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Unformatted text preview: 1 LECTURE NOTES: CHAPTER 13 “CAPACITY AND LEGALITY” INTRODUCTION Chapter 13 logically follows the material covered in Chapters 11 and 12, which concern determining when an agreement is reached and if an agreement is supported by legally sufficient consideration. This chapter (and the next chapter) discusses policies and factors that outweigh the reasons for implementing an agreement. This chapter considers first whether or not certain people—minors, incompetent persons, and intoxicated persons—have the capacity to contract (that is, the legal ability to enter into a contractual relationship). The discussion of the capacity of minors to contract may surprise some of you because, under certain conditions, sixteen-, seventeen-, and even some eighteen-year-olds may avoid contracts. This chapter also discusses how legality affects the validity of a contract. To be enforced in court, a contract must call for the performance of a legal act. That courts will not enforce contracts that are contrary to state or federal law or to public policy is a simple concept. To allow a person to profit from his or her wrongdoing is clearly contrary to the mores of society. I. Contractual Capacity Generally, courts presume that parties to a contract have contractual capacity, but there are some situations in which capacity is lacking or may be questionable. In some sit- uations, a party may have capacity but also the right to avoid liability under it. A. MINORS In most states, the age of majority for contractual purposes is eighteen. Some states provide for the termination of minority on marriage. A minor can enter into any contract that an adult can enter into, except a contract prohibited by law for minors. Subject to exceptions, contracts entered into by a minor are voidable at the option of the minor. An adult who enters into a contract with a minor cannot avoid contractual duties unless the minor opts to avoid the contract. 1. Minor’s Right to Disaffirm For a minor to avoid a contract, he or she need only manifest an intent not to be bound. A contract can ordinarily be disaffirmed at any time during minority or for a reasonable time after coming of age. A minor must disaffirm an entire contract. 2. Minor’s Obligations on Disaffirmance Generally, a minor need only return the goods (or other consideration), if they are still within his or her control. Their condition does not affect a minor’s right to disaffirm. In a few states, minors have a duty of restitution (in accord with the maxim that one’s youth may be used as a shield, but not as a sword) to return the other party to the position he or she was in before the contract was made. 2 3. Exceptions to the Minor’s Right to Disaffirm a. Misrepresentation of Age In most states, a minor can disaffirm even if he or she misrepresented his or her age. In many states, however, this is enough to bar disaffirmance....
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- Spring '11