Chapter 14

Question 1

Contractual Capacity

Answer 1

legal ability to enter into contractual relationship

Question 2

Minors in Contract

Answer 2

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.

Question 3

Disaffirmance

Answer 3

the legal avoidance, or setting aside, of a contractual obligation

Question 4

Ratification

Answer 4

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

Question 5

Necessaries

Answer 5

basic needs (clothing, food, shelter, etc)

Question 6

Express Ratification

Answer 6

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.

Question 7

Implied Ratification

Answer 7

takes place when the minor, on reaching the age of majority, indicates an intent to abide by the contract.

Question 8

Parent’s Liability

Answer 8

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.

Question 9

Intoxication

Answer 9

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.

Question 10

Disaffirmance of Intoxication

Answer 10

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

Question 11

Ratification of Intoxication

Answer 11

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

Question 12

Mental Incompetence (Void)

Answer 12

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.

Question 13

Mental Incompetence (Voidable)

Answer 13

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.

Question 14

Mental Incompetence (Valid)

Answer 14

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.

Question 15

Contracts Contrary to Statute

Answer 15

 Contracts to Commit a Crime
 Usury (Charging an illegal rate of interest)
 Gambling
 Licensing Statutes

Question 16

Contracts Contrary to Public Policy

Answer 16

 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

Question 17

Reformation

Answer 17

court-ordered correction of a written contract so that it reflects the true intentions of the parties.

Question 18

Unconscionable Contract/Clause

Answer 18

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

Question 19

Procedural Unconscionability

Answer 19

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.

Question 20

Members of Protected Classees

Answer 20

40 hour work week, airline attendants limited to work hours, same as truck drivers

Question 21

Withdraw From Illegal Agreement

Answer 21

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

Question 22

Contract Illegal via Fraud, Duress, Undue Influence

Answer 22

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.

Question 23

Severable Contract

Answer 23

A contract that is severable, or divisible, consists of distinct parts that can be performed separately, with separate consideration provided for each part.

Question 24

Indivisible Contract

Answer 24

With an indivisible contract, in contrast, complete performance by each party is essential, even if the contract contains a number of seemingly separate provisions.