Ch+16-REVIEW-Capacity+_+Illegality

Ch+16-REVIEW-Capacity+_+Illegality - Ch. 16 CONTRACTUAL...

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Ch. 16 CONTRACTUAL CAPACITY and LEGALITY REVIEW BLaw 2361 -S10 The THIRD element of a legally binding K Contractual Capacity: --The minimum mental capacity required by law for a party who enters into a K to be bound by it. -- DEF: The minimum mental capacity required by law for a party who enters into a K to be bound by it. --A person who has legal capacity to K is one who is of legal age and has the mental ability to: --know (s)he is entering into a K and the nature & consequences of such; AND --understand his or her rights and obligations under the K. --Depending on the nature and extent of the defect, a person may have either -- NO capacity , in which case any K they attempt to make is VOID. -- OR LIMITED capacity , in which case their Ks are VOIDABLE. -- OR FULL CAPACITY if, although suffering a mental deficiency, they fully understand the nature and consequences of making the K, and their rights and obligations under the K. Ks are NOT void or voidable, but fully enforceable. REMEMBER: Unlike a void contract, which is unenforceable on its face, a voidable contract is presumed to be enforceable because it is valid on its face; however , some factor exists which allows “ avoidance ,” such as the contractual incapacity of one of the parties . Minors: 1
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-- In virtually all states, unmarried persons under the age of eighteen ( 18 ) may enter into any K an adult can, provided that the K is not one prohibited by law for minors ( e.g. , agreement to purchase cigarettes or alcohol). --However , unlike Ks entered into by adults, those entered into by minors are generally voidable by the minor . DISAFFIRMANCE BY MINOR Disaffirmance = Legally avoiding or setting aside a contractual obligation. A minor’s Ks are VOIDABLE—i.e., can be AVOIDED by the minor. --Only the minor has the right to disaffirm, not the adult(s) w/whom the minor entered into a K. --Generally speaking, a minor may disaffirm a contract at any time during minority OR for a reasonable time after the minor comes of age. MINOR’S OBLIGATIONS ON DISAFFIRMANCE MAJORITY OF COURTS: Minor need only (1) NOTIFY the competent party that (s)he is disaffirming the K AND (2) RETURN the goods or other C/S the minor received as a result of the K, provided they are in the minor’s possession or control and regardless of the condition of the C/S. EXCEPTIONS TO MINORS’ RIGHTS TO DISAFFIRM GENERAL RULE —Minors cannot disaffirm CERTAIN Ks, such as: Minors cannot disaffirm Ks for life and health insurance, psychological counseling, performance of duties related to stock and bond transfers and bank accounts, educational loans, child support, marriage and Ks to enlist in armed services. Liability for Necessities: A minor who enters into a K to purchase food, shelter, clothing, medical attention, or other goods or services necessary to maintain his/her well-being, is able to 2
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disaffirm the K, BUT will generally still be liable for the reasonable value of those goods and services even if (s)he disaffirms the contract. MENTAL INCOMPETENCE
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Ch+16-REVIEW-Capacity+_+Illegality - Ch. 16 CONTRACTUAL...

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