Chapter 13: Capacity and Consent in Contract Law

What is legal capacity in contract law?

The legal ability to enter into a contract.

Who lacks capacity to enter a contract?

Minors and mentally impaired individuals.

What is a voidable contract?

A contract that may be canceled by the party who lacks capacity.

What is disaffirmance?

Notifying the other party that one refuses to be bound by a contract.

What must a minor do to disaffirm a contract?

Return the consideration received to the extent possible.

What is a minor exception regarding fully executed contracts?

In some states, minors cannot disaffirm fully executed contracts.

How long can minors disaffirm contracts after turning 18?

Up to a reasonable time after turning 18, if they weren't already bound.

What happens if a minor misrepresents their age?

In some states, they cannot disaffirm the contract if they lied about their age.

What defines a mentally impaired person in contract law?

A person unable to fully understand a transaction due to mental illness or defect.

What is the effect of intoxication on contract validity?

Contracts made by intoxicated persons are void.

What is required for a mentally infirm party to void a contract?

They must make restitution.

What is innocent misrepresentation?

A false statement believed to be true by the owner, who had good reason to believe it.

What distinguishes fraudulent misrepresentation from innocent misrepresentation?

Fraudulent misrepresentation involves knowing a statement is false or reckless disregard for its truth.

What are the three elements needed to rescind a contract based on fraud?

1. False statement of fact. 2. Defendant knew it was false or acted recklessly. 3. Injured party justifiably relied on the statement.

What is puffery in the context of fraud?

Exaggerated sales talk that is not considered fraudulent.

When is non-disclosure considered misrepresentation?

When disclosure is necessary to correct previous assertions or to reveal latent defects.

What is a bilateral mistake?

When both parties negotiate based on a factual error, making the contract voidable by the injured party.

What is a unilateral mistake?

A mistake in assumption by one party that can lead to rescission if certain conditions are met.

What constitutes economic duress?

Threatening a victim to enter a contract without reasonable alternatives, making the contract voidable.

What must be shown to prove undue influence?

A relationship of trust or domination and improper persuasion by the stronger party.