Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract BELL...

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

BELL QUIZ ON CHAPTER 61. What is a deliberate deception intended to secure an

unfair or unlawful gain called?

2. How many elements of fraud must be demonstrated when filing a lawsuit?

3. There are two types of bilateral mistakes. Name one.

4. Overcoming a person’s will by use of force or threat of force or bodily harm is called……

5. There are three types of duress. Name one.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

ANSWERS TO BELL QUIZ CHAPTER 6

1. Fraud

2. 5

3. 1) Mistake as to the possibility of performance 2) Mistake as to the subject matter

4. Duress

5. Physical, Emotional, Economic

SECTION OPENER / CLOSER:INSERT BOOK COVER ART

Contractual CapacityContractual CapacitySection 7.1Section 7.1

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Why It’s Important

Understanding the rights afforded to minors in contract law will enable you to exercise your rights and help others.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Capacity, one of the six elements of a contract, is the legal ability to enter a contract.Capacity relates directly to the involvement of minors in contracts.

The Requirement of Capacity

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

When people enter into contracts, they are permitted by law to presume that the other party or parties have the capacity to contract.

Minor’s Rights and Obligations

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

This presumption, known as a rebuttable presumption, can be challenged in court.

Minor’s Rights and Obligations

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

The presumption of capacity plays a key role in contracts made by minors because the law permits minors, within certain limits, to rescind or void their contracts.

Minor’s Rights and Obligations

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

The court has established specific standards regarding who is considered a minor and what the term minority means.

Minor’s Rights and Obligations

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

The age of legal adulthood is known as the age of majority.A person who has not yet reached majority is considered a minor and is still in his or her minority.

Definition of Minority

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

In 1971 the voting age was lowered from 21 to 18. At this time many states lowered the age of majority from 21 to 18.

Legal Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

For many years, the age of majority was also the age at which a person could begin to buy alcoholic beverages.

Legal Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Now, however, the age of majority is 18 nationwide, but most states have raised the legal drinking age to 21.

Legal Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

For legal purposes, people turn 18 at the beginning of the day before their 18th birthday.

Legal Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Some states have declared that minors who are no longer under the control of their parents are emancipated.This means they are responsible for their contracts.

Emancipation and Abandonment

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

A minor who marries or leaves home, giving up all rights to parental support, is considered emancipated and is said to have abandoned the protection afforded him or her as a minor.

Emancipation and Abandonment

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

If a minor claims to be over the age of majority, then he or she has committed fraud.Fraud is a wrongful act, and minors are responsible for their wrongful acts.

Misrepresentation of Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Some states allow the other party to sue a minor who has misrepresented his or her age for fraud. Other states do not.

Misrepresentation of Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

However, it is illegal to lie about your age in order to buy age-restricted products, such as alcohol.

Misrepresentation of Age

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Pre-Learning Question

Why would the contracts of minors be different from the contracts of adults?

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Contracts of Minors

The law shields minors when they make contracts to protect them from unscrupulous adults. Minors may be vulnerable because of

immaturityinexperience

lack of educationnaïveté (innocence)

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Voidable Contracts

Contracts made by minors are voidable by the minor.

This means that minors may disaffirm, or avoid, their contracts if they so choose.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Voidable Contracts

To disaffirm a contract means to show the intent not to live up to the contract by a statement or some other act.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Voidable Contracts

By permitting minors to have the privilege of disaffirming contracts, the law provides young people with a second chance when they use poor judgment.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Returning the Merchandise

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

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Disaffirming the Whole Contract

A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Disaffirming Contracts Madewith Other Minors

When two minors enter into a contract with each other, both parties have the right to disaffirm the contract.

Figure 7.2 p.153

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Ratification of Minors’ Contracts

After reaching the age of majority, a person can ratify, or approve, contracts made during minority.

Example 2 p.154

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

7.1

Ratification

1

2

3 4

A business advertisement in a newspaper can constitute an offer of sale, even if the advertisement is aimed toward minors.

Offer

If a minor agrees to the terms of an offer, then a voidable contract is created.

Acceptance

Reaching Majority

When a minor reaches the age of majority, his or her contracts can be ratified.

Ratification

Using or selling an item obtained by contract for a reasonable time after reaching the age of majority has the effect of ratifying the contract. Ratification can also be accomplished orally or in writing.

Figure 7.3 p.155

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Contracts for Necessaries

A minor is held responsible for the fair value of necessaries.Necessaries, or necessities, include food, clothing, shelter, and medical care.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Special Statutory Rules

There are many differences in state statutes regarding minors.Minors should check the statutes of their own state to find out about special contractual capacities that they may be allowed.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Other Contractual Capacity Rules

Other classes of persons are also able to avoid contracts.

mentally impaired personsintoxicated persons

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Mentally Impaired Persons

Mentally impaired persons also have the right to disaffirm contracts because they are considered unable to make sound judgments.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Mentally Impaired Persons

Before a guardian is appointed to look after the affairs of a mentally impaired person, his or her contracts are voidable.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Intoxicated Persons

Persons who are intoxicated by alcohol or drugs at the time they enter a contract are sometimes able to disaffirm those contracts.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Intoxicated Persons

To disaffirm a contract for this reason, a person must have been so intoxicated at the time of the contracting that he or she did not understand the purpose, nature, or effect of the transaction.

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

Other Capacity Limitations

Other classes of persons lack the capacity to enter into certain types of contracts.

1. convicts—people convicted of a crime

Understanding Business and Personal Law

Contractual Capacity Section 7.1

Capacity to Contract

2. aliens—people who are living in this country but owe their allegiance to another country

3. enemy aliens—certain foreign-born persons designated as such during time of war

Other Capacity Limitations

End of Chapter 7