lesson 11 Flashcards
capacity
legal ability to enter into a contract
consent
the genuine agreement and desire to enter into the contract, the party understands the terms and agreement is made voluntarily
what can prohibit genuine consent
coercion, pressure, or fraud
if there is a lack of capacity or consent, the contract is
voidable
issues involving capacity
minors and mentally impaired
law provides that minors
lack the legal capacity to enter into contracts. if a minor does enter into a contract, it is voidable.
what can a minor do to void contract
- disaffirm/give notice he is cancelling
- file a lawsuit to rescind the contract
johnny doe v epic games
Doe downloaded fortnight and agreed to end user license agreement (EULA, provided that they could change terms after they agreed and they’d be bound to them), rules changed to say disputes had to be settled through arbitration. Johnny kept playing, spent money, now wants a refund, Epic says he’s bound to arbitration. courts allowed him to disaffirm the contract and get a refund.
James buys a car at 16, pays for 4 months, reveals he’s a minor and has a right to disaffirm the contract. he sues the car dealership, courts say as a minor he can and they must give him his money back. Does James, as a minor, get to keep the car and the all the benefits of the voidable contract?
No. He may benefit from the ability to disaffirm and the ability to get a refund, but not the car. the car dealership is given restitution (car is returned).
restitution
return of payment or property to put an aggrieved party back to its og position
does it matter when the minor disaffirms?
yes, minor has to disaffirm when he’s still a minor or within a reasonable period after he becomes an adult
john purchases a computer at 17 years and 8 months old. he pays $400, turns 18, pays 3 more months after. John then tells computer company that he disaffirms the contract and is allowed to b/c it’s a reasonable time after he turned 18. in this instance:
john has ratified the contract by paying $100/month after he turned 18. the continued payments are evidence of john’s intent to be bound and to “ratify” the contract. if he had stopped paying at 18 and tried to disaffirm 3 months later, it would’ve been okay.
exception to minors
lying about age
Edward uses a fake ID to buy a tv at walmart. he goes back months later and demands a refund, says he can disaffirm since he’s a minor. what happens?
a few states will allow a refund, but majority would not. the rule protecting minors is for minors who make mistakes or change their mind, not ones who abuse the protection through their own deceit.
mentally impaired persons
people that suffer from some mental illness or defect and they are unable to understand the nature and consequences of the contract (voidable)
exception to mentally impaired persons
if court has adjudicated the person to be incompetent, then all contracts thereafter are not voidable, but they are completely void
voluntary intoxication
like being mentally impaired or being a minor, usually voidable. you must be highly affected to the extent that you do not understand the nature and consequences of a contract, being drunk is not enough
consent
the genuine intent to agree or accept
reasons for lack of consent
fraud, mistake, duress, undue influence
when discussing fraud in contracts, we are referring to
civil fraud
elements of civil fraud
- intentional or reckless misrepresentation of fact - other party must either intentionally lie or show reckless disregard for the truth (make a claim they do not know to be true)
- false statement must be material - must be about something important to the deal, the false statement must be one of the reasons the other party enters the agreement
- justifiable reliance - victim of fraud must justifiably rely on statement being true to enter into agreement
remedies for civil fraud
victim can rescind the contract, sue for damages, or both
Sue is offered a job in Colorado, flies out to Denver, finds a house she really loves. Sue decides to take the job, tells house seller she doesn’t like the cold, house seller assures her that the heating system in the house is in good condition. It gets cold, Sue discovers system does not work after buying house and moving in. what happens?
she proves fraud in court and they give her the option to get out of contract or buy house with full refund
If seller of home has knowledge that roof leaks and says nothing about it to the buyer, has the seller committed fraud?
there is NO duty to disclose known defects, but if seller is specifically asked, they cannot lie
