Chapter 10 Test Review

Capacity Rights

Showing that a party has the ability to understand a contract terms and their own actions.

Mental incapacity is the legal test which is used to show is a person can determine the consequences of their own actions.

What is Contractual Capacity?

Minors (Anyone under the age of 18) Emancipated Minors (Someone who

has severed the relationship with parents)

Intoxicated people (Only if the intoxication made them make a decision they would not normally make)

Mentally incapacitated (Someone without the ability to learn or think through decisions)

Who has Special Capacity Rights or is protected?

Being “Intoxicated” when you enter a contract is NOT always a defense

If a person was already showing they were interested in contracting, this defense cannot be used

Intoxication is a defense if it caused you to do something you would not normally do

Intoxication

They do NOT have capacity (Ever) If they (Or any protected party) purchases a

necessary item, they are only required to pay “Fair Market Value”, rather than the price listed

Judging capacity rights “IS” based on your economic circumstances

Minors can disaffirm a contract “ANY TIME” while still incapacity.

Facts about Minors rights

Anyone under the age of 18 They end their rights as minors when they turn 18

Treated as an adult at 18

Minors

Difference between

Ratification Disaffirmance

Showing intent to be bound by a contract

Signature is best way to ratify

Binds the agreement

Means to give back or take back consideration by both sides

Must take place “prior” to ratification

Necessaries are things needed to maintain life and lifestyle, like food, clothing and shelter

Non-necessaries are luxury items like cars, expensive jewelry or high expense items

Protected groups (Minors, mentally impaired and intoxicated) are protected against purchases of “Non-necessaries” by the law

Necessaries and Non-Necessaries

Some items are basic, like food Some items are based and judged on a persons “Economic” status

Economic status means how much they can afford

How to determine a Necessary

Difference Between…..

Age of Minority Age of Majority

Defined as the time between when you are born and when you turn 18

Defined as the time between the age of 18 and when you pass on

The range of acts a person is given control over to make decisions for or do

Party given scope of authority “IS” liable if the business is not

Example) If a manager is allowed to sign off on deliveries to the store, they are given the “Authority” by the company to make the decisions and therefore “bind” the company

Scope of Authority

The “Severing” of the child-parent relationship

Means the child (Minor) now has some rights as an adult

They are responsible for themselves

Emancipation

Differences between

Formal Emancipation Informal Emancipation

A court ordered thing

Both parties must follow the courts decision

Completed through action

Ex) Getting married, having a baby, agree with parent, military, full time job

A standard legal test done to show if a person has the ability to understand their own actions

Usually completed by a court psychologist

Challenges a person’s ability to make a contract on their own

Mental Incapacity

What does it mean to disaffirm? To take back consideration by both sides “Prior” to ratification

Minors can “disaffirm” a contract if its within a “REASONABLE” time after turning 18

Ratification- Means to show intent to be bound by a contract (Agreeing with party who you will contract with)

Can a minor Ratify a Contract?YES- But only for necessary items

If a purchase is for a non-necessary (Luxury item) it CANNOT be ratified until the minor turns 18 (Reaches majority status)

Once you ratify a contract, you CANNOT back out (Need to sue)

How can a Minor Ratify a contract “After” turning 18? A new promise: Contacting the person

who you entered the contract with and creating a new agreement that is now BINDING

An action: Good example would be making a payment on something after turning 18 or writing the person a letter or email saying you want to stay in the contract

What does a minor do with a luxury purchase they want to return? They cannot keep the purchase and

ask for their money back If its damaged, they are “Still” entitled to get their money back, BUT the business or person they buy it from can attempt to sue them for damages

They are entitled to get ALL their money back

Contracts minors Cannot Disaffirm Major Commitments- Military, college, marriage

Banking agreements Insurance agreements Property agreements Work agreements Court approved agreements Some leases for an apartment rental (If Non-necessary)

What if a minor “Lies” about their age to make a purchase? They are still protected under the

law Can disaffirm Can get all their money back BUT, they can be charged with Fraud or Misrepresentation criminally or sued in a civil court for damages

Torts (Civil Acts) These are lawsuits Any person (Even a child) is held responsible for their own actions therefore can be sued for damages

Collecting on a lawsuit with a minor is nearly impossible, but it can be done