2 What is CapacityContractual Capacity – Ability to understand the consequences of a contractDoes not require that a person understand the actual terms of the contract
3 Lack Some Capacity Three groups lacking some capacity Minors IntoxicatedMentally Impaired
4 Minors In Ohio the age of majority is 18 Minors – Under the age of majorityIn Ohio the age of majority is 18Ends the day before the birthday of the age
5 Protecting those lacking capacity Contracts of those lacking capacity are voidableDisaffirmance – Protection granted to those lacking capacityIn contract law it means a refusal to be bound by a previous legal commitmentWhen a protected party disaffirms a contract, by law the protected party is to receive whatever they have put into the contractThe other party may or may not get back their consideration
6 DisaffirmExample – A protected party bought a four-wheel ATV from a dealership and then wrecked it. You can disaffirm the contract and recover any payments made.The dealership would only be able to recover the damaged ATV
7 Necessities Necessities – things needed to maintain life The protected must at least pay a reasonable value for the necessities even if they disaffirm the actual purchase contract
8 Minors Contracts are considered voidable (may get out of) May also disaffirm for a reasonable length of time after achieving the age of majority.After majority, the power to disaffirm is immediately cut off if you ratify the contractMinors also may find themselves bound to their contract if they are Emancipated
9 Emancipated Emancipated – Severing the parent-child relationship Ends the duty of the parent to support a child and the duty of the child to obey their parentUpon reaching the age of majority you are emancipated
10 Emancipated Formal emancipation Informal emancipated Court decrees the minor emancipatedInformal emancipatedArises from the conduct of the parent and minor
11 Informal EmancipatedThe parent and minor agree that the parent will cease supportThe minor marriesThe minor moves out of the family homeThe minor becomes a member of the armed forcesThe minor gives birthThe minor undertakes full-time employment
12 Mentally Incapacitated Mentally Incapacitated - A person lacks the ability to understand the consequences of his or her contractIf permanently Insane – Contract is VoidTemporary Insane – Contract is Voidable
13 IntoxicatedDoes the person have the ability to understand the consequencesCourts typically allow disaffirmance only for those who are so temporarily intoxicated that they do not even know they are contractingStricter because intoxication is a voluntary actIf a person is in a permanent state of intoxication – Contract is void
14 Who has contractual capacity in organizations Scope of Authority – has capacity to contractPeople acting outside the scope of authority, are personally liable when the organization isn’t
15 9-1 AssessmentTurn to page 161 and complete the 9-1 Assessment Questions
17 9-1 AssessmentProbably not. Clare purchased necessaries so she cannot disaffirm. If she paid more than the reasonable value, she would receive the excess back.No. Courts do allow a reasonable period of time after entering majority to evaluate the contracts made during minority. However, five months is far too long. Making her monthly payments beyond a month or two would be ratification.
18 When can disaffirmance occur Disaffirmance – can happen:Any time still under the incapacityWithin a reasonable time after attaining capacityAfter attaining capacity, a person can ratify their contractRatification – Action by the party indicating intent to be bound by the contract
19 RatificationFor a minor, ratification must occur after achieving majority.Ratification may consist of:Giving a new promise to perform as agreedAny act (such as making a payment) that clearly indicates the party’s intention to be bound
20 What must be done upon disaffirming When a minor disaffirms, anything of value the minor received and still has must be returned.The minor is entitled to get back everything that was given to the other party.
21 Contracts that cannot be disaffirmed Court approved contractsMajor commitments – armed services, educational loansBanking contractInsurance ContractsWork Related ContractsSales of RealtyApartment rental
22 Misrepresenting AgeMinors who lie about their age may disaffirm contractsHowever, they are liable for the tort of false representation
23 9-2 AssessmentTurn to page 165 and complete the 8 questions
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