Ch 14: Capacity and Legality

Question 1

Contractual capacity

Answer 1

legal ability to enter into a contract

Question 2

Capacity isn’t present subject to

Answer 2

Insanity and rules apply that result in contractual capacity being absent

Question 3

insanity

Answer 3

person doesn’t have the ability to take care of their own self-interest
- can be backtracked to where judge deems appropriate
-business people must ensure that clients are mentally stable (could result in losses)

Question 4

lucid intervals

Answer 4

periods where people are temporarily sane. Gotta be careful when dealing with these people because it might not last long. Wishes can be heard in court

Question 5

incompetence because of intoxication

Answer 5

can void a contract, but not popular with juries and its not a good excuse

Question 6

age of majority

Answer 6

if you have not reached the age of majority you are a minor. Every state has their own age of majority

Question 7

disaffirmance

Answer 7

a contract entered into by a minor is valid but is voidable by the minor’s option.
Merchants have every right to not sell to minors to protect themselves

Question 8

disaffirmance regular conduct

Answer 8

kid must only return consideration in the condition it is at time of disaffirmance to receive total consideration back
(kid totals care but not his fault)

Question 9

disaffirmance egregious conduct

Answer 9

minor must return consideration in condition it was upon receipt

Question 10

legality

Answer 10

contract must be legal, for a legal purpose, and provisions within it must be legal

Question 11

What will judge do if all of a contract is legal except for one clause

Answer 11

judge will attempt to save contract

Question 12

licensing statutes

Answer 12

make sure you have all licenses you’re supposed to have for your line of business. if you do business with someone that isn’t licensed then there is no contract

Question 13

contract contrary to public policy

Answer 13

ability of any governmental unit to take care of the health, welfare, safety, and morals of the people - void for legality

Question 14

contracts in restraint of trade

Answer 14

void except for if the contract has a covenant not to not compete in a sale of a business legal if
- same type of business
- up to 2 years
- within 75 miles

Question 15

Contracts contrary to state

Answer 15

licensing, contracts to do something prohibited by statutory law, contract contrary to public policy, and contracts in restraint of trade, discriminatory contracts

Question 16

discriminatory contracts

Answer 16

Can’t have anything discriminating against race, age, sex, national origin, or disability

Question 17

effects of legality

Answer 17

if contract is illegal than courts leave parties where they find them. They also won’t help you if one side has performed because common law states that courts can enforce illegal contracts