Chapter 14: Capacity and Legality Flashcards
Contractual Capacity:
the legal ability to enter into contracts; the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.
If an individual is deemed to have, “No Competence”, is the contract considered void?
Yes.
If an individual is deemed to have, “Limited Competence,” is the contract considered void?
Not necessarily; the contract will be considered “voidable” depending whether the individual was lucid or not.
If they were lucid, the contract is enforceable.
If they were not lucid, the contract is not enforceable.
In most states, (aka the majority rule) does the condition of the property included in the contract with a minor go into consideration when a minor disaffirms the contract?
No. The condition of the property usually doesn’t matter, and the minor can simply disaffirm the contract by returning the object regardless of what state it is in.
In the few states with the Minority rule, does the condition of the property included in the contract with a minor go into consideration when a minor disaffirms the contract?
Yes. The minor is liable for any decrease in value to the consideration during the time the minor held the property.
Exceptions to a minor’s right to disaffirm:
- The big ideas are: Misrepresentation of age (fraud), Necessaries, and Ratification. *
The full list:
- misrepresentation of age
- engaging in business as an adult
- marriage contracts
- unjust enrichment (minor must return the consideration to disaffirm)
- contracts to enlist in the armed forces
- contracts for necessaries
- insurance (not a necessary; minor can disaffirm and recover premiums paid)
- loans (not a necessary so generally can be disaffirmed, but not in the case of loans used to purchase necessaries.)
Ratification:
the act of enforcing and giving legal force to an obligation that previously was not enforceable.
What is express ratification:
when a minor, upon reaching the age of majority, states orally or in writing that they intend to be bound by the contracgt.
What is implied ratification:
when a minor, upon reaching the age of majority, indicates intent to be bound by the contract. (courts will look at their behavior, and if they kept the property under consideration, it is assumed that they implied ratification.)
True/False: If a minor fails to ratify within a reasonable time of reaching the age of majority and they still have an executory contract, the courts will assume it is ratified.
False: the courts will determine it to be disaffirmed if both parties haven’t fully performed.
In the case of a parent’s liability, when do parent’s become liable for their children’s actions?
when they co-sign on their minor’s obligation, they may become liable. However, if they do not co-sign, they will not be held liable for their minor’s actions.
A contract entered into by an intoxicated person may be:
Voidable OR Valid (and therefore enforceable.)
To disaffirm a contract made while intoxicated, one must:
disaffirm within a reasonable time of becoming sober and return all consideration received unless the consideration was necessaries.
Contracts for necessaries are voidable, but can be held to a quasi contract for the reasonable value of the consideration received.
Ratification for a contract made while intoxicated:
Similar to the ratification of a contract by a minor upon reaching the age of majority, but an intoxicated adult may ratify a contract upon becoming sober either expressly or impliedly.
Contracts made by a mentally incompetent person may be:
Void, Voidable, or Valid