Chapter 14- Contractual Capacity Flashcards
Contracts with Minors:
Almost without exception, a minor’s contract is voidable at the guardians discretion.
The minor is in the favored position to disaffirm or enforce the contract.
Minor
A person who has not attained the age of legal majority. Common law: reminder was an individual who had not reached the age of 21.
Most states have altered it to 18.
Special Contracts that a Minor cannot avoid
- student loans, medical care
- contracts that have a lower age of capacity (bank accounts, marriage, insurance)
Disaffirmance
a minor may disaffirm anytime before reaching the age of majority. A minor may also disaffirm within a reasonable amount of time after reaching the age of majority. (unless the contract has already been ratified.) it’s a minor chooses to disaffirm the contract, the minor must return the goods, if the goods involved are used in the monetary value must be returned (w/i reasonable value.)
Necessaries
- Food, water, shelter, school, books etc
-even though the contract is voidable, the minor has to pay a reasonable value for the necessities.
The rules are the same even if you lie about your age.
Ratification
A minor has the option of ratifying your contract after reaching the age of majority. Ratification makes the contract binding from the beginning. That is, the result is the same as if the contract had been valid and binding from its inception.
Liability for misrepresentation of age:
Even if a minor lies about their age they do have the power to disaffirm. However the minor is responsible for restoring the other party to the position they occupied before making the contract or,allow the defrauded party to recover damages against the minor in tort.
Incompetent Persons: Persons Under Guardianship
- if a person is under guardianship by court order, her contracts are void and have no legal effect. A court appoints a guardian toControl and preserve the property of a person who is impaired capacity prevents her from managing her own property.
- however, a party dealing with an individual under guardianship may be able to recover the fair value of any necessities. Additionally the contracts may be ratified by her guardian during the period of guardianship.
Mental Illness or Defect
Because the contract is a consensual transaction, the parties to a valid contract must have a certain level of mental capacity. If a person lacks the capacity or is mentally incompetent, the contract is voidable.
- Only voidable if they can prove mental incompetence
- Inability to understand the contract, its nature, or consequences.
- modern view: cant act reasonably/control behavior.
Intoxicated Persons
A person may avoid any contract that he enters into if the other party has reason to know that the person, because of his intoxication, is unable to understand the nature and consequences of his actions. Such contracts are voidable.
HOWEVER, they may be ratified upon regaining capacity.
THE INTOXICATED PERSON MUST DISAFFIRM CONTRACT IMMEDIATELY AFTER REGAINING CAPACITY.
