Legality of Subject Matter & Contractual Capacity

Question 1

standards of contractual capacity are based on:

Answer 1

1. the person’s age and

2. mental condition at the moment the contract is entered into

Question 2

The law generally favors contractual relationships, it does sometimes permit an agreement that has both legal and illegal provisions to be severed; What does this mean?

Answer 2

the legal portion of the contract, if possible, is separated from the illegal portion and upheld, whereas the illegal portion remains unenforceable

Question 3

The law has divided “illegality” into two broad categories; what are they and what do they mean?

Answer 3

1. Malum in se: bad in and of themselves

2. Malum Prohibitum: a prohibited wrong, or something prohibited by statutory regulation

Question 4

Contracts that are considered “Malum in se”

Answer 4

1. Are contracts that violate public policy;
2. the actions prohibited by these laws are considered to be morally reprehensible, and
3. contracts formed for purposes malum in se are entirely unenforceable
4. Ex. felonies, contracts in restraint of trade, contracts found to discriminate against a protected category of citizen , contracts that are deemed unconscionable

Question 5

Contracts that are considered “Malum Prohibitum”

Answer 5

1. Actions that are not morally reprehensible or against public policy but are still minor violations of the law;
2. some quasi contractual relief may be available if the aggrieved party can demonstrate that to deny recovery would unjustly enrich the other party to the agreement

Question 6

The statute of frauds is a law that requires what? and what is the exception?

Answer 6

1. certain types of contracts to be in writing in order to be enforceable
2. If the parties actually perform under the oral agreement, their performances will take the contract out of the Statute of Frauds and make it enforceable

Question 7

the 6 things listed under Statutes of Fraud

Answer 7

1. Contracts for an interest in realty
2. Contracts that are not to be performed within one year
3. Contracts in consideration of marriage
4. Guarantees
5. Sale of goods valued over $500
6. Executors’ promises to pay the decedent’s debts

Question 8

what is Usury laws and what is its relation to contracts?

Answer 8

1. regulate the legal rate of interest that can be charged for extending credit
2. A contract for the loan of money that indicates a rate of interest above the legal limit is malum prohibitum b/c it is usurious and therefore unenforceable

Question 9

Gambling in relations to contracts?

Answer 9

except in certain locations and under certain prescribed situations, it is illegal; a contract entered into for the purpose of betting is malum prohibitum

Question 10

Licensing Statutes in relations to contracts?

Answer 10

1. Any contract that would violate the government licensing statute is malum prohibitum

Question 11

Laws that impose licensing requirements are created either to protect the public or to provide the government with income from the licensing fees; explain what happens if the

1. violation is with the public?
2. violation is with raising money?

Answer 11

1. if the agreement violates licensing law designed to protect the PUBLIC, no recovery at all is possible
2. if the purpose of the licensing statute is merely to RAISE REVENUE, some quasi-contractual remedy may be available

Question 12

The law generally favors contractual relationships, it does sometimes permit an agreement that has both legal and illegal provisions to be SEVERED; what does this mean?

Answer 12

the legal portion of the contract, if possible, is separated from the illegal portion and upheld, whereas the illegal portion remains unenforceable

Question 13

there are 4 major areas of contractual capacity:

Answer 13

1. Age
2. Mental capacity
3. Alcohol
4. Drugs

Question 14

Minors in relation to contracts; what is the contract considered to be?

Answer 14

1. Minors may avoid contracts they enter into at any point up to reaching their majority without being in breach of contract
2. The contracts entered into by minors are considered voidable at the option of the minor

Question 15

There are certain categories of contracts that the law has determined that minors cannot avoid; what are they?

Answer 15

these contracts are contracts to provide the minor with necessaries - Items deemed essential to support life such as food, clothing, shelter, and medical aid

Question 16

Many states prohibit a minor from avoiding contracts for , _______ or ________ and the federal government has determined that minors cannot avoid _________ simply b/c of age.

Answer 16

1. education or marriage

2. their voluntary military enlistment

Question 17

Mental Capacity in relations to contract; explain how mental capacity is determined by one who suffers occasional mental lapses?

Answer 17

1. A mentally deficient person lacks contractual capacity
2. If the person only suffers occasional mental lapses and is not confined, his mental capacity is determined by the nature of the contract, and whether or not he understands the nature of what he is undertaking

Question 18

Alcohol and Drugs in relations to contracts?

Answer 18

1. A person who is under the influence of alcohol or drugs is incapable of entering into a valid contract (the incapacity is only temporary)
2. Any contract entered into during the period of incapacity may be reaffirmed and made valid once the temporary incapacity is removed

Question 19

What are considered malum prohibitum in relations to contracts (4);

Answer 19

1. contracts that violate the statute of frauds
2. Usury laws
3. Gambling
4. contracts that violate the government licensing statue