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Chapter10slides - Chapter 10 Chapter Capacity and Legality...

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Unformatted text preview: Chapter 10 Chapter Capacity and Legality Minors Minors • Need protection from – Overreaching adults – Their own youthful folly • Law will presume the above and provide Law broad protections broad • Disaffirmance provides this Disaffirmance Disaffirmance • Minor can avoid the contract – Contract is voidable by the minor – Only the minor can avoid – Minor is returned to status quo • Adults deal with minors “at their peril” Upon Disaffirmance Upon • Restitution: Duty of adult to return minor Restitution: to status quo to – Return of Consideration – Or a reasonable substitute • Restoration: Duty of minor to return Restoration: what is left of consideration to the adult; what Trend is to require more than mere restoration restoration Minor’s Duty-Current Trend Minor’s • Historically: Restitution-minor is entitled Historically: to full refund—still the rule in most states. states. • Trend: Deduct from minor’s refund an Trend: amount for either: amount – Minor’s use (benefit) from the item – Decline in fair market value – See p 280 Time to disaffirm Time • Minor can disaffirm – While still a minor – For a reasonable time after reaching For adulthood adulthood • 1-2 months is common • But, depends on all facts and circumstances Ratification Ratification • • • Can ratify expressly Failure to disaffirm = ratification Attempted ratification while still a minor Attempted is not binding is • Promise while a minor (in contract or Promise separate) to not disaffirm is not binding separate) Necessaries Necessaries • • • Minor obligated, but only for fair value Protects minor from paying too much What qualifies, depends on minor’s What “station in life” “station • E.g., car is for some, not others • Item provided for by parents is not a Item necessary to the minor necessary Intoxication Intoxication • Intoxicated person can avoid if so Intoxicated intoxicated that could not comprehend nature of the transaction nature Mentally Incompetency Mentally • Persons adjudged insane have not Persons capacity to contract, thus attempts to do so are void so • Other persons can avoid if could not Other comprehend contract when entered into. when Illegal Contracts Illegal • • • Void Court leaves parties where they are Statutory violations – Generally clearly in violation or not Statutory Illegal Contracts Statutory • Usury • Gambling Debts – New York: state can enforce laws against New internet gambling internet • Licensing Statutes – Regulatory – Revenue-raising Public Policy Public • Considered Illegal, though no statute is Considered violated violated • Wide court discretion • Used where court does not want to Used enforce contract enforce • Even if technically not illegal, court can Even say it is against public policy, and will be treated as illegal. treated Public Policy Examples Public • • • Contracts to divorce Prenuptial agreements Noncompete Agreements (sale of Noncompete business or employment) must be reasonable: reasonable: – Time – Line of business – Geography Exculpatory Clauses Exculpatory • • • • • “Disclaimers” Generally not valid for essential services Lift ticket example Valid for negligence Not for gross negligence or intentional Not acts acts • Issue: Can adult disclaim for their child? Unconscionable Contracts Unconscionable • Must be extreme • Usually based on both the terms and Usually how they were negotiated how Court’s response Court’s • Usually ignores, even if one party benefits at Usually the expense of the other the • Exceptions: – – – – Justifiable ignorance Protected Class e.g. employees Withdrawal from the contract Severable contract: Will delete illegal part and Severable enforce the rest enforce ...
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