Business Law Chapter 13 Vocabulary

age of majority

when a person is no longer a minor. the age (18 in most states) at which a person, formerly a minor, is recognized by law as an adult and is legally responsible for his or her actions.

Does a minor have the capacity to enter into an enforceable contract? What does it mean to disaffirm a contract?

- Yes, a minor does have the capacity to enter into an enforceable contract provided that the contract is not prohibited by law for minors. The contract can be voidable at the option of the minor as long as the minor expresses through words or conduct their intent not to be bound. - Dissafirmance is the legal avoidance of a contractural obligation.

Three exceptions to a minor's right to disaffirm a contract

1) Marriage contracts and contracts to enlist in the armed services; due to public policy 2) Misrepresenting their age, especially in a contract with adults. 3) Enters a contract for necessaries (food, clothing, shelter, etc.) may disaffirm the contract but remains liable for the reasonable value of the goods.

four types of contracts contrary to statute

1) contracts to commit a crime 2) usury 3) gambling 4) licensing statutes (for a profession like physicians)

Under what circumstances will a covenant not to compete be enforced? When will such covenants be enforced?

A covenant not to compete is the contractural promise of one party to refrain from conducting business similar to that of another party for a certain time and within a specified geographical area. Enforced: as long as the covenant is reasonable and an original part of the sale of an ongoing business or employee contract. Not enforced: when period to wait to compete is too long or geographical area is too large

What is an exculpatory clause? In what circumstances might exculpatory clauses be enforced? When will they not be enforced?

Exculpatory clause releases a contractural party from liability in the event of monetary or physical injury, no mater who is at fault. Enforced: reasonable, do not violate public policy, and do not protect parties from liability for intentional misconduct. Not enforced: when it is deemed unconscionable.

parent's liability with minors and contracts

General rule, parents are not liable for the contracts made by minor children acting on their own, except contracts for necessaries, which the parents are legally required to provide. Businesses usually require parents to cosign with minors so in case minors avoid liability, parents obligated to perform the conditions.

Mentally incompetent persons

Void contract: if court has previously determined the person is mentally incompetent and has appointed a guardian to represent the person (guardian can enter binding contract for mentally incompetent person) Voidable contract: if court has not previously determined the person is mentally incompetent but person was incompetent at the time of contract Valis contract: if mentally ill person (who court not previously determined the person as mentally incompetent) made a contract during period of lucidness.

Does an intoxicated person have the capacity to enter into an enforceable contract?

Yes, if the person shows consideration and contractural capacity and all the other stages than it is enforceable. However, if the person was sufficiently intoxicated to lack mental capacity, then the transaction may be voidable at the option of the intoxicated person.

unconscionable (contract or clause)

a contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the other party. "void of conscience"

exculpatory clause

a clause that releases a contractural party from liability in the event of monetary or physical injury, no matter who is at fault.

employment contract

a contract between an employer and an employee in which the terms and conditions of employment are stated.

reformation

a court ordered correction of a written contract so that it reflects the true intentions of the parties

adhesion contract

a standard form contract in which the stronger party dictates the terms. Written exclusively by one party and presenting it to the other party on a take-it or leave-it basis.

usury

charging an illegal rate of interest

emancipation

in regard to minors, the act of being freed from parental control. A child's parent or legal guardian relinquishes the legal right to exercise control over the child.

necessaries

necessities required for life, such as food, shelter, clothing, and medical attention.

ratification

the act of accepting and giving legal force to an obligation that previously was not enforceable.

covenant not to compete (the sale of an ongoing business)

the contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area. This enables a seller to sell and a purchaser to buy without worrying about the seller opening a business a block away.

contractual capacity

the legal ability to enter into a contractual relationship. the capacity required by the law for a party who enters into a contract to be bound by that contract.

disaffirmance

the legal avoidance, setting aside, of a contractual obligation. to disaffirm, a minor must express, either through words or conduct, his or her intent not to be bound by the contract. Minor must disaffirm whole contract, not just part of it.