Chapter 14- Capacity and Legality

Question 1

Minors

(Age of Majority)

Answer 1

18 years old

Question 2

Emancipation

(Contractual Capacity)

Answer 2

when a child’s parent or legal guardian relinquishes the legal right to exercise control over the child

Question 3

Disaffirmance

(Contractual Capacity)

Answer 3

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

Question 4

Minors Obligation on Disaffirmance

(Contractual Capacity)

Answer 4

minor needs to return the goods subject to the contract, provided the goods are still in the minor’s possession or control. Can return damaged goods for a full refund.

Question 5

Minors Exceptions to Disaffirmance

(Contractual Capacity)

Answer 5

marriage contratcs

enlist on the armed services

Misrepresentation of Age

Contracts for Necessaries

Question 6

Contract for Necessaries

(Contractual Capacity)

Answer 6

can disaffirm the contract but remains liable for the reasonable value of the goods.

• food
• clothing
• shelter
• medical services

Question 7

Ratification

(Contractual Capacity)

Answer 7

is the act of accepting and giving legal force to an obligation that perviously was not enforceable.

Question 8

Express Ratification

(Contractual Capacity)

Answer 8

when the individual, on reaching the age of majority, states orally or in writting that he or she intends to be bound by the contract.

Question 9

Implied Ratification

(Contractual Capacity)

Answer 9

when the minor, on reaching the age of magority, indicates and intent to abide by the contract.

Question 10

Parent’s Liability

(Contractual Capacity)

Answer 10

parents are not liable for contracts made by minor children acting on their own.

Question 11

Intoxication

(Contractual Capacity)

Answer 11

a contract entered into by and intoxicated person can be either voidable or valid (and thus enforceable.

despite intoxication, the person understood the legal consequences of the agreement, the contract will be enforceable.

Question 12

Disaffirmance due to Intoxication

(Contractual Capacity)

Answer 12

if a contract is voidable because one party was intoxicated, that person has the option of disaffiming it while intoxicated and for a reasonable time after becoming sober.

• must return all goods received under the contract.

Question 13

Ratification due to Intoxication

(Contractual Capacity)

Answer 13

after becoming sober, may ratify a contract expressly or impliedly.

Question 14

Mental Incompetence

(Contractual Capacity)

Answer 14

can be void, voidable or valid

Question 15

Mental Incompetence- Void

(Contractual Capacity)

Answer 15

a court has perviously determined that a person is mentally incompetent, any cintract made by this person is void- no contract exists.

Question 16

Mental Incompetence- Voidable

(Contractual Capacity)

Answer 16

if a court has not perviously judged a person to be mentally incompetent but the person, but the person wa incompetent at the time the contract was forned, the contact my be voidbable.

Question 17

Mental Incompetence- Vaild

(Contractual Capacity)

Answer 17

a person enters into a contract, and has not be declared incompetence by the court, may also be valid is the person has capacity at the time the contract was formed.

Question 18

Legality

Answer 18

is the 4th requirement for a valid contract to exist.

Question 19

Contracts Contrary to Statue

(Legality)

Answer 19

1. Usuious loans
2. Gambling Contracts
3. Contracts to commit a crime
4. Contracts by unlicensed persons

Question 20

Usury

(Legality)

Answer 20

makes a loan at an interest rate above the lawful maximum .

Question 21

Licensing Statues

(Legality)

Answer 21

certain professions require a license, either from a test or an application.

• a contract with an unlicensed person is legal and enforceabe depends on the purpose of the licensing statue.
  
  • if to proterct the public from an unauthorized practitioners, then the contract involving an unlicensed practitioner is generally illegal and unenforceable.

Question 22

Contracts Contrary to Public Policy

(Legality)

Answer 22

some are not enforceable due to the inpact they would have on society.

1. Contract in Restraint of Trade
2. Contracts to commit a Tort
3. Unconscionable contracts
4. Adhesion Contratcts
5. Exculpatory Clauses
6. Discriminatory Contracts

Question 23

Contracts to Restraint of Trade

(Contracts Contrary to Public Policy)

Answer 23

such contracts also violate one or more federal or state antitrust statutes.

Question 24

Covenant not to compete

(Contracts Contrary to Public Policy)

Answer 24

The restrictive covenant is reasonable and is a ancillary part of the sale of an ongoing business, it is enforceable.

Question 25

Convenants not to Compete in Employment Contracts

(Contracts Contrary to Public Policy)

Answer 25

people in midde or upper evel management positions commonly agree not to work for competitors or not to start competing businesses for a specified period of time after termination of employement.

Question 26

Reformation

(Contracts Contrary to Public Policy)

Answer 26

courts usually resort to contract reformation only when necessary to prevent undue burdens or hardships.

Question 27

Unconscionable Contracts or Clauses

(Contracts Contrary to Public Policy)

Answer 27

relieve innocent parties of part or all of their duties. because they are so unscrupulous or grossly unfair as be “void of conscience”

Question 28

Procedural Unconscionability

(Contracts Contrary to Public Policy)

Answer 28

arises when a party’s lack of knowledge or understanding of the contract terms deprived hm or her of any meaningful choice.

Question 29

Substantive Unconscionability

(Contracts Contrary to Public Policy)

Answer 29

occurs when contracts, or portions of the contracts, are opressive or overly harsh

Question 30

Exculpatpry Clauses

(Contracts Contrary to Public Policy)

Answer 30

which release a party from liability in the event of monetary or physical injury no matter who is at fault.

Question 31

Discriminatory Contracts

(Contracts Contrary to Public Policy)

Answer 31

contracts in which a party promises to discriminate on the basis of race, color, national origin, religion, gender, age or disability.

• also enforceable

Question 32

in pari delicto

Answer 32

both parties are at fault

Question 33

Justifiable ignorance of the facts

(Effects of Illegality)

Answer 33

When one party is relatively innocent, has no reason to know the contract is illegal. The court will allow parties to return to their original positions.

Question 34

Members of protected classes

(Effects of Illegality)

Answer 34

statue is designed to protect a certain class of people.

example: Flight attendants- are prohibited from working more than a certain number of hours per month.

Question 35

Withdrawal from an Illegal Agreement

(Effects of Illegality)

Answer 35

if the illegal part of the bargain has not yet been performed, the party rendering performance can withdraw from the contract and recover the performance or the value.

Question 36

Contract illegal throughfraud, duress, or undue influence

(Effects of Illeagality)

Answer 36

when one party uses fraud, duress, undue influence yo induce another party yo enter inyo an illegal bargain.

allowed to recover from performance or its value.

Question 37

Severable, or Divisible, Contracts

(Effects of Illegality)

Answer 37

consists of distinct parts that can be performed separately, with separate consideration provided for each part.

court can enforce the legal parts of the contracts.