BUL Ch 11

minors

-"infants" in law -are usually not legally bound by contracts -in mosts states the age of majority for contractual purposes is 18 -thus, in these states, after someone turns eighteen, he or she is no longer considered a minor

valid contracts and mentally incompetent persons

-A contract entered into by a mentally incompetent person may also be valid. -A person can understand the nature and effect of entering into a certain contract yet simultaneously lack capacity to engage in other activities. -In such situations, the contract is valid because the person is not legally mentally incompetent for contractual purposes.

intoxicated persons

-A contract entered into by an intoxicated person can be either voidable or valid. -If the person was sufficiently intoxicated to lack mental capacity, the transaction is voidable at the option of the intoxicated person, even if the intoxication was purely voluntary. -For the contract to be voidable, it must be proved that the intoxicated person's reason and judgment were impaired to the extent that he or she did not comprehend the legal consequences of entering into the contract. -If the person was intoxicated but understood these legal consequences, the contract is enforceable. -Under any circumstances, an intoxicated person is liable for the reasonable value of any necessaries he or she receives. -Problems often arise in determining whether a party was sufficiently intoxicated to avoid legal duties. -Many courts prefer looking at factors other than the intoxicated party's mental state (for example, whether the other party fraudulently induced the person to become intoxicated).

LO3: Explain how intoxication can affect a contract.

-A contract entered into by an intoxicated person is voidable at the option of the intoxicated person if the person was sufficiently intoxicated to lack mental capacity, even if the intoxication was voluntary. -A contract with an intoxicated person is enforceable if, despite being intoxicated, the person understood the legal consequences of entering into the contract.

LO4: Discuss how mental incompetence can affect a contract.

-A contract made by a person adjudged by a court to be mentally incompetent is void. -A contract made by a mentally incompetent person not adjudged by a court to be mentally incompetent is voidable at the option of the mentally incompetent person. -A contract made by a mentally incompetent person who nevertheless understands the nature and effect of entering into the contract is valid.

disaffirmance and necessaries

-A minor who enters into a contract for necessaries may disaffirm the contract but remains liable for the reasonable value of the goods. -Necessaries include whatever is reasonably needed to maintain the minor's standard of living. ----food, clothing, shelter, and medical services are necessaries. -What is a necessary for one minor, however, may be a luxury for another, depending on the minors' customary living standard.

LO2: Identify obligations that minors cannot avoid.

-A minor who has misrepresented her or his age will be denied the right to disaffirm by some courts. -A minor may disaffirm a contract for necessaries but remains liable for the reasonable value of the goods. -In some states, if a minor does business or engages in employment in the manner of an adult, his or her related contracts are fully enforceable.

restitution

-A remedy that restores a person to the position held before a contract, including the restoration of goods, property, or funds previously conveyed

ratification

-Accepting and giving legal force to an obligation that previously was not enforceable. -Also, the confirmation of an act or contract performed by another. -A minor who has reached the age of majority can ratify a contract expressly or impliedly.

a minor's obligations on disaffirmance

-All states' laws permit minors to disaffirm contracts, including fully executed (performed) contracts. -States differ, though, on the extent of a minor's obligations after disaffirmance. -In most states, courts hold that 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. -A few states place an additional duty on the minor—the duty of restitution.

example of voidable contracts and mentally incompetent persons

-Annabelle Duffie was mildly mentally retarded and, at age seventy, had the beginning of dementia. -For her entire life, she had lived with her brother, Jerome. -When Jerome died, he left Annabelle his property, including 180 acres of timberland near Hope, Arkansas, valued at more than $400,000. -Less than three months later, Annabelle signed a deed granting her interest in the tract to Charles and Joanne Black. -The Blacks agreed to pay Annabelle $150,000 in monthly payments of $1,000. -Later, Annabelle's nephew, Jack, was appointed to be her legal guardian. -On her behalf, Jack filed a lawsuit in an Arkansas state court against the Blacks, seeking to void the land deal because of Annabelle's lack of mental competence. -The court ordered the Blacks to return the property to Annabelle. They appealed. Was the contract between Annabelle and the Blacks voidable because of mental incompetence? -Yes. In Black v. Duffie, a state intermediate appellate court cited strong evidence that Annabelle had been incompetent her entire life. -She lacked the cognitive ability to make the complex financial decisions involved in selling property. -She was therefore not capable of entering into a valid, enforceable contract, and the contract was voidable.

parent's liability

-As a general rule, parents are not liable for contracts made by their minor children when the children are acting on their own. -That is why businesses ordinarily require parents to sign any contract made with a minor. -The parents then become personally obligated under the contract to perform the conditions of the contract, even if their child avoids liability.

example of contracts and intoxicated persons

-Bill offers to buy Portside Warehouse, a prime commercial property, from Nick. -Nick refuses to sell. -Bill encourages Nick to quickly down a couple of strong alcoholic drinks "to celebrate your resolve." -Bill then persuades Nick to sell the property. -If a court finds that Bill fraudulently induced Nick to become intoxicated, and that Nick was sufficiently intoxicated to lack mental capacity, Nick can avoid the sale.

mentally incompetent persons

-Contracts made by mentally incompetent persons can be void, voidable, or valid.

LO1: Understand a minor's right to disaffirm a contract.

-Contracts with minors are voidable at the option of the minor. -Disaffirmance can take place (in most states) at any time during minority and within a reasonable time after the minor has reached the age of majority. -If a minor disaffirms a contract, the entire contract must be disaffirmed. -When disaffirming an executed contract, the minor has a duty of restitution to return the received goods if they are still in the minor's control and (in some states) to pay for any damage to the goods.

example of disaffirmance within a reasonable time

-Darlo's great-grandmother dies and leaves him a small rental house. -As a minor, Darlo is not prepared to manage the property, so he agrees to let his grandmother do so on his behalf. -Five years after reaching his majority, Darlo sells the house. -His grandmother asks to be reimbursed for funds she has spent to maintain the property. -Darlo refuses. Can Darlo disaffirm the management agreement with his grandmother? -No. A minor is bound by his or her contracts unless they are disaffirmed within a reasonable time after the minor reaches majority. -What constitutes a reasonable time depends on the circumstances. -Here, Darlo's disaffirmance takes place five years after he reaches majority. -It has not occurred within a reasonable time. -A court will likely hold that the contract with his grandmother has been ratified.

example of void contracts and mentally incompetent persons

-Delilah has a rare form of amnesia as a result of a head injury suffered in a car accident ten years ago. -Ronald is her legal guardian. -When Lisa offers to buy Delilah's house for a good price, Delilah agrees and signs the sales contract. -This contract is void due to Delilah's amnesia. -Lisa, however, could create a valid contract with Ronald to buy Delilah's house, if Ronald agrees.

void contracts and mentally incompetent persons

-If a person has been adjudged mentally incompetent by a court of law and a guardian has been appointed, any contract made by the mentally incompetent person is void—no contract exists. -Only the guardian can enter into a binding legal duty on the person's behalf.

disaffirmance and business contracts

-In many states, certain business contracts entered into by minors cannot be disaffirmed. -In those states, if a minor does business or engages in employment in the manner of an adult, his or her related contracts are fully enforceable.

minors and the duty of restitution

-In these states, courts may hold a minor responsible for damage, ordinary wear and tear, and depreciation of goods that the minor used before disaffirming a contract. -This duty of restitution recognizes the legitimate interests of those who enter into agreements with minors. -The theory is that the adult party should be returned to the position he or she held before the contract was made with the minor. -If a minor disaffirms a contract, he or she must disaffirm the entire contract. -The minor cannot decide to keep part of the contracted goods and return the rest.

example of disaffirmance with minor

-Jared, a minor, is a motocross competitor. At Monster Mountain MX Park, he signs a waiver of liability that releases the park from any loss or injury due to its negligence. -While riding on the mountain track, Jared goes over a blind jump and crashes into a tractor, which has been left on the track by a park employee. -To recover damages for his injuries, he files a lawsuit against Monster Mountain, alleging negligence for its failure to remove the tractor from the track. Does the park's liability waiver bar Jared's claim to sue for negligence? -No, Contracts entered into by minors are voidable at their option. -Thus, Jared has the choice of disaffirming (avoiding) the waiver contract and setting aside all legal obligations arising from it. -To disaffirm the waiver contract, Jared need only demonstrate an intention not to be bound by it. -Jared's lawsuit against Monster Mountain clearly shows his intent to disaffirm the waiver.

example of disaffirmance and misrepresentation of age

-Jennifer, a minor, contracts to purchase a new car from Haydocy Pontiac. -She tells the salesperson that she is twenty-one. Jennifer finances most of the purchase price. -Immediately following delivery of the car, she turns it over to her boyfriend and thereafter never has possession. -She makes no further payments on the contract and attempts to disaffirm the contract. -She makes no offer to return the car. -Haydocy sues Jennifer for the balance owed. Can Haydocy recover the balance, given the fact that Jennifer is a minor who misrepresented her age? -Yes. If Jennifer lives in a state that prohibits disaffirmance by minors who misrepresent their age for unfair personal gain, Haydocy can attempt to recover the remaining balance of the contract. -Jennifer's misrepresentation of her age in this instance was done to intentionally benefit herself and her boyfriend.

example of ratification

-Lindsay posts an ad on Craigslist offering to sell her grandmother's Yamaha Grand Piano for $6,000. -Axel, who is seventeen years old, agrees to purchase the piano by making monthly payments of $200 over the next two and a half years. -Axel does not disaffirm the contract, and six months into the agreement, he turns eighteen (the age of majority in his state). -When Axel stops by Lindsay's house to make his seventh payment, he states, "I love the piano and will continue making payments." Has Axel expressly ratified the contract with Lindsay? -Yes. His oral statement to Lindsay to continue making payments on the piano is an express ratification of their contract. -He can no longer disaffirm it. -If Axel never expressly tells Lindsay he will continue making payments but continues to do so well after reaching the age of majority, he has implied the contract's ratification.

example of disaffirmance and business contracts

-Miguel is seventeen years old and a gifted computer science student. -While in high school, he creates a new app called "Taking Care of Business." -The app links personal to-do lists, maps, building directories, and other useful data to connected social media and contact networks. -Using attorneys to negotiate a sales agreement, Miguel sells the app to Wilson Tech. -Later, another large corporation offers Miguel a better price, but he cannot disaffirm his agreement with Wilson Tech. -because Miguel has done business in the manner of an adult, and in his state, that means his contract cannot be disaffirmed.

disaffirmance and misrepresentation of age

-Ordinarily, minors can disaffirm contracts even when they have misrepresented their age. -AKA the minor lied and said that they were older than 18 -A growing number of states, however, have enacted laws to prohibit a minor's disaffirmance in certain situations. -In short, the right to disaffirm a contract is to protect minors. If, instead, a minor uses the right to disaffirm for unfair personal gain, then that protection may be dismissed in certain states.

example of valid contracts and mentally incompetent persons

-Rhonda is diagnosed with manic depression, but a court has not declared her mentally incompetent. -One afternoon, wearing shabby clothes and with her hair uncombed, she arrives at Classic Automotive. -After two hours of negotiations, she trades in her Honda Civic and signs a lease for a BMW. -She does not test-drive the new car, she has difficulty removing the Civic's keys from her key ring, and the payments on the BMW are more than she can afford. Can Rhonda disaffirm the lease agreement because of mental incompetence? -No. A party cannot avoid a contract on the ground of mental incompetence unless at the time of the contract's execution, the person did not reasonably understand the nature and terms of the contract. -In this situation, nothing—including Rhonda's disheveled appearance, her difficulty with the keys, her failure to test-drive the car, or its price—indicates that she did not understand she was executing an auto lease. -After all, she negotiated more than two hours with Classic Automotive.

other example of disaffirmance with minors

-Sierra, a sixteen-year-old minor, is hired by Fast Burgers. -At the employer's request, Sierra signs an agreement to resolve any dispute through arbitration. -Sierra is injured on the job and quits. -Her mother files a lawsuit against Fast Burgers on Sierra's behalf to recover for the injury. -The employer files a motion to compel arbitration. A Can Sierra avoid the agreement to arbitrate? -Yes. A minor can disaffirm a contract at his or her option. -Sierra opted to disaffirm the agreement to arbitrate by quitting her job and filing a lawsuit against Fast Burgers.

emancipation

-The release of a minor from parental control. -the release of a minor by his or her parents -involves completely relinquishing the right to the minor's control, care, custody, and earnings. -It is a repudiation of parental obligations. -Emancipation may be express or implied, absolute or conditional, total or partial. -A number of jurisdictions permit minors to petition for emancipation themselves. -a minor may petition a court to be treated as an adult for business purposes. If the court grants the minor's request, it removes the lack of contractual capacity, and the minor no longer has the right to disaffirm business contracts.

general rule for minors

-a minor can enter into any contract an adult can, provided that the contract is not one prohibited by law for minors. HOWEVER -subject to certain exceptions, the contracts entered into by a minor are voidable (nullified) at the option of that minor -the minor can ratify (accept) the contract and thus make it enforceable -or a minor can disaffirm (avoid) the contract and set aside all legal obligations

Disaffirmance within a Reasonable Time

-a minor can ordinarily disaffirm a contract at any time during minority or for a reasonable time after coming of age. -It is important that disaffirmance be timely.

some situations where capacity is lacking or questionable...

-a person adjudged by a court to be mentally incompetent cannot form a legally binding contract with another party. -in other situations, a party may have the capacity to enter into a valid contract but also have the right to avoid liability under it. (ex: minors!)

contractual capacity

-the legal ability to enter into a contractual relationship -courts generally presume the existence of contractual capacity

disaffirmance

-the legal avoidance, or setting aside, of a contractual obligation. -public policy permits minors to disaffirm, and thereby void, their contracts. -it is also a well-settled principle that a court should act to protect a minor's best interests. (This includes financial interests.) -For a minor to exercise the option to disaffirm a contract, he or she need only show an intention not to be bound by it. -Words or conduct may serve to show this intent.

termination of minority status

-when a minor gets married. -minor's emancipation from his or her parents

voidable contracts and mentally incompetent persons

-when mentally incompetent persons who have not been adjudged incompetent by a court enter into contracts -Such contracts are voidable if the incompetent persons did not know they were entering into the contracts or they lacked the mental capacity to comprehend the contracts' subject matter, nature, and consequences -the contracts are voidable at the option of the mentally incompetent person but not the other party. -As with minors, voidable contracts made by mentally incompetent persons may be disaffirmed or ratified. Ratification must occur after the person is mentally competent or after a guardian is appointed and ratifies the contract. -Like intoxicated persons, mentally incompetent persons are liable for the reasonable value of any necessaries they receive.

age of majority

age when a person is no longer a mnor

what is the third requirement for a valid contract?

contractual capacity

express ratification

occurs when the individual, on reaching the age of majority, STATES ORALLY OR IN WRITING that she or he intends to be bound by the contract

implied ratification

takes place when the minor, on reaching the age of majority, indicates an INTENT to abide by the contract