CH14+16

licensing

All states require members of certain professions and occupations to be licensed by the state in which they practice; Problems arise if an unlicensed person tries to collect payment for services provided to another under a contract. Some statutes expressly provide that unlicensed persons cannot enforce contracts to provide these services.

Void contracts with someone who is mentally incompetent

Any contract entered into by a person who has been declared incompetent is void.

Timing of Disaffirmance for Minors

Any time before reaching age of majority plus a reasonable time; States differ on the extent of a minor's obligations when the minor disaffirms a contract. Most states require the minor to return any consideration (goods) in the minor's possession or control. A number of states are now holding that the minor has a duty of restitution, meaning the minor has to place the party back to their original position.

Ratification by Intoxication

After becoming sober, an intoxicated person can ratify the contracts he entered into while intoxicated.

Restrictive Covenants in the Sale of a Business

Many contracts for the sale of a business require the seller not to open a competing business within a defined area; To be enforceable, the geographic restriction must be reasonable, and it must be effective only for a reasonable period of time after the sale is completed.

The Restatement (Second) of Contracts version of Promissory Estoppel

Provides that if the parties enter into an oral contract that should be in writing under the Statute of Frauds, the oral promise is enforceable against the promisor if these three conditions are met: (1) the promise induces action or forbearance of action by another, (2) the reliance on the oral promise was foreseeable, and (3) injustice can be avoided only by enforcing the oral promise.

Ratification by Minors

if a minor does not disaffirm a contract either during the period of minority or within a reasonable time after reaching the age of majority, the contract is considered ratified; this can be verbal, written or implied.

infancy doctrine

Created to protect minors, gives minors the right to disaffirm (cancel) most contracts they have entered into with adults; Minor has the option of choosing whether to enforce the contract

usury

an upper limit on the annual interest rate that can be charged on certain types of loans; Less that $500,000, max rate of interest is 18%. More than $500,000, max rate is 25%.

Necessaries of Life by Intoxication

Intoxicated persons are liable to pay the reasonable value for necessaries of life they receive.

revenue-raising statutes

Licensing statutes enacted to raise money for the government; A person who provides services pursuant to a contract without the appropriate license required by such a statute can still enforce the contract and recover payment for services rendered.

regulatory statutes

Licensing statutes that are enacted to protect the public; Generally, unlicensed persons cannot recover payment for services that this statute requires a licensed person to provide

parental liability

parents will be liable if they co-sign the contract and, thereby, assume personal liability for performance of the contract.

Cognitive Understanding Test

persons mental incapacity makes them incapable of understanding or comprehending the nature of the transaction

Majority Rule

the contract is voidable only if the person was so intoxicated when the contract was entered into that he was incapable of understanding or comprehending the nature of the transaction.

Statute of Frauds

"An Act for the Prevention of Frauds and Perjuries," passed by the British Parliament in 1677. Designed to prevent the perpetration of frauds arising out of purely oral agreements and requires that there be evidence in writing (called a memorandum) about certain kinds of contracts that the Parliament considered subject to perjury, abuses, and fraud. Today, almost all states have enacted this which requires certain types of contracts to be in writing.

Sale or Transfer of Interest in Real Property

*- Full Performance:* if the seller completely performs her side of a contract for the sale or transfer of interest in real property, a court is likely to enforce the agreement even if it is oral. *- Part Performance:* Paid part of the purchase price, and either entered upon the land or made improvements to it; For the sale of goods over $500, an oral contract is enforceable to the extent that the seller has accepted payment or the buyer has accepted delivery of the goods covered by the oral contract.

Voidable contracts with someone who is mentally incompetent

A contract will be voidable by a person who is incompetent at the time the contract was formed, but not previously determined by the court to be mentally incompetent. Unless the other party does not have contractual capacity, he or she does not have the option to avoid the contract.

Timing of Disaffirmance by Intoxication

A person can disaffirm the contract based on intoxication; If the intoxicated person disaffirms the contract, the intoxicated person must be returned to the status quo, meaning the intoxicated person must return the consideration received under the contract to the other party and make restitution that returns the other party to the status quo.

Person Under Guardianship

A relative, loved one, or other interested party may institute a legal action to have someone declared legally incompetent. If the person is declared incompetent, the court will make that person a ward of the court and appoint a guardian to act on that person's behalf.

Memorandum

A written document that, to be valid, must identify all the essential terms of the parties' agreement and must have been signed by the party being charged (sued).

Restrictive Covenants in Employment Contracts

Many employment contracts require the employee to refrain from working for a competitor or starting a new business in competition with the employer for a reasonable period of time, and within a reasonably defined geographic area, after the employment relationship ends.

intoxication

Most states provide that contracts entered into by certain intoxicated persons (due to drugs or alcohol) are voidable by that person

Mental Incompetency

The law protects people suffering from substantial mental incapacity from enforcement of contracts against them because such persons may not understand the consequences of their actions in entering into a contract. Person must have been mentally incompetent at the time of entering into the contract; A person who has dealt with a mentally incompetent person must place that person in status quo if the contract is either void or voided by the mentally incompetent person.

contractual capacity

The legal ability to enter into a contract

Misrepresentations Regarding Age

Under common law, a minor who misrepresented his/her age would still have the right to disaffirm the contract; Some states still allow for the minor to disaffirm the contract entirely. Some statutes prohibit disaffirmance. Many states, though, prohibit disaffirmance of executed contracts unless the minor can return the consideration received.

Necessaries of Life of Minors

When minors contract for the necessaries of life (food, clothing, shelter, and medical services), they are obligated to pay for those necessaries of life; Automobiles, tools of trade, education, and vocational training can be considered necessaries of life in some situations. The minor is obligated to pay the reasonable value of the goods or services received.