Contractual Capacity Business Law Chapter 7

Opening Scene Alena Jake Arkadi Mr. Barenbalatt Narrator

Capacity Capacity: Relates directly to the involvement of minors in contracts ▫Law is intended to protect minors from unscrupulous adults who might try to take advantage of their inexperience

Rebuttable Presumption: Permitted by law to presume that the other party or parties have the capacity to contract

Definition of Minority Majority: Legal adulthood Minor: Not yet reached the age of legal adulthood Minority: Person below the age of majority

▫Legal Age: Moved from on 1972  People reach a particular age at the beginning of the day before their birthday ▫Emancipation and Abandonment:  Emancipated: Minors who are no longer under control of their parents  Gets married, leaves home, given up all rights to parental support  Abandoned: No longer have the protection afforded them as minors

Misrepresentation of Age If a minor claims to be over the age of majority, then he or she has committed fraud ▫To prove fraud all five elements of fraud must be proven

Contracts of Minors Voidable Contracts: ▫Contracts made by minors are voidable by the minor  Second chance, even if they damage or destroy an item, a few states however, an amount can be deducted for the damage ▫Returning the Merchandise:  Merchandise should be returned  Most states will permit a minor to disaffirm a contract and still get back the full amount paid for an item, even if the minor no longer has the item

▫Disaffirming the Whole Contract:  Must disaffirm all or none of the contract  Cannot pick and choose items ▫Disaffirming Contracts Made With Other Minors:  When two minors enter a contract, either minor can disaffirm  Have to understand if two minors enter a contract a either can drop out, sell a bike to a friend, friend can cancel

Ratification of Minors’ Contracts Ratify: Approve contracts made when a minor ▫Once you reach majority  Can be done by orally, in writing, or by actions  Getting a car loan at 17 and continue to make payments after turn 18 is ratifying  Actions include keeping the item for a “reasonable time” Contracts for Necessaries: ▫Minors are held responsible for the fair value

Special Statutory Rules: ▫Different states have different statutes  Some allow minors to get car insurance, treat married minors as adults, etc.

Other Contractual Capacity Rules Mentally Impaired Persons: ▫Same rights of minors is also given to the mentally impaired  Guardian: In charge of impaired person Intoxicated Persons: ▫Must not be able to understand the purpose, nature or effect of the transaction Other Capacity Limitations: ▫Aliens: peole who are living in this country but owe their allegence to another country ▫Convicts  Lack the capacity to enter into certain types of contracts