2 The Requirement of Capacity Capacity is the 4th element of a contract. It relates to the involvement of minors. The law permits minors to rescind their contracts. This law is intended to protect minors from unscrupulous adults who try to take advantage of their inexperience.
3 Is the legal ability to enter a contract CapacityIs the legal ability to enter a contract
4 Definition of Minority A person who has not reached the age of legal adulthood, known as the age of majority, is considered a minor.
5 New York State LawDrinking Age?21 yearsVoting Age?18 years
6 When do people reach their ‘age of majority’? (For legal purposes) – at the beginning of the day before their birthday!
7 EmancipationSome states have declared that minors who are no longer under the control of their parents are emancipated.Although emancipated minors are fully responsible for their own contracts, many merchants are reluctant to deal with them.
8 Misrepresentation of Age If a minor claims to be over the “age of majority” and is NOT, then he or she has committed…………….FRAUD!
9 Contracts of MinorsThe law shields minors in making contracts as a protective measure.The law does not intend, however, to give a minor the right to take advantage of other people.
10 Voidable Contracts Contracts made by minors are voidable by the minor. If voided, all merchandise should be returned
11 Voidable Contracts Cont... A minor must disaffirm the entire contractWhen 2 minors enter into a contract with each other, both parties have the right to disaffirm the contract.
12 Other Contractual Capacity Rules Mentally Impaired PersonsConsidered unable to make sound judgmentsA guardian must be appointed by the court to make contracts valid
13 Capacity Rules Continued Intoxicated PersonsIntoxicated by drugs and/or alcohol at the time they entered into the contractTo disaffirm, person must have been so intoxicated at the time that they did not understandJudge or jury decides
14 Capacity Rules Continued Other Capacity LimitationsSome states, convicts have limitationsAliens – those people who are not US citizens
15 The Case of the Sneaky Snowboarder Ursula was 16 when she entered a contract to purchase a snowboard from the Georgetown Sporting Goods store. Later, Ursula decided to disaffirm the contract based on her minority. The store agreed that she could disaffirm the contract bust asked that the snowboard be returned. Ursula argued that she did not have to return the snowboard because of her minority. Was Ursula correct? Explain your answer.Answer:No. Ursula was incorrect. If a minor still has the merchandise he or she received upon entering into a contract, that merchandise must be returned when the contract is disaffirmed.