Chapter 13 Outline

Chapter 13 Outline - Chapter 13 Capacity and Legality 1...

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Chapter 13: Capacity and Legality 1) Contractual Capacity: the legal ability to enter into a contractual relationship. a) Minors i) The age of majority for contractual purposes is eighteen years ii) Minority status may be terminated based on marriage or emancipation (occurs when a child’s legal guardian relinquishes the legal right to exercise control over the child) iii) General rule is that a minor can enter into any contract that an adult can, provided that the contract is not one prohibited by law for minors iv) A contract entered into by a minor is voidable at the option of that minor, subject to certain exceptions v) Minor’s Right to Disaffirm (1) Disaffirmance: the legal avoidance, or setting aside, or a contractual obligation (2) To disaffirm, a minor must express his/her intent, through words or conduct, not to be bound to the contract. (3) Must disaffirm the entire contract, not merely a portion of it. (4) A contract can be ordinarily be disaffirmed at any time during minority or for a reasonable period after reaching majority. (5) An adult who enters into a contract with a minor cannot avoid his/her contractual duties on the ground that the minor can do so. vi) Minor’s Obligation’s on Disaffirmance (1) Majority Rule (a) The minor need only return the goods (or other consideration) subject to the contract, provided the goods are in the minor’s possession or control. (2) Minority Rule (a) The duty to restore the adult party to the position that she/he held before the contract vii)Exceptions to a Minor’s Right to Disaffirm (1) Misrepresentation of Age (a) A minor who has misrepresented his/her age can be bound by a contract, at least under certain circumstances (b) Misrepresentation of age is enough to prohibit Disaffirmance
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(2) Contracts for Necessaries (a) Necessaries: items that fulfill basic needs, such as food, clothing, shelter, and medical services, at a level of value required to maintain the minor’s standard of living or financial and social status. (b) For a contract to qualify as a contract for necessaries (1) the item contract for must be necessary for the minor’s subsistence, (2) the value of the necessary item must be up to a level required to maintain the minor’s standard of living or financial and social status, and (3) the minor must not be under the care of a parent or guardian who is required to supply this item (c) Unless these 3 criteria are met, the minor can disaffirm the contract without being liable for the reasonable value of the goods used (i) Insurance is not viewed as a necessary, so minors can ordinarily disaffirm their insurance contracts and recover all premiums paid. (ii) Financial loans are seldom considered to be necessaries
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Chapter 13 Outline - Chapter 13 Capacity and Legality 1...

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