Madison Regan

Law Notes · Chapter 7 – Capacity to Contract

Section 7.1 Capacity to Contract

You turn the age of your birthday, the day before your actual birthday.

The legal age of adulthood – age of majority

If you haven’t reached the age of majority, you are a minor

Emancipated – some states have declared that minors who are no longer under control of their parents are emancipated.
This means they are responsible for their contracts.
Such individuals are said to have abandoned 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
In some states, when a minor lies about his or her age and then disaffirms a contract, the other party may sue the minor for
fraud (successful only if all five elements of fraud are present)
Some states will follow an older law stating that minors cannot be sued for fraud, even when they lied about their age.
However, most states still consider it a criminal offense for a minor to lie about his or her age to buy age-restricted
products.

Minors can disaffirm contracts. Contracts are voidable by minors. The law protects minors.
Many times minors can disaffirm contracts if they destroy or damage the product. Things can be done to prevent minors
from destroying something then returning it. They can’t go against the law, but they can put other things in tact like having
to get a cosigner.
You have to disaffirm the whole contract, you can’t pick a choose which parts.
Two minors can enter into a contract together. Both can disaffirm.

Ratification of Minors’ Contracts

You can ratify, or approve, contracts made during minority just by using the product after reaching the age of majority or
not returning the product within a reasonable time.
Making an installment payment on an item or keeping an item for a reasonable period of time after reaching majority is
also considered ratification.
“Reasonable time” has no exact definition. It varies under different circumstances, and is determined by a judge or a jury
acting on a judge’s instructions. (Cake a perishable item vs. a nonperishable like an automobile or a CD player)

Contracts for Necessaries

A minor is held responsible for the fair value of necessaries.
Necessaries, sometimes called necessities, include food, clothing, shelter, and medical care.

Mentally impaired people cannot enter into a contract.

Legal insane cannot enter into a contract on their own. If they have been appointed a guardian, only the contracts signed
by their guardian are effective. Those signed by the person are not. If there are no guardian, they can enter but they have
the law on their side to disaffirm a contract.

Intoxicated by drugs or alcohol, they are sometimes able to disaffirm depends on how intoxicated and the nature.

Aliens- people who are living in this country but owe their allegiance to another country-may have limitations.
In a few states, convicts have certain limitations placed on their powers to contract.

Pg. 159 Chapter 7 Law Review Assessment #7-15:

7. What are the two age-related milestones that many states have?
The age of majority is 18 years old, and the legal drinking age is 21 years old.
8. Why does the law shield minors in the making of their contracts?
The law shields minors in making contracts as a protective measure. Immaturity, inexperience, lack of education, or
naïveté could allow an unscrupulous adult to take advantage of a minor. The law does not intend, however, to give
a minor the right to take advantage of other people.
9. May a minor affirm and disaffirm parts of the same contract? Explain your answer.
A minor may not affirm parts of a contract that are favorable and disaffirm the unfavorable parts. Rather a minor
must disaffirm all or none. A minor may, however, disaffirm one (or both) of two separate contracts.
10. May a minor avoid a contract with another minor? Why or why not?
When two minors enter into a contract with each other, both parties have the right to disaffirm the contract. If only
one party is a minor, only the minor can avoid the contract. If the minor chooses to enforce the contract he or she
may do so.
11. Are intoxicated persons always able to disaffirm their contracts? Explain your answer.
Persons who are intoxicated by alcohol or drugs at the time they enter a contract are sometimes able to disaffirm
those contracts. Their contracts are treated in much the same way as the contracts of minors and the mentally
impaired. 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. The judge or the
jury must decide that question. Intoxicated persons, like minors and the mentally impaired, are responsible for the
fair value of necessaries.
12. What is an emancipated minor?
Minors who are no longer under the control of their parents are emancipated minors. This means that they are
responsible for their contracts. A minor who marries or leaves home, giving up all rights to parental support, is
considered emancipated.
13. What are necessaries?
Necessaries, sometimes called necessities, include food, clothing, shelter, and medical care. Under common law,
one’s “station in life” has a bearing on whether an item is a necessary. A minor is held responsible for the fair value
of necessaries.
14. What is capacity?
Capacity is the legal ability to enter a contract. When individuals enter into contracts, they are permitted by law to
presume that the other party or parties have the capacity to contract (this presumption = rebuttable presumption).
15. When are the contracts of a mentally impaired person considered valid?
If a mentally impaired person has been declared insane or incompetent by a court action, and a guardian has been
appointed to look after his or her affairs, the mentally impaired person’s contracts are absolutely valid. Before a
guardian is appointed, a mentally impaired person’s contracts are voidable. They are responsible for the fair value
of necessaries.

Cases pg. 160 #21-29

21. Tom Molinero, 17, buys a car from Clyde Tait for $1,500. Two weeks later, while still a minor, Molinero is involved in an
accident that occurs because Tait neglected to replace a faulty wire. The car is damaged beyond repair. Molinero wants Tait
to return the $1,500. Is Molinero entitled to the money? Explain your answer.
Molinero is entitled to the money because he is a minor and has the ability to disaffirm the contract. It doesn’t
matter that it is damaged because it was Tait’s fault.
22. Max Fisher, 16, bought a used personal computer from an electronics store. The box the computer came in indicated
that it carried a 90-day manufacturer’s limited warranty. The computer stopped working two months later. The clerk in the
electronics store tells Fisher that the warranty applied only when the machine was new and suggests that Fisher return it to
the factory for repair. Is another remedy available to Fisher?
Fisher could return the computer to the store that he bought it from because he is a minor and has the ability to
disaffirm the contract.
23. Dana Niebuhr, 17, buys an electric guitar. She tells the owner of the shop that she is 19. Two months later she returns
the guitar and demands the return of her money. The owner refuses to comply. Can Niebuhr avoid the contract? Explain
your answer.
No because she committed fraud by lying about her age.
24. Joel Petro, 17, operates a VCR repair business. He finds that he has ordered more supplies for his business than he
needs, so he contacts one of his suppliers to cancel his contract. The supplier refuses to cancel the contract. What might
Petro do?
He cannot pay for the supplies because he is a minor and wants to disaffirm the contract.
25. Two months before reaching the age of majority, Helen Smythe buys a motorcycle for $3,000. Three years later, she
seeks to void the contract, claiming that she was a minor at the time of the purchase. Is she legally bound by the contract?
Explain your answer.
Yes, because she didn’t disaffirm the contract within a reasonable amount of time, and she ratified the purchase by
keeping it.
26. Tina Kepler makes an agreement to purchase certain clothes from a local department store. Kepler has been declared
legally insane, and a guardian has been appointed to take care of her. Is the agreement binding on Kepler? Why or why
not?
Yes, because if a declared insane person has a guardian, their contracts are absolutely valid. If she didn’t have a
guardian, they would be voidable.
27. Marty Eng, 16, sells his car to Joseph Lutz, 19, for $1,500. Two days later, Marty changes his mind. He asks Joseph to
return his car and offers to refund the $1,500. Joseph refuses. Does Joseph have the legal right to do so? Explain your
answer.
Joseph does not have the legal right to do so because he is not a minor. The minor is the only one who can avoid
the contract.
28. Legal Age - Leo’s left hand was seriously injured in a job-related accident at 12:45 P.M. on August 3, 1977. Under the
Workers’ Compensation law, minors are entitled to triple damages. Leo was born on August 3, 1959, at 3:56 P.M. The age of
majority is 18. Is Leo entitled to triple damages? Explain your answer. Leo v. Maro Display, 412 A.2d 221 (RI).
No, because you turn the legal age/age of majority the day before your birthday.
29. Rescinding a Sale - Before reaching the age of 18, Brenda Sanchez sold property to Norman and Mary Ann Sanchez for
$3,000. Upon reaching the age of 21, Brenda signed an official acknowledgment that she had sold the property to Norman
and Mary Ann. Brenda then attempted to rescind the sale on the grounds that she was a minor at the time of the sale. May
she do so? Why or why not? Sanchez v. Sanchez, 464 So.2d 1009 (LA).
No, because she did not rescind it in a reasonable amount of time, and she ratified the agreement when she was
over the age of majority (age 21) by signing an official acknowledgement saying she sold the property to the.