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Business Law Exam 3

Terms in this set (32)

Contractual capacity is the legal ability to enter into a contractual relationship
The law gives special protection to those who are inexperienced youth or lack mental competence
A child is considered to be a minor until they turn 18, are emancipated by the Courts, or married
Minors can enter into legal contracts, but only they have the option to void or disaffirm the contract (cannot enter into a contract to buy alcohol or tobacco)
To void or disaffirm a contract, a minor must express his or her intent through words or conduct not to be bound by the contract
Adults cannot disaffirm contracts entered into with a minor

Minors upon disaffirming can get back their consideration ($$$)
Can disaffirm while a minor or after a reasonable time once reaching the age of majority
If not disaffirmed by a minor after reaching the age of majority, the contract will be ratified
A majority of the Courts hold that a minor who returns the goods (or other consideration), has disaffirmed the contract (even if the goods are damaged)
A minority of Courts hold that the minor will be held liable for damages, ordinary wear and tear and depreciation incurred prior to disaffirming the contract (the other party is to be returned to their position prior to the contract)
Contracts that cannot be disaffirmed by minors due to public policy include:
Marriage contracts
Joining the military
Misrepresentation of age
Executed contracts
Necessities (required for minors subsistence, maintain a standard of living, and has no parent or guardian to provide the essentials of life) can be disaffirmed but must pay the reasonable value of the goods
Financial loans and insurance are not considered to be necessities, therefore, voidable by minors
Ratification (whether expressed or implied) is the act of accepting and giving legal force to an obligation that previously was not enforceable
Contracts that are executed are presumed to be ratified while executory contracts can be disaffirmed
Unless a parent co-signs the loan for a minor, they are not liable for the contracts entered into by their minor child
Parents can be held liable for minor's tortious conduct if they fail to exercise proper parental control if they knew or should have known the lack of control creates a risk of harm to others


Intoxication:
A person's normal capacity to act or think is inhibited by alcohol and drugs (Captain Obvious)
If sufficiently intoxicated to lack mental capacity, then the contract may be voidable by the drunk
Cannot comprehend the legal consequences of entering into the contract
If you understand the consequences of the contract while under the influence, the contract is not voidable (objective indications are used to determine whether there was the required capacity to enter into the contract)
Must disaffirm within a reasonable amount of time after sobering up and return the consideration
If it involves necessaries, may be liable for the reasonable value of the consideration received
Intoxicated contracts may also be ratified


Mental: Void (court declares a person mentally incompetent and appoints a guardian)
Voidable (person has not yet been adjudged "legally" incompetent)