Chapter 14

Generally, the age of majority for contracting purposes is 21 years.

False

Ratification makes a contract valid from its inception.

True

A minor entered into a contract with GAM & Co. On attaining majority, he wishes to enforce the contract. The adult party must: A. perform the contract. B. rescind the contract. C. abandon the contract. D. ratify the contract.

A. perform the contract.

A bargain is considered to be void if a court has _____ a person to be mentally incompetent at the time the bargain was formed. A. ratified B. adjudicated C. disaffirmed D. emancipated

B. adjudicated

Payne entered into a written agreement to sell a parcel of land to Stevens. At the time the agreement was executed, Payne had consumed alcoholic beverages. Payne's ability to understand the nature and terms of the contract was not impaired. Stevens did not believe that Payne was intoxicated. The contract is: A. void as a matter of law. B. legally binding on both parties. C. voidable at Payne's option. D. voidable at Stevens' option.

B. legally binding on both parties.

_____ makes any contract valid from its inception and can be done effectively only after a minor reaches majority. A. Disaffirmance B. Emancipation C. Ratification D. Consideration

C. Ratification

A minor has the right to recover property transferred to third parties. This includes even good faith purchasers.

False

Emancipation is a formal agreement in writing to terminate a parent's right to control a child and receive services from him.

False

Once a contract made by a minor has been effectively ratified, it cannot be affirmed.

False

Ordinarily, contracts entered into by mentally impaired people are void, while contracts entered into by intoxicated people are voidable.

False

Under the theory that alcohol and drug use should not be rewarded, today most courts say that contracts made by intoxicated people are perfectly binding, no matter how severe the intoxication.

False

A contract made by a person who has been adjudicated to be insane and institutionalized or put under a guardian's care is void rather than voidable.

True

A minor's contract for necessaries makes the minor liable for the reasonable value of the necessaries furnished to him.

True

Minors are considered to lack capacity to contract.

True

Ordinarily, an item is not considered to be a necessary if a parent or guardian already supplies the minor with similar items.

True

The traditional rule is that, where the consideration given a minor under a minor's contract has been lost, stolen, or dissipated, the minor can disaffirm without compensating the adult for the loss in any way.

True

Under the Restatement (Second) of Contracts, intoxication will make a contract voidable if the other party had reason to know that the intoxicated person was so intoxicated that he/she did not understand the transaction.

True

Which of the following CANNOT be disaffirmed until after the age of majority? A. A contract that affects title to real estate. B. A contract for a necessary. C. A contract that is fully executed. D. A contract for the sale of goods.

A. A contract that affects title to real estate.

_____ is the ability to incur legal obligations and acquire legal rights. A. Capacity B. Emancipation C. Necessity D. Disaffirmance

A. Capacity

Rebecca, a minor, rented an apartment from Jones for a period of one year when she had no place to stay. She disaffirmed the contract after four months, though she paid rent only for the first two months. Which of the following is true of the case? A. Jones can recover the unpaid rent for two months. B. Jones can recover rent for the whole year because he has suffered a loss. C. Rebecca need not pay any rent because she has disaffirmed the contract. D. Rebecca is not liable to pay any rent if she can prove that she is a minor.

A. Jones can recover the unpaid rent for two months.

Pat is a rich boy whose parents supply him with every conceivable necessity of life. While still a minor, Pat buys a coat on credit from a men's store for $5,000. After wearing the coat for a while, Pat decides that it bores him and that he would like to disaffirm. Which of the following is most likely to be true? Assume that Pat is still a minor. A. Pat can disaffirm the contract, and he must return the coat. B. Pat cannot disaffirm the contract, but he is liable only for the reasonable value of the coat. C. Pat cannot disaffirm the contract, and he is liable for the full price of the coat ($5,000). D. Pat can disaffirm the contract, but the store will sue him for deceit.

A. Pat can disaffirm the contract, and he must return the coat.

Which of the following is true of necessaries? A. The liability for necessaries is quasi-contractual. B. A minor is liable for the necessaries that he/she did not receive. C. In case of a disaffirmance, the minor need not pay for any necessary. D. An item is considered a necessary even if the minor already possesses it.

A. The liability for necessaries is quasi-contractual.

Which of the following is true of contracts involving intoxicated parties? A. The rules are similar to the ones for people with a mental incapacity. B. Courts are generally sympathetic to people involved in such contracts. C. A person incapacitated by intoxication can disaffirm at any period of time. D. In most such cases, people have escaped their contractual obligations.

A. The rules are similar to the ones for people with a mental incapacity.

Tracy, age 12, is named the sole inheritor of her family mansion which is valued to be worth millions. She has disaffirmed the agreement on the advice of her uncle and guardian Pete. This automatically transfers the title to the latter. Which of the following statements is true of the case? A. Tracy cannot disaffirm until she has reached majority. B. Tracy's decision will be allowed by the family courts. C. Pete has every right to Tracy's property and can take legal possession of it. D. Tracy's decision is valid as long as it is in writing.

A. Tracy cannot disaffirm until she has reached majority.

In general, contracts made by insane (mentally impaired) persons: A. can sometimes be ratified. B. are unconditionally void. C. are unconditionally voidable. D. are voidable only if they involve necessaries.

A. can sometimes be ratified.

Ted failed to disaffirm a contract during his minority. The contract was automatically: A. ratified. B. rescinded. C. set aside. D. made voidable at the option of the minor.

A. ratified.

In January 2002, a court with the necessary subject-matter jurisdiction holds Marvin mentally incompetent and appoints a guardian for him. In November 2002, Marvin escapes his guardian's care and takes off on his own. While eating lunch with Clara, who knows about Marvin's condition, Marvin signs an agreement to sell a valuable property he owns. When he signs the contract, Marvin believes that he is the President of the United States signing an important treaty. The agreement between Marvin and Clara is best described as: A. void. B. voidable. C. unenforceable. D. perfectly valid, if the price Clara pays for the property is fair.

A. void.

Sarah is 16 years old. She left home at age 15; her parents no longer support her. Sarah entered into a contract with Best Groceries for the purchase of $100 of groceries on credit. The groceries consisted of basic, necessary items. However, their reasonable value is only $80. If Sarah discovers that she has been overcharged and refuses to pay, Best Groceries is entitled to collect: A. nothing. B. $80. C. $100. D. $90.

B. $80.

Which of the following contracts is void? A. A contract made by an unemancipated minor. B. A contract made by a person who has been adjudicated insane and institutionalized. C. A contract made by a person under the influence of mind-altering drugs. D. A contract made by a minor who receives no support from a parent or guardian.

B. A contract made by a person who has been adjudicated insane and institutionalized.

Beth has just turned 17 years of age. She entered into a contract with ABC Corp. for the purchase of a used car, with full payment due in 30 days. The purchase price was $5,000. This car is necessary for Beth to use as transportation to her job, which she needs in order to pay tuition at the university where she is a freshman. Beth's parents have refused to help her pay for college. Three days later Beth changes her mind; she now wants to return the car because she has learned that it is worth only $4,000. $4,000 is in fact the reasonable value of this car. If Beth does not pay, and the seller sues, the outcome of this lawsuit will be that: A. Beth must pay $5,000. B. Beth must pay $4,000. C. Beth does not have to pay for the car; she is entitled to the remedy of rescission because she is a minor. D. Beth does not have to pay for the car; she is entitled to the remedy of punitive damages because ABC overcharged her.

B. Beth must pay $4,000.

The general rule is that, contracts entered into during minority can be disaffirmed as soon as they are formed. Which of the following is an EXCEPTION to the rule? A. Contracts affecting investment. B. Contracts affecting the title to real estate. C. Contracts affecting necessary supplies to be provided to the minor. D. Contracts affecting his/her employment as a child actor.

B. Contracts affecting the title to real estate.

Which of the following characterizes the effect of incapacity caused by mental impairment? A. A person formerly incapacitated by mental impairment cannot ratify a contract if he/she regains his capacity. B. If a contract is found to be voidable on the ground of mental impairment, the person who lacked capacity at the time the contract was made has the right to disaffirm the contract. C. If a court has found a person mentally incompetent after holding a hearing on his mental capacity and has appointed a guardian for him, the contract is considered voidable. D. The contracts of people who are suffering from a mental defect at the time of contracting are usually considered to be void.

B. If a contract is found to be voidable on the ground of mental impairment, the person who lacked capacity at the time the contract was made has the right to disaffirm the contract.

_____ is a ground for lack of capacity only when it is so extreme that the person is unable to understand the nature of the business at hand. A. Infancy B. Intoxication C. Misrepresentation D. Duress

B. Intoxication

Marlene, a self-employed 16-year-old whose parents are dead, buys a dress on credit for $50. After receiving the dress and discovering that its reasonable value is only $25, Marlene tries to disaffirm the deal before paying the $50. In this case: A. Marlene can disaffirm, and she is bound to pay the full $50. B. Marlene can disaffirm, but she is only bound to pay $25. C. Marlene can disaffirm, and she can return the dress without paying for it. D. Marlene can disaffirm, and she can keep the dress without paying for it.

B. Marlene can disaffirm, but she is only bound to pay $25.

Three days before she was judicially declared mentally incompetent and institutionalized, Irma bought a $50,000 automobile by cash and took delivery of it. Which of the following is true about this contract? A. It is voidable at the discretion of the seller. B. The contract is voidable due to Irma's institutionalization. C. The contract cannot be disaffirmed because it is fully executed. D. Irma ratified the contract by paying the price of the car.

B. The contract is voidable due to Irma's institutionalization.

Betty, age 16, buys a car and wrecks it one week later. She takes it back to the seller and demands all her money back. According to the traditional rule, is she entitled to get all her money back? A. Yes, regardless of the condition of the car, because this was a void contract. B. Yes, regardless of the condition of the car, because this was a voidable contract. C. No, she is entitled to no remedy in this situation. D. No, she is entitled to get some money back but less the value of the damage to the car.

B. Yes, regardless of the condition of the car, because this was a voidable contract.

A(n) _____ is something that is essential for the minor's continued existence and general welfare that has not been provided by the minor's parents or guardian. A. disaffirmance B. necessary C. estoppel D. capacity

B. necessary

Which of the following is true of contracts involving people suffering from mental illnesses? A. Contracts of people suffering from a mental defect at the time of contracting are usually considered to be enforceable. B. A person disaffirming on the ground of mental impairment need not return any consideration given by the other party. C. A person disaffirming on the ground of mental impairment is liable for the reasonable value of necessaries. D. A person incapacitated by mental impairments cannot ratify a contract if he/she regains his capacity.

C. A person disaffirming on the ground of mental impairment is liable for the reasonable value of necessaries.

Which of the following is most likely to constitute ratification of a contract made by a minor? A. Not performing one's duties under the contract after reaching the age of majority. B. Nonperformance of the other party to the contract after the age of majority. C. Failing to disaffirm a completely executory contract within one month after the age of majority. D. Making an oral statement that "I will ratify the contract."

C. Failing to disaffirm a completely executory contract within one month after the age of majority.

Russell, age 45, has been suffering from mental impairment for a long time. He signs a contract to sell his villa for $1 million to Andre. When Russell's wife Katie, who is also his appointed (by the court) guardian, gets to know of the deal, she wants to ends the contract. Which of the following statements is true? A. Andre cannot claim the villa until he has paid for it. B. Russell has the right to enter into such a contract. C. Katie need not worry because the contract is void. D. The court will give primary preference to Russell's opinion.

C. Katie need not worry because the contract is void.

Shelly, age 15, sells a car to Fiona, age 25. Fiona in turn sells the car to Raphael. Under section 2-403 of the Uniform Commercial Code, if Shelly chooses to disaffirm the contract with Fiona: A. Shelly can get the car back from Raphael. B. Raphael will have to sell it back to Shelly. C. Shelly can do so since she is a minor. D. Shelly needs to file a breach of contract against both Fiona and Raphael.

C. Shelly can do so since she is a minor.

What is emancipation? A. Termination of a case of fraud and misrepresentation. B. Termination of a bargain that is considered void. C. Termination of parental rights to control a child. D. Termination of necessaries in a quasi-contractual case.

C. Termination of parental rights to control a child.

What remedy is provided by states that allow disaffirmance to adults who suffer losses due to a minor's misrepresentation of age? A. There is no remedy B. Tort of necessaries C. Tort of deceit D. Emancipation

C. Tort of deceit

Bill is 17 years old. His parents no longer support him. He purchases bread and eggs from a grocer on credit, and then does not pay. Does the grocer have a right to payment from Bill for these items? A. No, because Bill is a minor. B. No, because these items are "necessaries." C. Yes, because these items are "necessaries." D. Yes, because Bill is emancipated.

C. Yes, because these items are "necessaries."

Contracts made by severely intoxicated people: A. are void rather than voidable. B. can be disaffirmed anytime after he/she has regained his/her mental faculties. C. cannot be ratified until the person has regained his mental faculties. D. are always binding, because the law does not want to reward drug or alcohol abuse.

C. cannot be ratified until the person has regained his mental faculties.

Which of the following characterizes the traditional rule regarding a minor who misrepresents his/her age? A. He/she can be prosecuted for such an offense. B. An adult can file a tort of deceit against such a minor. C. An adult can seek compensation for any losses caused by such a minor. D. A minor's right to disaffirm is valid in such a case.

D. A minor's right to disaffirm is valid in such a case.

Cathy Young, age 16, buys a 1973 Chevy Camaro from Mark Watson, age 23, for $400. Cathy's indulgent parents, who give her everything she wants, loaned her the money for the car. The reason for Cathy's purchase is that all her friends have cars and she feels left out without one. One week after buying the car, however, Cathy changes her mind and tells Mark that she wants to disaffirm the contract. When Mark comes to pick up the car and give Cathy her money, though, Cathy changes her mind again, telling Mark, "I'll stick by the deal." However, when Cathy's parents gave her a new car for her 17th birthday, she finally decides to disaffirm once again. Which of the following is correct? A. Cathy cannot disaffirm because the car is a necessary. B. Cathy cannot disaffirm because she ratified the contract by saying "I'll stick by the deal." C. Cathy cannot disaffirm because there is a sale of goods and Article 2 of the UCC says that 16 is the age of contractual capacity. D. Cathy can still disaffirm.

D. Cathy can still disaffirm.

Which of the following is a criticism of the traditional rule of restitution in the case of minors? A. It allows adults to ratify a contract with a minor. B. It allows a minor to be exploited in a contract. C. It does not allow a minor to disaffirm a bargain. D. It is harsh on innocent adults dealing with minors.

D. It is harsh on innocent adults dealing with minors.

Mike Minor buys some real estate as investment. The contract obligates Mike to make monthly installment payments for 10 years. Mike reaches the age of majority one month after making the contract. After this, Mike makes 25 monthly payments under the contract, but then decides that he wants to rescind the deal. Which of the following is most true? A. Mike can disaffirm. B. Mike cannot disaffirm because contracts for the sale of land can only be disaffirmed before the age of majority. C. Mike cannot disaffirm because contracts for the sale of land must be disaffirmed within one year of the age of majority. D. Mike cannot disaffirm because he has already ratified the contract.

D. Mike cannot disaffirm because he has already ratified the contract.

On May 1, 1985, Mint, a 16-year-old, purchased a sailboat from Sly Boats. Mint used the boat for six months, at which time he advertised it for sale. Which of the following statements is correct? A. The sale of the boat to Mint was void, thereby requiring Mint to return the boat and Sly Boats to return the money received. B. Sly Boats has the power to recover the boat from Mint because he has advertised it for sale. C. Mint's use of the boat for six months after the sale on May 1 constituted a ratification of that contract. D. Mint may disaffirm the May 1 contract at any time prior to reaching majority.

D. Mint may disaffirm the May 1 contract at any time prior to reaching majority.

At 17, Otto signed a contract to purchase a new Hummer by advancing a payment of $50,000. However, when Otto turned 20, he wished to disaffirm this contract. Does the law permit this? A. Yes, because he was a minor when he signed the contract. B. Yes, because he is not yet 21 years of age. C. No, because a car is a "necessary." D. No, because Otto implied his ratification.

D. No, because Otto implied his ratification.

Which of the following characterizes emancipation? A. It allows parents to receive services from the child. B. It occurs only through parents' consent. C. Most states grant an emancipated minor the capacity to contract. D. There are no formal requirements for it.

D. There are no formal requirements for it.

The right of minors to avoid a contract as a means of protecting themselves against their own improvidence and against overreaching by adults is called: A. emancipation. B. ratification. C. adjudication. D. disaffirmance.

D. disaffirmance.

Ratification has to be expressly made only in written form.

False

A person who at the time of the contract lacked capacity due to mental impairment can ratify the contract once he/she regains his/her normal mental faculties.

True