Chapter 11 Capacity and Legality Flashcards
What is contractual capacity?
The capacity required by the law for a party who enters into a contract to be bound by that contract.
What is emancipation?
In regard to minors, the act of being freed from parental control.
What is disaffirmance?
The legal avoidance, or setting aside, of a contractual obligation.
Does a minor have the capacity to enter into an enforceable contract?
No. Minors or infants are usually not legally bound by contracts.
When can a minor disaffirm a contract?
Any time during minority, or for a reasonable period after minor is emancipated. The contract must be disaffirmed completely and only the minor can disaffirm the contract.
What are necessaries?
Things required for life (food, shelter, clothing, and medical attention)
What is majority rule?
Minor need only return the goods subject to the contract, provided the goods are in the minor’s possession or control. (Just the hub cap)
What is minority rule?
Increasing number of states hold the minor must restore the adult to the position held before the contract was made. (The entire car)
Exceptions to a minor’s right to disaffirm
Generally, minor can disaffirm the contract, but some states (Montana), can prohibit disaffirmance and hold the minor liable.
Can a minor disaffirm a contract for necessaries?
Yes but remains liable for the reasonable value of the goods.
What is ratification?
The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable.
When does implied ratification take place?
Takes place when the minor, on reaching age of majority, behaves in a manner inconsistent with disaffirmance.
When are parents liable?
Generally parents are not liable for contracts made by minors unless they co-sign with minor.
Does an intoxicated person have the capacity to enter into an enforceable contract?
If you knew what you were doing, yes they can. If you did not know what you were doing, no they can’t.
Court will look to see if you negotiated the contract, in which case you knew what you were doing and the case is enforceable)
Can a mentally incompetent person have the capacity to enter into an enforceable contract?
Someone with a guardian cannot enter into a binding contract; only the guardian can.
A person who has been deemed mentally incompetent the contract is voidable.
A person who has not yet been determined mentally incompetent can enter into a contract and it is valid.
Legality
For a contract to be valid and enforceable, it must be formed for a legal purpose.
Contracts contrary to statute
Contracts to do something illegal is illegal and therefore is void (ever existed)
What is usury?
Charging an illegal rate of interest.
Sets maximum interest that can be charged
Gambling?
Contracts for gambling is illegal including online gambling.
Licensing statutes?
Certain professionals shall be licensed by the state. A contract without a license can still be valid unless the license is for competence like doctors, that contract is void.
What is a covenant not to compete?
A contractual promise in which one party agrees not to compete in business with another party for a certain period of time and within a specified geographical area.
What is an unconscionable contract or clause?
A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party.
What is an adhesion contract?
A standard-form contract in which the stronger party dictates the term
What is an exculpatory clause?
A clause that releases a contractual party from liability in the event of momentary or physical injury, no matter who is at fault.
