CHAPTER 14 - CAPACITY

Minor

whether executed or executory, a minor’s contract is voidable, unless the contract has been ratified

The minor is in a favored position by:

having the option to disaffirm the contract or to enforce it

The adult party to the contract:

cannot disaffirm their contract with a minor

An emancipated minor

cannot avoid contractual liability in most jurisdictions

Disaffirmance

avoidance

releases the minor from any liability on the contract; party may not be bound by terms. minor may disaffirm at any time before reaching age of majority

A person may disaffirm a contract within a reasonable time…

after coming of age, as long as they have not RATIFIED

Disaffirmance may be exercised through:

words or conduct showing intention not to abide by it

Ratification

affirmation

makes the contract binding ab initio (from the beginning); once effected, is final & cannot be withdrawn; ratification can only happen as a whole

Ratification must take place after

the individual has acquired contractual capacity (becoming of age, reaching competency)

Ratification can happen in 3 ways:

1. expressed language

2. implied conduct

3. failure to make a timely disaffirmance

Restitution

a minor who has disaffirmed a contract is entitled to restitution from the other party for any benefit the minor has given on the other party (can also be reversed - holds minor accountable)

Liability for Necessaries

• A minor is liable for (the reasonable value) of such necessaries that have been supplied to him

• recovery is based on quasi-contract.

Liability for Misrepresentation of Age

If minor fraudulently misrepresents their age when entering a contract, the minor can still disaffirm

• some states however prohibit disaffirmance if a minor misrepresented their age to an adult who, in good faith, reasonably relied on the misrepresentation

Person Under Guardianship

contracts are void and of no legal effect

Mental Illness or Defect

If a person lacks such mental capacity, or is mentally incompetent, the agreement is voidable

Lucid Period

an incompetent person may ratify or disaffirm voidable contracts when he becomes competent

Cognitive Ability Test

tests whether a person can comprehend the subject of the contract, its nature, and its probable consequences

Intoxicated Persons

• contracts are voidable (unable to understand nature and consequences of actions)

• may be ratified when the intoxicated person regains his capacity.

To avoid a contract, an intoxicated person…

(once capacity is gained) must act promptly to disaffirm and generally must offer to restore consideration he has received

necessaries

minors can enter into contracts for necessaries → food, shelter, medicine, clothing