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Final Review - o Chapter 14 Capacity to Contract to...

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Chapter 14 – Capacity to Contract A person must have the ability to give consent before he can be legally bound to an agreement. Capacity: The ability to incur legal obligations and acquire legal rights. o Minors (infants), persons suffering from mental illness, or intoxicated persons are considered to not have capacity Cont ract law give s the m the righ t to avoi d cont ract s that they ente r duri ng inca paci ty. o Effect of Lack of Capacity Barg ain is con side red to be void if, at the time of the for mati on of the barg ain, a cour t had alre ady adj udi cate d (dec reed ) one or mor e of the part ies to be men tally inco mpe tent or one or mor e o f the part ies was so imp aire d that he coul d not eve n man ifest asse nt. Capacity of Minors o Minors Right to Disaffirm minors are vulnerable to their dealings with adults, and the courts grant them the right to avoid contracts. o Only the minor or legal representative may disaffirm the contract/ o Words acting to communicate the minor’s desire to cancel the contract constitutes disaffirmance. o Exception: State law statutes preventing minors from disaffirming transactions such as marriage, agreements to support their children, educational loans, life and medical insurance contracts, contracts for transportation by common carriers, and certain types of contracts approved by a court (contracts to employ a child actor). Age of Minority o 1971 – Was 21 o Now, in 49 states, the age is 18. Emancipation: Termination of a parent’s right to control a child and receive services and wages from him. o Might not necessarily grant the child capacity. Time of Disaffirmance o Contracts entered during minority that affect title to real estate can’t be disaffirmed until majority. o All other contracts entered during minority may be disaffirmed as soon as the contract is formed. Ratification: Act of affirming the contract and surrendering right to avoid the contract once the child comes of age o Can be done effectively only after the minor reaches majority o Can be expressed in an oral or written statement o Can be implied by conduct of the part of the former minor. Duties Upon Disaffirmance o Duty to Return Consideration : If neither party has performed his part of the contract, the parties’ relationship will simply be canceled by the disaffirmance. Each part y has a duty to retu rn con side rati on Mino r has righ t to reco ver any con side rati on he has give n to the adul t part y Righ t to reco ver som e pro pert y that has bee n tran sfer red to thir d part ies. o Exception in 2- 403 of UCC, where minor can’t recover goods that have been transfer red to a good faith purchas er. o Must disaffirming minor make restitution? A split of authority Tradi tion al Rul e: IF min or can’ t retu rn con side rati on, they are not obli gate d to pay the adul t for ben efits rece ived or com pen sate for depr ecia tion of con side rati on.
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