Law for Business and Personal Us Law for Business and Personal Us © Thomson South-Western CHAPTER 9 Legal Capacity to Contract 9-1 Contractual Capacity of Individuals and Organizations 9-2 Limits on the Rights of Those Without Capacity
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Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
CHAPTER 9Legal Capacity to Contract
9-1 Contractual Capacity of Individuals and Organizations
9-2 Limits on the Rights of Those Without Capacity
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 2
9-19-1 Contractual Capacity of Individuals and Organizations
GOALS Identify parties who lack contractual
capacity Explain the role of capacity in
organizations
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 3
FOCUS
Have you ever tried to get out of a contract because you were young and inexperienced in the matter?
Did you know that you had a legal right to disaffirm contracts made while you were still in your minority?
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 4
WHAT IS CAPACITY?
Protections for those who lack capacity Minors Those mentally incapacitated The intoxicated
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 5
What three classifications of individuals lack contractual capacity?
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 6
WHO HAS CONTRACTUAL CAPACITY IN ORGANIZATIONS?
Scope of authority Employer grants authority to employee Assumption of authority based on job
title
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 7
In what two ways is capacity to contract on behalf of an organization created?
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 8
9-29-2 Limits on the Rights of Those Without Capacity
GOALS Recognize the time frame during which a
contract can be disaffirmed Identify contracts that cannot be
disaffirmed Discuss the effects of misrepresentation
of age on contractual responsibilities
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 9
FOCUS
Explain the following quote from Benjamin Cardozo, Associate Justice of the U.S. Supreme Court, 1932–1938.
Liberty of contract is not an absolute concept. It is relative to many conditions of time and place and circumstance.
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 10
WHEN CAN DISAFFIRMANCE OCCUR?
Any time while still under the incapacity Within a reasonable time after attaining
capacity
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 11
WHAT MUST BE DONE UPON DISAFFIRMANCE?
Loss of value Obligations of party with capacity
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 12
DISAFFIRMANCE TIMELINE
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 13
When can a person who lacks contractual capacity disaffirm a contract?
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 14
CONTRACTS THAT CANNOT BE DISAFFIRMED
Court-approved contracts Major commitments Banking contracts Insurance contracts Work-related contracts Sale of realty Apartment rental
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 15
Which contracts that cannot be disaffirmed apply in all 50 states?
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 16
CONTRACTUAL EFFECT OF MISREPRESENTING AGE
Other party to the contract may collect damages
Minor still may be able to disaffirm contract
Law for Business and Personal UseLaw for Business and Personal Use© Thomson South-Western
Chapter 9Slide 17
If minors lie about their age, what happens in most states with regard to their ability to disaffirm contracts for goods and services that are not necessaries?
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