable by a minor?
Voidable anytime while the person is still a minor, then for a reasonable amount of time after they become the age of majority.
Capacity
What happens when a minor voids a contract?
Most states will allow a minor to return the item and void the contract without restitution. Look at the in class example about the minor who purchases the 10,000 car, crashes it, the voids the contract. The car dealer must return the 10,000 dollars and they are SOL.
Capacity
What does RS 15 say about Mentally Ill or Defective?
(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.
(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.
Capacity
What is the test for mental incapacity?
If they are unable to reasonably understand the contract OR He is unable to act and the other party knows of his condition.
Capacity
What is the rule for intoxication?
Similar to the rule for mental illness. Intoxication must be so extreme as to prevent any manifestation of assent. This is held to a very high standard and requires a lot to meet it. But whether the person is incapable of manifesting their intent is held to the reasonable person standard.
What are adults presumed to be able to do in regards to contracts?
All adults are presumed to be able to enter into a contract. So it must be proved that they fall into these exceptions.
