Chapter 14 Flashcards
Minors
Chronologically children under 18 and not emancipated
Emancipation
the act of removing minority status and is prescribed by statutes (get married before 18)
While a minor, parents have rights to…
earnings, control, etc.
Are parents liable for breaches of contracts entered into by a minor?
No
Are parents liable for torts by a minor?
No
Generally speaking, minors can…
enter into any contract that an adult can as long as it is not against the law for them.
Disaffirmance
Words or conduct can be used by minor to express intent not to be bound.
Minors may disaffirm contracts during…
minority and for a reasonable period of time after attaining the age of majority.
A minor who is exercising his or her right of disaffirmance must…
disaffirm the entire contract. (all in or all out)
The contract is voidable by the minor, but…
not by the adult.
Employment contract. 16 year old works for KFC. Policy – tell you as a new employee that you have to sign a contract forfeiting the right to sue. Girl is injured. Workers comp. Mom files a lawsuit
Girl “disaffirmed” the contract by quitting and filing a lawsuit.
Generally, if a minor disaffirms…
each party must make restitution by returning the consideration received from the other party.
What if goods minor has are gone or damaged when the Minor disaffirms? (Majority View)
minor must only return goods that are in minor’s possession or control. Even if goods are damaged, minor still has right to disaffirm. Most protective of the minor… but allows the minor to kind of take advantage of the adult.
What if goods minor has are gone or damaged when the Minor disaffirms? (Minority View)
if goods are damaged, the minor is required to compensate adult with a “reasonable” amount for the damages. The books calls this the “minor’s duty of restitution.” They don’t get all of their money back, they have to compensate the adult for the damages.
16 year old. Bought a used pick up truck with $5,000 cash. Truck has mechanical problems. He continues to drive it until it is pretty much no longer drivable. At that point he wants his money back.
In a majority view state…
he would get all of his money back. (after a lawsuit)
16 year old. Bought a used pick up truck with $5,000 cash. Truck has mechanical problems. He continues to drive it until it is pretty much no longer drivable. At that point he wants his money back.
In a minority view state…
he only gets SOME of his money back. He compensates the adult. The truck is only worth $500 after he continued to drive it. He get’s $500 only “compensating” the adult $4,500.
Exceptions to the Minor’s Right to Disaffirm
- In some states, if a minor has misrepresented his or her age in order to induce another person to enter into a contract, the minor may still disaffirm the contract.
- Other states have statues prohibiting minors who misrepresent their age from later disaffirming contracts.
Necessaries
food, clothing, shelters, medicine, services for the minor’s protection (ambulance, hospital, etc.)
Liability for Necessaries
Minor may disaffirm a contract for necessaries but is liable for the reasonable value of necessaries that were furnished to the minor.
Is insurance viewed as a necessary?
No
Ratification
Minor accepts legal responsibility under this contract.
A contract will be enforceable if the minor indicates an intention to be bound after…
reaching the age of majority
Express ratification
when the individual, on reaching the age of majority, states orally or in writing that he or she intends to be bound by the contract
Implied Ratification
when the minor, on reaching the age of majority, indicates an intent to abide by the contract
A parent is not liable for performance of a contract made by his or her minor child unless…
the parent personally obligated himself or herself as a party to the contract, or the contract was for necessaries which the parent failed to furnish.
Generally, parents are not liable for torts committed by their minor children, but may be liable for…
negligence in failing to exercise parental control over their minor children.
Who has the burden of proof in intoxication allegations?
The party alleging the intoxication
“Competency standard” Test the person has to pass
A contract is voidable if it was made by a person who was so intoxicated that his or her judgment was impaired and he or she did not comprehend the nature of the transaction and the legal consequences of entering into the contract.
If the contracting party understands the consequences of the contract, even if he or she is intoxicated, the contract will…
not be voidable
The contract will be voidable if…
the other party to the contract fraudulently induced the person to become intoxicated.
Lucy v. Zehmer.
2 “dogone drunks” to see who could talk the biggest. Mr. Zehmer REMEMBERED many details. Mr. Zehmer couldn’t prove that his drinking caused him to “rise to this level.”
A contract may be disaffirmed while a person is intoxicated or within a reasonable time after he or she becomes sober.
Restitution must be made.
An intoxicated person must pay the reasonable value for necessaries that were furnished.
Mentally Incompetent Persons - Void Contracts
- a person is declared judicially incompetent, and
- a guardian is appointed to represent him or her,
Mentally Incompetent Persons - Voidable Contracts
A person who is not adjudicated incompetent, is considered mentally incompetent if his or her judgment is impaired because he or she cannot understand or comprehend the nature and effect of a particular transaction.
Once the voidable incompetant persons standard has been proven…
the incompetent person can disaffirm or ratify within a reasonable period of time.
BUT the contract is only voidable by the incompetent.
Brother leave the incompetent (Annabell Duffie) all of his land when he dies. Sale: Black’s buy land from Duffie for several hundred thousand dollars below fair market value.
Court’s don’t care about whether or not they have a “good deal.” But the argument goes to prove the incompetence of Duffie.
Court rules the contract with the Blacks is voidable.
Mentally Incompetent Persons - Valid Contracts
Contract entered into by a mentally ill person (not adjudicated incompetent) are valid if the contract is formed during a lucid interval.
Lucid Interval
period during which their intelligence, judgment, and will are temporarily restored
2 classes of mentally incompetent individuals:
- Those who have been adjudicated incompetent
- Those who have not been adjudicated incompetent but whose judgement is impaired because he/she cannot comprehend the nature of the transaction
Contracts Contrary to Statute
- Criminal statutes
- Usury statutes
- Gambling statutes
- Licensng statutes
Contracts to Commit Crimes
VOID
If the purpose/performance of the contract becomes illegal because of the enactment of a statute after the contract has been entered into, the parties are discharged from their obligations by operation of law.
Usury
Usury statutes fix the maximum lawful contract rate of interest that can be charged for a loan of money. The rate varies from state to state, and over time.
Exceptions to Usury
(both based on risk)
1. The borrower is a corporation or LLC
2. Borrowers of small amounts are typically high risk
If more than the statutory lawful maximum rate is charged, the effect varies from state to state.
1) In some states, the transaction is void as to the excess interest only.
2) In some states, the transaction in void as to the interest, but not the principal.
3) In some states, the entire transaction is tainted by usury and void as to principal and interest.
Gambling
the creation of risk and distribution of property by chance among persons who have given consideration in order to participate.
In general, gambling contracts are…
illegal, and thus void
Joe went to Nevada, and incurred a $40,000 gambling debt that he isn’t paying. Casino can’t sue him…
in Texas (his home state), they have to sue him in Nevada.
Licensing Statutes
All states have statutes that require licenses to be obtained in order to engage in certain trades, professions, or business.
Enforceability of contracts made by unlicensed persons.
1) Some statutes expressly provide that contracts which are made by unlicensed persons are void and unenforceable.
2) If the purpose of a statute is regulatory (to protect the public from unauthorized practitioners), contracts are void and unenforceable.
3) If the purpose of a statute is merely to raise government revenue, contracts are enforceable.
Contracts Contrary to Public Policy
an agreement which injures an established interest of society, or which has a negative effect on society is void and will not be enforced. (restraints of trade, unconscionable contracts, exculpatory contracts, discriminatory contracts)
Contracts in Restraint of Trade
If two or more parties enter into an agreement in which they exchange mutual promises not to compete with each other and their only objective is to restrict competition, the agreement is void because it is against a strong public policy favoring free, fair competition.
Covenants NOT to compete are enforceable if they are
Ancillary AND reasonable
An ancillary (subsidiary) covenant not to compete will be enforced if the promise is reasonable.
The covenant not to compete must be secondary to the contract.
It must be no more extensive than necessary under the circumstances to protect the property or other valuable interest of the promisee.
Ancillary covenant not to compete elements
- Time
- Geographic area
- Scope
Time for covenant not to compete
1-2 years is reasonable
6 months or less for jobs in technology
Contract for the Sale of a Business
The seller of a business agrees not to open another competing store within the area of the store that he is selling
Employment Contracts
A covenant that an employee will not start a competing business for a certain period after termination of employment.
Employment contracts are legal so long as…
the time period and the geographical area restrictions are reasonable
Company made ALL employees sign noncompete.
Key employees would have been better for the argument of “we’re trying to protect proprietary information.” Too overly broad. Severs out the covenant not to compete, the rest of the contract is enforceable.
Men’s grooming salon, barbers agreed to sign (within 3 mile radius of “The Shave” she wouldn’t work within 3 mile radius for 2 years and wouldn’t solicit other customers)). Works within 2 miles, posts pictures of “The Shave” customers at her new place of employment.
Court takes the location of “The Shave” – tiny difference. Shave Barber Co. wins.
As soon as the employer realizes that the covenant is being violated, they should
file an injunction
Ways around a covenant to not compete:
Banker here in town had a restrictive contract – could not work in lending in the “Brazos Valley” for 2 years.
Focus on the scope, “lending.” Can work for another bank in operations.
Nike executives have to sign a noncompete. VP Marketing of Nike leaves Nike and goes to work for Reebok. Nike noncompete: “cannot work for a competing firm IN THE WORLD for 2 years.”
Court said that this was reasonable because Nike is in a world market.
Unconscionable Contracts or Clauses
A contract may be unconscionable if a party who is receiving an unusually greater benefit has superior bargaining power (a “take it or leave it” situation).
A contract may be unconscionable if it “shocks the conscience” of the court.
Exculpatory Clauses
In general, an exculpatory clause is not enforced when the party seeking its enforcement engages in a business that is important to the public, such as:
1) Employment contracts relieving employer of liability for employee’s on-the-job injury.
2) Rental of commercial property.
3) Residential property leases.
Exculpatory clauses are often enforced when parties seeking their enforcement are…
not engaging in businesses that are essential to the public.
1) parties must have generally equal bargaining power
2) language must not be ambiguous
Discriminatory Contracts
Promises to discriminate based upon color, race, religion, national origin, or gender, violate statutes and are contrary to public policy.
The general rule is that an illegal agreement is…
void, and therefore, a court will not aid either party.
Exceptions to Illegality
a. Justifiable ignorance to the facts that caused the agreement to be illegal.
b. A member of a class intended to be protected by a statute prohibiting a specific activity may enforce the contract.
c. Withdrawal from an illegal agreement before illegal performance is rendered.
d. Contract illegal through fraud, duress, or undue influence - a party who was induced to enter into an illegal bargain may recover the consideration that was paid to the guilty party.
Severable, or Divisible, Contracts
courts will enforce legal provisions of a contract if the illegal portions of the contract can be severed.
