Legality of Subject Matter & Contractual Capacity Flashcards
standards of contractual capacity are based on:
- the person’s age and
2. mental condition at the moment the contract is entered into
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?
the legal portion of the contract, if possible, is separated from the illegal portion and upheld, whereas the illegal portion remains unenforceable
The law has divided “illegality” into two broad categories; what are they and what do they mean?
- Malum in se: bad in and of themselves
2. Malum Prohibitum: a prohibited wrong, or something prohibited by statutory regulation
Contracts that are considered “Malum in se”
- Are contracts that violate public policy;
- the actions prohibited by these laws are considered to be morally reprehensible, and
- contracts formed for purposes malum in se are entirely unenforceable
- Ex. felonies, contracts in restraint of trade, contracts found to discriminate against a protected category of citizen , contracts that are deemed unconscionable
Contracts that are considered “Malum Prohibitum”
- Actions that are not morally reprehensible or against public policy but are still minor violations of the law;
- 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
The statute of frauds is a law that requires what? and what is the exception?
- certain types of contracts to be in writing in order to be enforceable
- 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
the 6 things listed under Statutes of Fraud
- Contracts for an interest in realty
- Contracts that are not to be performed within one year
- Contracts in consideration of marriage
- Guarantees
- Sale of goods valued over $500
- Executors’ promises to pay the decedent’s debts
what is Usury laws and what is its relation to contracts?
- regulate the legal rate of interest that can be charged for extending credit
- 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
Gambling in relations to contracts?
except in certain locations and under certain prescribed situations, it is illegal; a contract entered into for the purpose of betting is malum prohibitum
Licensing Statutes in relations to contracts?
- Any contract that would violate the government licensing statute is malum prohibitum
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
- violation is with the public?
- violation is with raising money?
- if the agreement violates licensing law designed to protect the PUBLIC, no recovery at all is possible
- if the purpose of the licensing statute is merely to RAISE REVENUE, some quasi-contractual remedy may be available
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?
the legal portion of the contract, if possible, is separated from the illegal portion and upheld, whereas the illegal portion remains unenforceable
there are 4 major areas of contractual capacity:
- Age
- Mental capacity
- Alcohol
- Drugs
Minors in relation to contracts; what is the contract considered to be?
- Minors may avoid contracts they enter into at any point up to reaching their majority without being in breach of contract
- The contracts entered into by minors are considered voidable at the option of the minor
There are certain categories of contracts that the law has determined that minors cannot avoid; what are they?
these contracts are contracts to provide the minor with necessaries - Items deemed essential to support life such as food, clothing, shelter, and medical aid
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.
- education or marriage
2. their voluntary military enlistment
Mental Capacity in relations to contract; explain how mental capacity is determined by one who suffers occasional mental lapses?
- A mentally deficient person lacks contractual capacity
- 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
Alcohol and Drugs in relations to contracts?
- A person who is under the influence of alcohol or drugs is incapable of entering into a valid contract (the incapacity is only temporary)
- Any contract entered into during the period of incapacity may be reaffirmed and made valid once the temporary incapacity is removed
What are considered malum prohibitum in relations to contracts (4);
- contracts that violate the statute of frauds
- Usury laws
- Gambling
- contracts that violate the government licensing statue