Contract Defenses: Incapacity

Question 1

What are the six main contract defenses?

Answer 1

• Incapacity
• Misrepresentation
• Duress
• Undue Influence
• Unconscionability
• Public Policy

Question 2

Are incapacity defenses available under the UCC?

Answer 2

• Incapacity defenses are available under common law and the UCC.

Question 3

What are the two kinds of incapacity?

Answer 3

• Infancy
• Mental incompetence

Question 4

What is the infancy rule for contracts?

Answer 4

• Minors (under 18) may enter into a K, but it is voidable at minor’s option.

Question 5

Would a minor be subject to an enforceable contract if they are married?

Answer 5

• Marriage or emancipation would not affect a minor’s avoidance rights

Question 6

Would a minor be subject to an enforceable contract if they misrepresented their age?

Answer 6

• A minor who misrepresented their age would still not be subject to an enforceable contract; it is still voidable at the minor’s option

Question 7

What must a minor do if they disaffirm a contract?

Answer 7

• Minor is obligated to return any goods received
• Minor NOT liable for any damages or reasonable value for use of any goods or services.

Question 8

How does ratification affect the infancy doctrine?

Answer 8

• Once minors turn 18, they may expressly or impliedly ratify Ks entered during minority and bind themselves to obligations they might otherwise have disaffirmed.

Question 9

Under what exception would a merchant have a right to recover for providing goods or services to minors?

Answer 9

• Necessaries Exception: A minor’s K for necessaries (food, clothing, shelter, medical care) is voidable, but merchant has quasi K right to recover reasonable value of goods or services.

Question 10

Are mentally incompetent people bound to an enforceable contract?

Answer 10

• Under modern rules, a person lacks capacity to contract if mentally incompetent (i.e., to reasonably understand the transaction) at time of contracting.

Question 11

What must a mentally incompetent person do if they disaffirm a contract?

Answer 11

• Unlike minors, the mentally incompetent person is obligated to not only return any goods received but IS also liable for any damages or reasonable value for use of any goods or services

Question 12

What happens if the competent party was aware of a person’s mental incapacity?

Answer 12

• If the competent party was aware of the mental incapacity of another, then the mentally incompetent party is treated just like minor and is NOT liable for any damages or reasonable value for benefit received

Question 13

When may a mentally incompetent person ratify a contract?

Answer 13

• A party who was mentally incompetent at the time of contracting may expressly or impliedly ratify the K if he becomes competent at a later time.

Question 14

Is there a necessaries exception for mentally incompetent parties who enter into contracts?

Answer 14

• Yes. The mentally incompetent party can disaffirm the K but the provider of the necessaries can recover in quasi-contract for the reasonable value of the goods/services.
  o Additional necessary - legal representation in connection with incompetency proceedings.