Hello please the attached. The use of websites such as Chegg or Course Hero are prohibited. Questions that are submitted to, or answers that are obtained from, online sources will result in a fai

Contractual Capacity A. Contractual Capacity 1. Ability to understand that a contract is being made and to understand its general meaning. If emancipated, party is presumed to have capacity. 2. Minors a. Who is a minor ? – In most states, the age of majority for contractual purposes is eighteen. A minor can enter into any contract that an adult can enter into. Minor’s power to avoid contracts b. Minor’s decision to disaffirm (avoid) contracts -- Generally, a contract entered into by a minor is voidable at the minor ’s optio n. But an adult who enters into a contract with a minor cannot avoid contractual duties unless the minor opts to avoid the contract. i. For a minor to avoid a contract, he or she need only express intent not to be bound by the contract. This intent may be expressed by words or conduct. ii. A contract can ordinarily be disaffirmed at any time during minority or for a reasonable time after coming of age . A minor must disaffirm an entire contract. iii. Minor’s mis representation of age – In general, the fact that a minor has misrepresented their age does not impact their ability to disaffirm a contract. We will assume that a minor can disaffirm even if they misrepresent their age (even though some exceptions apply: see #1 below) 1. Some states view this misrepresentation as fraud and block the minor’s ability to disaffirm. Some states allow the minor to disaffirm but may require the minor to pay. c. Consi deration must be returned by minor when disaffirming i. Original Consideration Intact . When a Minor has what they received from the other party, they must return what had been received (status quo ante ). ii. Original consideration damaged or destroyed – If what the minor has received is damaged, or destroyed, the minor mus t return what remains, if anything . This does not prevent the minor from disaffirming. We will assume that a minor can disaffirm even if they damage or destroy the item (even though some exceptions apply: see #1 below) 1. Some states require the minor to p ay for the damage d. Recovery of property by minor after disaffirming i. When a minor disaffirms, any property that was given as part of the contract must be returned to the Minor . (If the minor traded in a car and the dealer still has it they must return the car) a. If the property has been sold, the minor gets the value of the item sold, or money received. (If the car has been sold, the dealer must give the minor the money it received in the sale) e. Ratification of former minor’s voidable contract -- A minor cannot disaffirm a contract that has been ratified after reaching the age of majority. i. Ratification is an act or an expression in words by which a minor, on or after reaching majority, indicates intent to become bound by a contract. In general, any act or conduct showing intent to affirm the contract will be deemed ratification . An executed contract will be deemed ratified. ii. Form of ratification: There is no specific writing, or formal statement required for ratification in most states. Continued performance may be viewed as ratification. iii. Time for ratification – A minor may disaffirm a contract up to the age of majority, or a short time thereafter. However, ratification may only happen after the minor has reached the age of majority. f. If a minor has been declared as emancipated by the court they are presumed to have capacity and no longer have the right to disaffirm contracts . g. Contracts for necessaries – A minor can disaffirm a contract for necessaries but must pay the reasonable value of those necessaries. i. What constitutes necessaries – Originally, necessaries were those things that were related to food, clothing, and shelter of the minor. Over time, necessaries have been expanded to include education, health, and the comfort of the minor. ii. Liability of a parent or guardian – If a third party provides goods or services to a parent or guardian for the purpose of the minor; the minor is not liable for th ose necessaries. 1. Exception: When medical care is given to the minor, a parent is liable. However, if the parent is unwilling, or unable to pay, the minor can be held liable for necessary medical expenses. EXAMPLE: Sixteen year -old Madison was injured in a bike accident. She was transported to South Shore Hospital and provided with medical care in the Emergency Room. Madison’s parents did not pay the bill. After her eighteenth birthday, Madison received a bill from South Shore Hospital for the care she received as a minor. Is she required to pay? ANSWER: The courts ruled that Madison is liable. Minors can avoid contracts for necessaries but must pay the reasonable value , including medical care when the parents are unwi lling or unable to pay . Since Madison’s parents have not paid the bill, the hospital can collect the money from Madison. h. Contracts that minors cannot avoid -- The following are contracts that a minor may not disaffirm i. Educational loan – a minor cannot disaffirm a student loan ii. Made while running a business -- entrepreneurs under the age of majority cannot avoid contracts that were entered into in the course of running the business. iii. Court approved -- for example, a child -support agreeme nt iv. Bank accounts, insurance policies, or stocks i. Liability of third person for minor’s contract -- Generally, parents are not liable for their minor children’s contracts . Generally, minors are also liable for their own torts (wrongful acts) unless a paren t fails to use proper parental control when that failure would create a risk to others. i. Exceptions: 1. If the minor is acting as an agent for the parent when entering into a contract, the parent may be liable. 2. A parent, or other adult, who acts as a cosigner for a minor on a contract has independent liability. Therefore, if the minor decides to disaffirm the contract, the cosigner is still bound by the contract and must pay the creditor. 3. Factual Incapacity Lack of capacity due to mental incompetence related to age, illness, intoxication, or drugs (legal or illegal) a. Effect of incompetency: A person deemed incompetent, temporarily or permanently, may disaffirm a contract in the same manner as a minor . They express their intent to disaffirm and return what they contracted for. b. Example (applies to age, illness, and drugs as well): Intoxicated persons Intoxication is a condition in which a person’s capacity to act or think is inhibited by alcohol or some other drug . If a person was intoxicated enough to lack mental capacity, a contract entered into at the time may be voidable at his or her option. Bein g intoxicated enough to lack mental capacity means being so impaired as not to comprehend the consequences of entering into a contract. If the person is impaired but has an understanding that a contract is being made, the contract is enforceable. Example : James had two drinks at a restaurant with friends when he offered to sell his car. The next day he regretted making the deal. James claimed that he should be able to disaffirm the contract because he entered into the contract after two drinks. Can he disaffirm? No, there was no evidence to show that he didn’t know he was entering into a contract to sell his car. The court treats impairment caused by the use of drugs the same as impairment caused by the excessive use of alcohol. i. Once the party is sob er, the individual may disaffirm the contract. This right may dissolve if the party delays taking steps to disaffirm. c. Exception -- Appointment of guardian -- If the court has appointed a guardian for an incompetent person, any contract made by the perso n deemed incompetent is void. For example, if Amanda Bynes attempts to enter into a contract, the contract is void because the courts have appointment her mother as her guardian. The guardian has the right to ratify, or disaffirm any contracts made befor e they were appointed.