ch.16

Question 1

What is capacity?

Answer 1

Mental ability to understand rights and obligations established by contract, with the
presumptive ability to understand how to comply with the terms of the agreement

Question 2

If both parties have Full Capacity, the contract is what?

Answer 2

is Valid and enforceable by both parties

Question 3

If one of the parties has Limited Capacity, the contract is Voidable by the party…

Answer 3

with Limited Capacity and has the power to enforce or Void the contract.

Question 4

Who has capacity?

Answer 4

Natural persons over the age of majority (18 in most states) are presumed to have full
legal capacity

Question 4

If one of the parties has No Capacity then the contract is automatically…

Answer 4

Void

Question 5

Who has limited capacity?

Answer 5

• Minors
• Those suffering from mental deficiency that renders them incapable of understanding
  the nature and obligations of contracts
• Those who are intoxicated

Question 6

Who has no capacity?

Answer 6

• Those adjudicated insane
• Those adjudicated habitually intoxicated
• Those with appointed legal guardians

Question 7

Are contracts with minors voidable?

Answer 7

yes

Question 8

How long do minors control the enforceability of contracts while they are minors?

Answer 8

Minors control enforceability of Contracts while they are minors and up to a reasonable amount of time after becoming adults

Question 9

When a minor has the intent to rescind/disaffirm/void the contract, what happens to consideration?

Answer 9

• Any consideration received is returned.
• Even if consideration is damaged/destroyed, other party has no recourse against
  minor.

Question 10

What are valid contracts?

Answer 10

Contracts enforceable by parties with Full Capacity against minors

Question 11

Contracts for necessaries are typically enforced how?

Answer 11

against the minor and paid by parents

Question 12

Contract may be enforced against minor after minor reaches age of majority if what?

Answer 12

• express ratification
• implied ratification
• reasonable time has passed after minor becomes as adult

Question 13

Can an intoxicated party rescind a contract?

Answer 13

If the unintoxicated party know the other party was intoxicated and has limited capacity and take advantage of poor judgement of the intoxicated party, then the contract is voidable and the intoxicated party may rescind/disaffirm/Void contract within a reasonable time after becoming
sober

Question 14

When will the courts liberally interpret behavior that seems likes ratification

Answer 14

once the intoxicated
person becomes sober

Question 15

What is an exception to illegal contracts?

Answer 15

severable contracts

Question 16

Contracts can be illegal for reasons that include:

Answer 16

• violating state or federal statue
• contradicting public policy