Chapter 9 Capacity to Contract

Aim: How does capacity effect a contract?

I. Contracts of Minors

  1. Minority- less than 18 years of age- “minors”- stage of “infancy”
  2. Majority- anyone over 18 years- day before your 18th birthday
    1. 26th Amendment stating this was passed 1972

1. Voidable Contracts

  • Minors are regarded by federal law to be incapable of entering into major contracts
  • Minors may disaffirm their contract
  • This privalege is supposed to protect minors who, because of immaturity and inexperience, might be taken advantage of or make a poor decision
  • The right does not intend to take advantage of others
  • “Infancy is a shield, not a sword”
  • Infancy=minority
  • Disaffirm– to avoid contractual obligations due to limited contractual capacity

a. Returning the Merchandise– If a minor still has the merchandise he or she recieved upon entering a contract, that merchandise must be returned when the contract is disaffirmed

b. Misrepresenting Age- If a minor claims to be over the age of majority, then he or she has commited fraud

    • fraud is a wrongful act and minors are responsible for their actions
    • when a minor lies about their age, then dissafirms the contract, the other party may sue the minor for fraud
    • all five elements must be present including actual loss
    • NY Alcoholic Beverage Control Law provides for arrest, probation, and a fine of up to $100 for misrepresenting ones age to buy alcohol

c. Disaffirming the Whole Contract– A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts

d. Disaffirming Contracts Made With Other Minors– When two minors enter into a contract with each other, both of them have to right to disaffirm the contract.

2.  Ratification of Minors’ Contracts- After reaching the age of majority, a person can ratify (approve) contracts made during minority.

3. Contracts for Necessaries- A minor is held responsible for the fair value of necessaries (necessities include food, clothing, shelter, and medical care)

4. Special Statutory Rules- Many states have made changes in their statutes that control the capacity of minors to enter into contracts

II. Other Contractual Capacity Rules

1. Mentally Impaired Persons- The right given to minors to disaffirm contracts is also given to the mentally impaired for the same reason

2. Intoxicated Persons- Persons who are intoxicated at the time they enter a contract are sometimes able to disaffirm those contracts

3. Other Capacity Limitations- Other classes of persons lack capacity to enter into certain types of contracts

tender- offer to return it

guardian-person who is appointed to look after his pr her affairs

aliens– people who are living in this country but who owe their allegiance to another country

  • have limitations placed on their capacity to contract

disaffirm- avoid or not be bound to

ratify- approve

void

necessaries- necessities include food, clothing, shelter, and medical care

minority– someone who has not yet reached the age of majority which is 18 for voting and 21 for alcohol

car

criminal minors

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