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Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What Youll Learn How to explain the legal concept of minority.

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Presentation on theme: "Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What Youll Learn How to explain the legal concept of minority."— Presentation transcript:

1 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract What Youll Learn How to explain the legal concept of minority How to identify the rights of minors in relation to contracts How to identify contracts that are voidable by a minor How a person can ratify a contract made in minority How to identify others, besides minors, who can rescind contracts

2 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why Its Important Understanding the rights afforded to minors in contract law will enable you to exercise your rights and help others. Pre-Learning Question What is capacity?

3 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Legal Terms capacity (p. 147) rebuttable presumption (p. 147) majority (p. 148) minor/minority (p. 148) emancipated (p. 148) abandoned (p. 148) ratify (p. 154) necessaries (p. 156) guardian (p. 157) aliens (p. 157)

4 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The Requirement of Capacity Section Outline Minors Rights and Obligations Definition of Minority Misrepresentation of Age Contracts of Minors Voidable Contracts Ratification of Minors Contracts Contracts for Necessaries Special Statutory Rules Other Contractual Capacity Rules Mentally Impaired Persons Intoxicated Persons Other Capacity Limitations

5 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Capacity, one of the six elements of a contract, is the legal ability to enter a contract. Capacity relates directly to the involvement of minors in contracts. The Requirement of Capacity

6 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract When people enter into contracts, they are permitted by law to presume that the other party or parties have the capacity to contract. Minors Rights and Obligations This presumption, known as a rebuttable presumption, can be challenged in court.

7 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The presumption of capacity plays a key role in contracts made by minors because the law permits minors, within certain limits, to rescind or void their contracts. Minors Rights and Obligations The court has established specific standards regarding who is considered a minor and what the term minority means.

8 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Pre-Learning Question How would you define a minor? Why would the contracts of minors be different from the contracts of adults? What other classes of persons may be able to avoid contracts? Why?

9 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract The age of legal adulthood is known as the age of majority. A person who has not yet reached majority is considered a minor and is still in his or her minority. Definition of Minority

10 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 1972 - voting age was lowered from 21 to 18. - Many states lowered age of majority from 21 to 18. Legal Age For years the age of majority was also the age at a person could begin to buy alcoholic beverages. Now - the age of majority is 18 nationwide - Most states have raised legal drinking age to 21. For legal purposes, people turn 18 at the beginning of the day before their 18 th birthday.

11 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Some states have declared that minors who are no longer under the control of their parents are emancipated. This means they are responsible for their contracts. Emancipation and Abandonment A minor who marries or leaves home, giving up all rights to parental support, is considered emancipated and is said to have abandoned the protection afforded him or her as a minor.

12 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract If a minor claims to be over the age of majority, then he or she has committed fraud. Fraud is a wrongful act, and minors are responsible for their wrongful acts. Misrepresentation of Age

13 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Some states allow the other party to sue a minor who has misrepresented his or her age for fraud. Other states do not. Misrepresentation of Age However, it is illegal to lie about your age in order to buy age-restricted products, such as alcohol.

14 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Contracts of Minors The law shields minors when they make contracts to protect them from unscrupulous adults. Minors may be vulnerable because of ImmaturityInexperience Lack of education Naïveté

15 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Voidable Contracts Contracts made by minors are voidable by the minor. This means that minors may disaffirm, or avoid, their contracts if they so choose.

16 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Voidable Contracts To disaffirm a contract means to show the intent not to live up to the contract by a statement or some other act. By permitting minors to have the privilege of disaffirming contracts, the law provides young people with a second chance when they use poor judgment.

17 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Returning the Merchandise If a minor still has the merchandise he or she received upon entering a contract, that merchandise must be returned when the contract is disaffirmed.

18 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Disaffirming the Whole Contract A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts. Disaffirming Contracts Made with Other Minors When two minors enter into a contract with each other, both parties have the right to disaffirm the contract.

19 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Ratification of Minors Contracts After reaching the age of majority, a person can ratify, or approve, contracts made during minority.

20 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract 7.1 Ratification 1 2 3 4 A business advertisement in a newspaper can constitute an offer of sale, even if the advertisement is aimed toward minors. Offer If a minor agrees to the terms of an offer, then a voidable contract is created. Acceptance Reaching Majority When a minor reaches the age of majority, his or her contracts can be ratified. Ratification Using or selling an item obtained by contract for a reasonable time after reaching the age of majority has the effect of ratifying the contract. Ratification can also be accomplished orally or in writing.

21 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Contracts for Necessaries A minor is held responsible for the fair value of necessaries. Necessaries, or necessities, include food, clothing, shelter, and medical care.

22 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Special Statutory Rules There are many differences in state statutes regarding minors. Minors should check the statutes of their own state to find out about special contractual capacities that they may be allowed.

23 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Other Contractual Capacity Rules Other classes of persons are also able to avoid contracts. Mentally impaired persons Intoxicated persons

24 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Mentally Impaired Persons Mentally impaired persons also have the right to disaffirm contracts because they are considered unable to make sound judgments. Before a guardian is appointed to look after the affairs of a mentally impaired person, his or her contracts are voidable.

25 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Intoxicated Persons Persons who are intoxicated by alcohol or drugs at the time they enter a contract are sometimes able to disaffirm those contracts. To disaffirm a contract for this reason, a person must have been so intoxicated at the time of the contracting that he or she did not understand the purpose, nature, or effect of the transaction.

26 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Other Capacity Limitations Other classes of persons lack the capacity to enter into certain types of contracts. 1.Convictspeople convicted of a crime. 2. Alienspeople who are living in this country but owe their allegiance to another country. 3.Enemy alienssome foreign-born persons designated as such during time of war.

27 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Why does the law shield minors when making contracts?

28 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned 1. 1.What does it mean to be a minor? Section 7.1 Assessment 2. 2.What rights do minors have regarding contracts? 3. 3.What contracts are voidable by a minor? 4. 4.How can a person ratify a contract made in minority? 5. 5.Name two other classes of persons who are able to avoid contracts.

29 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Critical Thinking Activity Misrepresenting Your Age Should the act of misrepresenting your age if you are a minor be considered fraud? Why or why not?

30 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Legal Skills in Action What Is a Good Age? Over the past 30 years, the voting age, the age of majority, and the age at which a person could buy alcoholic beverages has changed. In a paragraph no less than 10 sentences long debate your position on the ages for voting, majority, and buying alcoholic beverages.

31 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract ANSWER To protect the minor from an unscrupulous adult who might take advantage of him or her. Answer #1 A minor is a person who has not yet reached the age of legal adulthood.

32 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Minors may disaffirm, or avoid, the contracts if they so choose. Section 7.1 Assessment Answer #2 In essence all contracts are voidable by a minor; however, minors may still have some responsibilities when avoiding contracts and some states may have special statutory rules regarding minors and contracts. Answer #3

33 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Reviewing What You Learned Upon reaching majority, a person can ratify a contract by approving of the contract orally, in writing, or by some action. Section 7.1 Assessment Answer #4 Mentally impaired persons and intoxicated persons. Answer #5

34 Understanding Business and Personal Law Contractual Capacity Section 7.1 Capacity to Contract Section 7.1 Assessment Critical Thinking Activity Misrepresenting Your Age Answer Answers may vary, but should compare the elements of fraud with the misrepresentation of age if you are a minor. Legal Skills in Action Answer What Is a Good Age? Debates will vary, but should include information that supports their positions.


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