Capacity to Contract

Question 1

When can a protected party terminate a contract?

Answer 1

• Minors
• Mental Incompetency/Mental Illness
• Intoxication

Question 2

Minor Definition

Answer 2

A minor is a person who has not reached the age of majority (age of majority based on jdx)

Question 3

General Rules for Minors

Answer 3

1. Minors can enter into contracts
2. Watch out for state-specific exceptions
3. Right of Disaffirmance
4. Right to disaffirm applies while still a minor, and for a reasonable time after
5. Minor must disaffirm entire contract

Question 4

Right of Disaffirmance

Answer 4

Relates to minors capacity to contract - K is voidable at the option of the minor

Question 5

Exceptions for parents (for minor contracts)

Answer 5

• Parents can be liable for contract if they’ve co-signed an agreement
• Parents can be liable for crimes conducted by minor

Question 6

Exceptions to Minor’s Right to Disaffirm a Contract

Answer 6

Relevant for all 50 states; instances that supersede policy to protect children; are necessities of life

• Food
• Medical care
• Housing (shelter)
• Clothing

Certain jurisdictions, including California, add:

• Education
• Legal Services

Question 7

Mental Incompetency General Rules

Answer 7

1. To be relieved of contract duties, a person must have been legally insane at the time of entering into the contract
2. Such a contract is void, meaning no court will enforce it.

Question 8

Legally insane for Mental Incompetency

Answer 8

must have a court order to confirm via “letter of conservatorship”

Question 9

Mental Illness Rules

Answer 9

1. If a person is insane but has not been adjudicated to be legally insane –> the contract is voidable at the option of the protected party (the mentally ill party).
2. If a person has alternating periods of sanity and insanity, contracts entered during sane periods are generally enforceable (i.e. Bipolar Disorder)

Question 10

Legally Insane for Mental Illness

Answer 10

1. Expert testimony by doctor
2. Testimony of family
3. Diagnostic tests
4. Call the person as a witness

Question 11

Exceptions for Mental Incompetency AND Mental Illness

Answer 11

Food
Medical care
Housing (shelter)
Clothing

Certain jurisdictions, including California, add:

Education
Legal Services

Question 12

Policy for Mental Illness/Incompetency

Answer 12

Why protect the mentally incompetent (public policy reasons):

(1) society has decided that the conditions of being legally insane are recognized medical conditions, and

(2) the goal of K law is to have a level playing field.

Question 13

Intoxication General Rules

Answer 13

1. A person can avoid a contract if the other contracting party knows, or has reason to know, that due to intoxication, the person is not capable of understanding the nature of the transaction.
2. Intoxication can be by alcohol (liquor), legal drugs, or illegal drugs.
3. Such a contract is voidable at the option of the protected party (the intoxicated person).
4. The intoxicated person must disaffirm the contract “promptly” upon regaining sobriety.

Question 14

Exceptions to Intoxication

Answer 14

Food
Medical care
Housing (shelter)
Clothing

Certain jurisdictions, including California, add:

Education
Legal Services

Question 15

Ratification

Answer 15

Ratification means to approve or confirm a legally binding act that would not otherwise be binding in the absence of such approval or confirmation.

Question 16

Ratification Characteristics

Answer 16

• A voidable contract may be ratified by a party who contracted while disabled.
• Upon ratification, the contract becomes a valid legal obligation of the party.
• Ratification can be express or implied by conduct.
• Ratification can also occur by the failure of a party to disaffirm a contract over a period of time.

Question 17

Who does not have a capacity to contract

Answer 17

Minors

Mental Incompetency

Intoxication