BUL chapter 11

A person who is so intoxicated as to lack mental capacity when he or she enters into a contract must perform the contract.

F

Jeff, a fifteen-year-old minor, contracts with Online, Inc., for Internet access services. Considering that Jeff is a minor, which of the following is true? Online can disaffirm the contract. Jeff can disaffirm the contract. Both a and b are true. None of the above are true.

Jeff can disaffirm the contract.

If an individual who has not been judged mentally incompetent understands the nature and effect of entering into a certain contract, the contract is normally valid.

T

In many states, certain business contracts entered into by minors cannot be disaffirmed.

T

In most cases, a person, to disaffirm a contract entered into when he or she was intoxicated, must return any consideration received.

T

Some states' statutes restrict minors from avoiding certain contracts, including for necessaries.

T

When a minor disaffirms a contract, whatever the minor transferred as consideration (or its value) normally must be returned.

T

restitution

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

Miriam has been adjudged mentally incompetent by a court of law, and a guardian has been appointed for her. Miriam wants to make some changes to her will to make sure that her assets are protected, and she asks her sister for help. How can Miriam legally change her will? a. Miriam's guardian must enter the contract on her behalf. b. Miriam cannot be involved in any legally binding actions. c. Miriam can enter the contract with two witnesses. d. Miriam's sister can enter the contract on her behalf.

a. Miriam's guardian must enter the contract on her behalf.

mentally incompetent persons- void

adjudged mentally incompetent by a court & guardian appointed -no contract -only guardian can

The general rule with regard to minors who enter into contracts is that: a. all such contracts are void. b. some contracts can be avoided by the minor. c. such contracts can be avoided by the adult party to the contract. d. all such contracts are always enforceable.

b. some contracts can be avoided by the minor.

If a person was sufficiently intoxicated to lack mental capacity to enter into a contract, the transaction is: a. voidable at the option of the non-intoxicated person. b. voidable at the option of the intoxicated person. c. void at the option of the intoxicated person. d. void at the option of the non-intoxicated person.

b. voidable at the option of the intoxicated person.

Rena enters into a contract to sell her stamp collection to her younger brother, a minor, when he turns 18. On his 18th birthday, she gives him the collection. He takes the collection from her, but after several months still has not paid her for it. The courts would consider this contract to be: a. disaffirmed since it has been executed. b. executory but disaffirmed c. executory but ratified d. ratified since it has been executed.

c. executory but ratified

In order for a minor to disaffirm a contract, the minor must: a. state in writing only his or her intent to not be bound by the contract. b. express his or her intent to not be bound by the contract through conduct only. c. show an intent to not be bound by the contract. d. wait until the minor turns 18.

c. show an intent to not be bound by the contract.

minor (can/can't) disaffirm the contract and set aside all legal obligations

can

In contract law, the act of accepting and giving legal force to an obligation is known as: a. executory. b. disaffirmance. c. capacity. d. ratification.

d. ratification.

capacity

legal ability to enter in a contractual relationship

minors entering contracts involving necessaries

necessities required for standard of living -minors may disaffirm the contract but remains liable for the reasonable value of the goods

mentally incompetent persons- valid

understand the nature and effect of entering into a certain contract yet lack capacity to engage in other activities

intoxicated persons- valid

understood legal consequences- enforceable

can minors disaffirm contracts even when they have misrepresented their age?

yes

can a minor who has reached the age of majority ratify?

yes- expressly or implied

disaffirmance- return?

some states: only return the goods subject to contract some: additional duty on the minor: duty of *restitution*

Emancipation has no effect on a minor's contractual capacity.

F

Generally, parents are liable for contracts made by their minor children.

F

When a person reaches the age of majority, he or she can no longer disaffirm a contract.

F

Lou and Sam are at a party where Sam has several strong alcoholic drinks. The next day, Lou comes to Sam's house with $500 to pick up a prized signed baseball from Sam's collection. Lou shows Sam a contract he signed at the party the night before, agreeing to sell the baseball to Lou for $500. The baseball has a market value of $400. But Sam has no recollection of signing the contract and insists he would not have sold the baseball for any price. In order to get a court to enforce the contract, Lou would have to prove: a. that Sam understood the legal consequences of the contract. b. that he was paying a fair price for the baseball. c. that Sam got intoxicated voluntarily. d. he did not know that Sam was intoxicated.

a. that Sam understood the legal consequences of the contract.

If a person was intoxicated but understood the legal consequences of entering into a contract, the contract is: a. valid. b. voidable. c. void at the option of the non-intoxicated person. d. void at the option of the intoxicated person.

a. valid

when can minors disaffirm

at any time during minority or for a reasonable time after coming of age

If a person enters into a contract, has been adjudged mentally incompetent by a court of law, and a guardian has been appointed, the contract is: a. disaffirmed. b. void. c. voidable. d. ratified.

b void

In most states, the age of majority for contractual purposes is: a. 21 years for both genders. b. 18 years for both genders. c. 18 years for males and 21 years for females. d. 17 years for both genders.

b. 18 years for both genders.

A judge ruled that Barry was mentally incompetent, placed him in a local mental hospital, and appointed a guardian. Barry escaped from the hospital, went to a used car lot, and purchased a car. In this situation: a. Barry can avoid the contract only if the salesperson knew he was mentally ill. b. Barry's contract was void from the start. c. Barry cannot avoid the contract. d. Barry has a valid contract.

b. Barry's contract was void from the start.

The general rule concerning the ability of a minor to disaffirm a contract for necessaries is that the minor: a. can disaffirm only if the subject matter of the contract is illegal. b. can disaffirm but will remain liable for the reasonable value of the goods. c. must disaffirm before the age of 14. d. can disaffirm only after turning 18.

b. can disaffirm but will remain liable for the reasonable value of the goods.

Charles Smith purchased a car on an installment contract from Bobby Floars Toyota, Inc., one month before his 18th birthday. Smith made regular monthly payments for eleven months but then returned the car to the dealer and made no further payments on it. The dealer sold the car and filed a lawsuit against Smith to recover the difference between the amount obtained from the sale of the car and the amount Smith still owed the dealer. Smith refused to pay on the grounds that he had been a minor at the time of purchase and had disaffirmed the contract after he had reached the age of majority. The dealer claimed that the ten monthly payments Smith had made constituted his ratification of the contract. The court most likely held that Smith had: a. not ratified the contract, because a minor has two years after reaching the age of majority within which to disaffirm. b. ratified the contract, because he had waited too long to disaffirm. c. not ratified the contract, because it was an adhesion contract. d. ratified the contract, because it was for the purchase of personal property.

b. ratified the contract, because he had waited too long to disaffirm.

minor (can/can't) ratify the contract and make it enforceable

can

Troy, a minor, sells his collection of sports memorabilia to Vern for $250. On his eighteenth birthday, Troy learns that the collection may have been worth at least $2,500. Troy can disaffirm, because the contract has not been fully performed. can disaffirm, if he does so within a reasonable time after attaining majority. cannot disaffirm, because he has already attained majority. cannot disaffirm, because the contract has been fully performed.

can disaffirm, if he does so within a reasonable time after attaining majority.

many states certain business contracts entered into by minors (can/cannot) be disaffirmed

cannot -if minor does business or engages in employment in the manner of an adult, his or her related contracts are fully enforceable

Ed is adjudged mentally incompetent. Irwin is appointed to act as Ed's guardian. Irwin signs a contract to sell some of Ed's property to pay for Ed's care. On regaining competency, Ed can disaffirm, because he was mentally incompetent. can disaffirm, because he is no longer mentally incompetent. cannot disaffirm, because Irwin could enter into contracts on his behalf. cannot disaffirm, because he may become mentally incompetent again.

cannot disaffirm, because Irwin could enter into contracts on his behalf.

If a mentally incompetent person who has not been adjudged mentally incompetent by a court of law enters into a contract, the contract is: a. void. b. ratified. c. disaffirmed. d. voidable.

d voidable

Antonio is diagnosed with panic disorder and social phobia, but has not been declared mentally incompetent by a court. Because he is afraid to leave his house, he signed a six-year contract with a company called Your Helping Hands to do all of his grocery shopping and other errands. Antonio's brother hears about it and offers to do all the shopping and errands for Antonio instead. a. Antonio can avoid the contract because of mental incompetence. b. Antonio's contract was void from the beginning. c. Antonio can avoid the contract if the salesperson knew of his psychiatric diagnosis. d. Antonio has a valid contract.

d. Antonio has a valid contract.

After having a few beers, Jeff signed a contract with a client to start a new job. The next day, Jeff had second thoughts and wanted to void the contract. Under which condition would Jeff not be able to avoid the contract? a. If he became intoxicated but the client did not know it b. If he never drinks alcohol and very small amounts cause him to become intoxicated c. If he became intoxicated but it was voluntarily d. If it can be proven that he understood the legal consequences of entering into the contract

d. If it can be proven that he understood the legal consequences of entering into the contract

Dana is looking for a new place to live and learns that her friend Penny needs a roommate. Dana takes a bottle of wine when she goes to see Penny. Over a glass of wine, Dana suggests that she move in with Penny, but Penny doesn't think it is a good idea. While Dana is a good friend, Penny doesn't think she would be a good roommate. Dana continues to refill Penny's wine glass, until Penny drinks almost the entire bottle. Dana then convinces Penny to sign a contract allowing Dana to become her roommate. Can Penny avoid the contract? a. Penny can avoid the contract because a reasonable person would have known that she was intoxicated. b. Penny cannot avoid the contract because she got intoxicated voluntarily. c. Penny cannot avoid the contract because one bottle of wine is not enough alcohol to render a person sufficiently intoxicated to avoid legal duties. d. Penny can avoid the contract since Dana fraudulently induced her to become intoxicated.

d. Penny can avoid the contract since Dana fraudulently induced her to become intoxicated.

Darryl goes to the local pub for a business meeting, has seven shots of whiskey, and then signs a contract for the purchase of a business. If he later wants to avoid the contract based on his intoxication, he will need to prove that: a. the business owner knew he was intoxicated. b. a reasonable person would have known that he was intoxicated. c. his capacity to act was unchanged. d. he lacked the mental capacity to enter into the contract.

d. he lacked the mental capacity to enter into the contract.

Brad, a 16-year-old, wrecks on his bike and breaks his arm. His friend Beaux drives him to the hospital for emergency medical care, where his arm is set and a cast is applied. Three weeks later, Brad receives a bill and contacts the hospital notifying them he is disaffirming the contract and will not pay the bill. Brad's attempt to avoid payment is: a. voidable. b. effective. c. void. d. ineffective.

d. ineffective.

Cara truly believes that she is a space alien from the planet Zelnor. She walks into a car dealership one day and buys a brand-new Volkswagen Jetta, telling the salesperson that she needs a sample of Earthling transportation to beam back to her home planet. If Cara wants to avoid her contract for the purchase of the car at a later date, she must: a. prove that the car dealership did not take adequate precautions to prevent sales to mentally disturbed individuals. b. prove that a court had previously judged her to be mentally incompetent. c. prove that the salesperson talked her into buying the car. d. prove that she lacked adequate mental capacity when she bought the car.

d. prove that she lacked adequate mental capacity when she bought the car.

To celebrate his 17th birthday, Zack buys a new computer. Two weeks later, his parents insist that he return the computer. Zack's attempt to return the computer will be: a. successful if he pays a fine. b. unsuccessful, because he has waited too long. c. unsuccessful unless he gets court approval. d. successful, because he has acted within a reasonable time.

d. successful, because he has acted within a reasonable time.

If a mentally incompetent person who has not been adjudged mentally incompetent by a court of law, and can understand the nature and effect of entering into the contract, enters into a contract, the contract is: a. void. b. disaffirmed. c. voidable. d. valid.

d. valid

Frank Feiden suffered from Alzheimer's disease. During a hospital stay for surgery unrelated to Alzheimer's, Feiden signed a contract conveying his farm to his sons, Harry and Norman, in unequal shares. Harry received a larger share than Norman. Norman asked a court to set the contract aside, claiming that his father was not mentally competent when he signed it. At the trial, a physician, a psychiatrist, and an attorney all testified that when they had seen Frank at various times in the prior year, he had been unable to handle his financial affairs or understand the legal consequences of his actions. Another psychiatrist, however, testified that Frank had lucid intervals, and the hospital's chart notes reflected that Frank had lucid intervals on the day he signed the contract. The attorney who drafted the contract stated that Frank understood what he was signing and was aware that he was granting more of the property to Harry than to Norman. The court most likely held that the contract was: a. valid, because Frank was mentally incompetent at the time he signed the contract. b. void, because Frank was mentally incompetent due to Alzheimer's disease. c. invalid, because the unequal property distribution was unfair. d. voidable, if Frank was mentally incompetent at the time he signed the contract.

d. voidable, if Frank was mentally incompetent at the time he signed the contract.

Adam, a sixteen-year-old minor, enters into a contract for necessaries, which his parents could provide but do not. Adam disaffirms the contract. Adam's parents must pay the reasonable value of the goods. must pay more than the reasonable value of the goods. can pay less than the reasonable value of the goods. do not have to pay anything for the goods.

do not have to pay anything for the goods.

Doug has been drinking heavily. Joe offers to buy Doug's farm for a fair price. Believing the deal is a joke, Doug writes and signs an agreement to sell and gives it to Joe. Joe believes the deal is serious. The contract is enforceable, if the circumstances indicate that Doug understands what he did. enforceable, because Joe believes that the transaction is serious. unenforceable, because the intoxication permits Doug to avoid the contract. unenforceable, because Doug thinks it is a joke.

enforceable, if the circumstances indicate that Doug understands what he did.

intoxicated persons

if the customer despite intoxication, understands the legal consequences of the contract being signed, contract is enforceable

First Bank loans money to Patty, a sixteen-year-old minor. Patty must repay the loan if the loan is made for the express purpose of buying necessaries. if First Bank makes sure the money is spent on necessaries. if both a and b are true. in none of the above circumstances.

if the loan is made for the express purpose of buying necessaries.

disaffirmance

legal avoidance, or setting aside, of a contractual obligation -only need to show an intention not to be bound by it (words/conduct) -all states permit minors to disaffirm even full executed contracts

Eve, a fifteen-year-old minor, buys a smartphone app from EZ Spyware. The contract is fully executed. Eve now wants to disaffirm it. In most states, Eve must return only the app to EZ. must return the smartphone with the app to EZ. must return just the smartphone to EZ. need do none of the above.

must return only the app to EZ.

are parents liable for minors

no but often sign contract to be obligated to perform the conditions of the contract even if the child avoids liability

mentally incompetent persons- voidable

not adjudged incompetent by a court, but did not know they were entering into the contracts or lacked mental capacity to comprehend the contract's subject matter, nature, & consequences -may be disaffirmed or ratified -ratification must occur after the person is mentally competent or after guardian appointed

implied

reaching age of majority indicates an intent to abide by the contract

express ratification

reaching age of majority states orally or in writing that she intends to be bound by the contract

under any circumstance: intoxicated person is liable for ____

reasonable value of any necessaries received

emancipation

release of a minor by parental control -repudiation of parental obligations -express, implied, absolute, conditional, total, or partial -minor can petition to be treated as an adult for business purposes

intoxicated persons- voidable

sufficiently intoxicated to lack mental capacity -must prove

ratification

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

age of majority

the age when a person is no longer a minor 18 -minor gets married -minor's emancipation from parents

Neal is adjudged mentally incompetent, and a guardian is appointed. Neal later signs an investment contract with Mary. This contract is valid. voidable. void. none of the above.

void