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- Must be genuine which must be:
- - Voluntary
- - Knowing
- - Competent
- 1.) Understand consequences (binding) of a contract
- 2.) Able to understand & represent your own best interest
Problem Areas for Capacity
- - Minors (not of the required age)
- - Mental Incompetents (persons with behavioral problems)
- - Intoxicated Persons/Prescribed Medicines
Bright Line Rule
Easy to determine and apply (e.g. setting capacity at the age of 18).
Under the age of majority (usually 18) - presumed to lack capacity
Liability on Contract (minors)
A minor's contracts are usually voidable at the minor's option
- Avoidable of the contract; may be done during minority and for a reasonable time after reaching majority.
- *Contracts for purchase & sale of land is exception. Minor must wait until 18.
Minor's Duty Upon Disaffirmance
- The prvailing view is tha the minor need only return what is actually in his/her own possession. (minor buys a car, wrecks it, they can return it and get all their money back)
- * done to discourage merchants from selling to minors
Why do merchants still sell to Minors (Wal-Mart)?
Because there is too much money in selling to minors to not. Cost-benefit analysis. Also, minors typically don't know about laws AND it is a process to get the money back. Mostly only sell small ticket items (e.g. video games, not cars).
Minor Loses Right to Disaffirm if:
- 1.) Wait too long after turn 18
- 2.) Expressly Ratify (after 18) (to SAY you will continue w/ contract)
- 3.) Impliedly Ratify (after 18) (to act in a way that says you will continue w/ contract [e.g. driving a car you got while still a minor])
Liability for Necessaries
Minor is liable for the reasonable value (not necessarily the market value) of necessaries, but only to the extent the minor has actually used or consumed them.
- Things that meet basic level of existence (food, shelter, etc).
- *Done this way so that merchants aren't penalized for selling minors things that are necessary to survive
Misrepresentation of Age
Minor may still disaffirm the contract.
Minors and Torts
Cannot be liable to contracts but can be liable to compesate for torts (but standard is modified to reasonable child instead of reasonable person).
Persons under Guardianship
Any purported contract is Void. To enter into contract, must enter with guardian or contract is void. (legal proceeding when court determines that person is mentally incopetent and needs a guardian)
Persons with Mental Illness or Defect
Treated like minors. (mental problems but have not yet had a guardian appointed)
Persons Under the Influence of Prescribed Medicines
Treated like minors. Mental capacity severley limited. Must prove that mental capacity was affected at time of the contract.
Intoxicated Persons (alcohol or recreational drugs)
- Can disaffirm only if capacity significantly impaired and other party had reason to know of the problem; must promptly disaffirm and offer to restore the other party to the status quo in full.
- *This class gets the least protection since it was a voluntary in-capacity.