Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract BELL QUIZ ON CHAPTER 6 1. 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 BELL QUIZ ON CHAPTER 6 1.What is a deliberate deception intended.
Jan 14, 2016
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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
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