Chapter 14: Capacity and Legality

Question 1

the legal ability to enter into contracts; the mental capacity required by law for a party who enters into a contract to be bound by that contract

Answer 1

contractual capacity

Question 2

Contractual capacity is either:

Answer 2

not present or subject to special rules

Question 3

today, the age of majority for contractual purposes in 48 states is:

Answer 3

18 years

Question 4

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

Answer 4

disaffirmance

Question 5

To disaffirm, a minor must express his or her _______, through words or conduct, not to be bound to the contract.

Answer 5

intent

Question 6

T or F: A minor can disaffirm a portion of a contract.

Answer 6

False; has to be all of it

Question 7

Typically, courts presume that in the case of minors, executed contracts (fully performed contracts) are _________ and that executory contracts (contracts not yet fully performed by both parties) are __________.

Answer 7

ratified; disaffirmed

Question 8

Contracts made by mentally incompetent people can be ______, ______, or ________.

Answer 8

void; voidable; valid

Question 9

When will a contract be void for mentally incompetent people?

Answer 9

If a court has previously determined that a person is mentally incompetent.

Question 10

If a court has not previously judged a person to be mentally incompetent but the person was incompetent at the time the contract was formed, the contract may be _______.

Answer 10

voidable

Question 11

lucid intervals

Answer 11

valid

Question 12

What is the age of majority in Alabama and Nebraska?

Answer 12

19

Question 13

T or F: If you don’t have contractual capacity you may not enter into a contract

Answer 13

False

Question 14

Sometimes, the object or performance of a contract is rendered illegal by a statute after the parties entered into the contract. In that situation, the contract is considered to be _________ (terminated) by law.

Answer 14

discharged

Question 15

charging an illegal rate of interest

Answer 15

usury

Question 16

Although contracts involve private parties, some are not enforceable because of the negative impact they would have on society. These contracts are said to be

Answer 16

contrary to public policy

Question 17

involves inconspicuous print, unintelligible language (“legalese”), or one party’s lack of an opportunity to read the contract or ask questions about its meaning.

Answer 17

procedural unconscionability

Question 18

A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.

Answer 18

exculpatory clauses

Question 19

both parties intended and mutually agreed to give or give up consideration

Answer 19

bargained for exchange

Question 20

contracts in restraint of trade (anticompetitive agreements) generally are:

Answer 20

void (unenforceable)

Question 21

T/F: you can’t have discriminatory contracts

Answer 21

true

Question 22

If their is an illegal contract courts just:

Answer 22

leave the parties where they find them

Question 23

T or F: A party may have the capacity to enter into a valid contract and the right to avoid liability under it.

Answer 23

True

Question 24

T or F: A minor can enter into any contract an adult can, without exception.

Answer 24

False

Question 25

T or F: Contracts in restraint of trade always violate one or more federal or state statutes.

Answer 25

False

Question 26

T or F: A court usually will enforce a covenant not to compete provided its restrictions are reasonable.

Answer 26

True

Question 27

T or F: A contract clause that releases an employer from liability for any injury to an employee, no matter who is at fault, is generally enforceable.

Answer 27

False

Question 28

T or F: A landlord can avoid liability for injuries that occur on rental property by including an exculpatory clause in the lease.

Answer 28

False