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Contractual Capacity Chapter 7.

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Presentation on theme: "Contractual Capacity Chapter 7."— Presentation transcript:

1 Contractual Capacity Chapter 7

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
Capacity Is 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 Law Drinking Age? 21 years Voting 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 Emancipation Some 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 Minors The 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 contract When 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 Persons Considered unable to make sound judgments A guardian must be appointed by the court to make contracts valid

13 Capacity Rules Continued
Intoxicated Persons Intoxicated by drugs and/or alcohol at the time they entered into the contract To disaffirm, person must have been so intoxicated at the time that they did not understand Judge or jury decides

14 Capacity Rules Continued
Other Capacity Limitations Some states, convicts have limitations Aliens – 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.

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