Chapter 14 Flashcards
Contractual Capacity
legal ability to enter into contractual relationship
Minors in Contract
The general rule is that a minor can enter into any contract that an adult can, except contracts prohibited by law for minors (such as contracts to purchase tobacco or alcoholic beverages).
A contract entered into by a minor, however, is voidable at the option of that minor, subject to certain exceptions.
To exercise the option to avoid a contract, a minor need only manifest (clearly show) an intention not to be bound by it.
Disaffirmance
the legal avoidance, or setting aside, of a contractual obligation
Ratification
act of accepting and giving legal force to an obligation that previously was not enforceable. A minor who has reached the age of majority can ratify a contract expressly or impliedly
Necessaries
basic needs (clothing, food, shelter, etc)
Express Ratification
takes place 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
takes place when the minor, on reaching the age of majority, indicates an intent to abide by the contract.
Parent’s Liability
As a general rule, parents are not liable for contracts made by minor children acting on their own, except contracts for necessaries, which parents are legally required to provide. As a consequence, businesses ordinarily require parents to cosign any contract made with a minor. The parents then become personally obligated under the contract to perform the conditions of the contract, even if their child avoids liability.
Intoxication
A contract entered into by an intoxicated person can be either voidable or valid (and thus enforceable).
If the person was sufficiently intoxicated to lack mental capacity, then the agreement may be voidable even if the intoxication was purely voluntary.
If, despite intoxication, the person understood the legal consequences of the agreement, the contract will be enforceable.
Disaffirmance of Intoxication
If a contract is voidable because one party was intoxicated, that person has the option of disaffirming it while intoxicated and for a reasonable time after becoming sober. The person claiming intoxication typically must be able to return all consideration received unless the contract involved necessaries. Contracts for necessaries are voidable, but the intoxicated person is liable in quasi contract for the reasonable value of the consideration received
Ratification of Intoxication
intoxicated person, after becoming sober, may ratify a contract expressly or impliedly, just as a minor may do on reaching majority. Implied ratification occurs when a person enters into a contract while intoxicated and fails to disaffirm the contract within a reasonable time after becoming sober. Acts or conduct inconsistent with an intent to disaffirm—such as the continued use of property purchased under a voidable contract—will also normally ratify the contract
Mental Incompetence (Void)
If a court has declared a person to be mentally incompetent and has appointed a legal guardian, any contract made by that person is void from the outset.
Mental Incompetence (Voidable)
If a court has not declared a person mentally incompetent, but that person lacked the capacity to comprehend the subject matter, nature, and consequences of the agreement, then the contract is voidable at that person’s option.
Mental Incompetence (Valid)
If a court has not declared a person mentally incompetent and that person was able to understand the nature and effect of the contract at the time it was formed, then the contract is enforceable.
Contracts Contrary to Statute
Contracts to Commit a Crime
Usury (Charging an illegal rate of interest)
Gambling
Licensing Statutes
Contracts Contrary to Public Policy
Contracts in Restraint of Trade
Covenants Not to complete and sale of an ongoing business
Covenants Not to complete in employment contracts
Enforcement
Reformation
Unconscionable contract or clause
Procedural unconscionability
Reformation
court-ordered correction of a written contract so that it reflects the true intentions of the parties.
Unconscionable Contract/Clause
A contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party
Procedural Unconscionability
often involves inconspicuous print, unintelligible language (“legalese”), or one party’s lack of an opportunity to read the contract or ask questions about its meaning. This type of unconscionability typically arises when a party’s lack of knowledge or understanding of the contract terms deprived him or her of any meaningful choice.
Members of Protected Classees
40 hour work week, airline attendants limited to work hours, same as truck drivers
Withdraw From Illegal Agreement
If the illegal part of a bargain has not yet been performed, the party rendering performance can withdraw from the contract and recover the performance or its value
Contract Illegal via Fraud, Duress, Undue Influence
Often, one party to an illegal contract is more at fault than the other. When one party uses fraud, duress, or undue influence to induce another party to enter into an illegal bargain, the second party will be allowed to recover for the performance or its value.
Severable Contract
A contract that is severable, or divisible, consists of distinct parts that can be performed separately, with separate consideration provided for each part.
Indivisible Contract
With an indivisible contract, in contrast, complete performance by each party is essential, even if the contract contains a number of seemingly separate provisions.
