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LSB 3213 Chapter 8 Smartbook

Terms in this set (29)

_______ is a legal doctrine used by courts to protect parties who may lack the ability to understand the terms of an agreement.
Capacity
Suppose Bill (16 year old painter), promises Greg (20 years old) to paint Greg's house. The contract is _______ against Greg who is not protected by the capacity rule but is _______ by Bill.
voidable, enforceable
In general, the contracts of minors (persons younger than 18 years of age) are ________.
voidable at their option
______ occurs when the minor, after reaching majority, begins to perform the contract, such as making an installment payment on a loan for a car.
Ratification by implication
When a minor _______ a contract, the majority of states would hold that the minor is still entitled to the return of the consideration he parted with.
disaffirms
Before a party can be legally bound to a contract, he must have the capacity to understand and appreciate contract terms. There are capacity issues for: _______, _______, and _______.
minors, intoxicated persons, mental incompetents
An exception to the rule that the minor must return the consideration occurs in the case of _______.
necessaries
If persons who lack capacity to contract make a promise, that promise is _______.
Multiple choice question.
voidable
A person _______ because of a mental illness or defect if the person is unable to understand the nature or consequences of a contract or is unable to act in a reasonable manner.
lacks capacity
Generally, a minor need not do any _______ act in order to derive the benefit of this general rule of _______.
affirmative, voidability
The majority of states hold that contracts made by an incompetent are _______, not void. If the incompetent party regains her mental capacity, or has a guardian appointed, she may _______ the contract.
ratify, voidable
_______ includes any act that indicates that the minor intends to be bound by his promise; it can be expressed orally, in writing, or it can be implied.
Ratification
_______ occurs when the minor attempts to avoid obligation under a contract, even though the contract has been partially performed.
Multiple choice question.
Disaffirmance
Courts will use a(n) ________ to determine whether a _______ person would have believed that an intoxicated person had sufficient capacity to enter into an agreement.
reasonable, objective standard
Johnnie consumes his necessaries and then disaffirms his contract with a grocery store. Will he be successful if he demands return of his complete consideration?
No, Johnnie is liable for the reasonable value of the necessaries.
For a contract to be ________ it must meet the requirement of _______, and both the subject matter and the performance of the contract must be legal.
enforceable, legality
Mental competence means not just obvious cases such as mental disorders, but also the following: _______. _______, or _______.
severely depressed, highly intoxicated people, traumatic pressure
Generally, an illegal contract is automatically _______, so neither party may enforce it against the other.
void
If Karen is a schizophrenic under a doctor's care, she lacks capacity to sign a contract because of mental illness or defect if either: _______ or _______, _______.
- she is unable to act in a reasonable manner in relation to the transaction
- she is unable to understand the nature and consequences of the contract
- the other party has reason to know of her condition
Generally, a contract that violates a statute _______ and thus will not be enforced by the courts.
is void
Generally, contracts against public policy dictates that one cannot lawfully do something that has a tendency to be _______.
injurious to the public good
In terms of intoxication, in the _______ case, even though the parties had been drinking alcohol, the contract to sell Zehmer's farm was upheld because of _______.
Lucy v. Zehmer, objective intent
Examples of contracts against public policy include all of the following except for a(n) _______.
contract for a reasonable restraint against trade
A contract for illegal gambling that is specifically barred by statute is ________ because its terms violate some _______ objective.
public policy, void
When a party to an agreement is a member of the class of persons for whose protection the contract was made illegal, he may either: _______ or _______.
obtain restitution, enforce the agreement
Suppose Harry promises to paint Carol's home in exchange for Carol's promise to smuggle 500 Cuban cigars into the United States in violation of federal law. What is the result?
The contract is void and neither party may enforce it.
If a statute declares that a specific type of contract is prohibited, such contract is _______.
absolutely void
Generally, the courts have the power to declare certain types of contracts _______ on the grounds that they are contrary to _______.
public policy, void
Exceptions to the nonenforcement rule regarding illegal contracts include all of the following: ________.
- when an insurance policy is illegal because the company did not use an approved form
- if a party to an illegal contract reminds before any part of the illegal purpose is carried out
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