BSL_14 10/20/2008

Contractual Capacity
 If you enter into an agreement without contractual capacity, the agreement is
voidable.
 Right to Disaffirm the contract- right to cancel the contract
 Right to Ratify- once ratified, a previously voidable contract becomes enforceable
Minors Contracts
 A minor is someone under the age of 18
o Minor has the Right to Disaffirm the contract
 Can exercise that right throughout their minority and for reasonable
time after turning 18
 Can be done explicitly OR implicitly (through actions)
o Ratification
 Only after the age of 18
 Can be done explicitly (say you intend to be bound), implicitly (act like
you intend to be bound), or by waiting too long
o Duties Upon Disaffirmance
 Adult’s Duty- adult is required to put the minor in the position they
were prior to entering the contract (must return to the minor
everything that the minor gave him)
 Minor’s Duty- depend on states
 Traditional Rule- the minor returns consideration in its
current condition
 Exception: minor’s must pay the “reasonable value” of
any necessaries they received under the contract
o Essential to the minor’s existence or welfare
(food, clothing, shelter, healthcare, etc..)
o AND parent or guardian are unwilling or unable
to provide essentials
 Modern Rule- minor must compensate the other party for
their use and/or depreciation
o Effect of Misrepresentation of Age
 Traditional Rule- no effect on the minor’s ability to cancel
 Modern Rule- minor cannot cancel the contract, as long as it was a
believable misrepresentation
Mental Incapacity
  Declared mentally incompetent by a court and a guardian has been appointed on
their behalf, subsequent contracts are void
 If they are unable to understand the nature and effect of a contract, the contract is
voidable
o Duties upon disaffirmance
 The capacitated party’s duty is to put the other party in the position
they were prior to entering the contract
 If the capacitated had reason to know of incapacitated, they must
return the consideration in its current condition
 If capacitated did not know, the incapacitated person must pay for
depreciation
Intoxication
 Must show, you were unable to understand the nature and effect of the contract
 AND must show that the other party knew or had reason to know that you were
incapacitated
 AND must put other party in the position they were prior to entering the contract
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