Chapter 9 Business Law Outline

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Chapter 9 Outline
Chapter 9
Legal Capacity to Contract
Contractual capacity is defined by the law to mean the ability to understand the consequences of a contract. * What is Capacity?
* Parties who have special contractual rights due to a legally recognized lack of such capacity include minors, the intoxicated, and mentally impaired. All of these parties are said to be incapacitated. * Minors are defined as individuals under the age of majority to contract. This is the age at which a person is entitled to the management of his/her own estate (18 in most states). * A person who has not yet reached the age of majority is called a minor. * Minority, or the state of being below the age of majority, ends the day before the birthday of the age set as the age of majority. * Protections for those who lack capacity

* Contracts of most parties who lack capacity are considered voidable. * The primary protection granted to those who lack contractual capacity is disaffirmance, or a refusal to be bound by a previous legal commitment. * The protected party is to receive back whatever they have put into the contract. * The other party may or may not get back their consideration. * When protected, or special, parties contract for necessaries—things needed to maintain life—they must at least pay a reasonable value for the necessaries even if they disaffirm the actual purchase contract. * Minors

* Minors may disaffirm contracts during their minority and for a reasonable length of time after achieving their majority. * After reaching the age of majority, the power to disaffirm is immediately cut off if the person ratifies the contract. * Minors may find themselves bound to their contracts if they are emancipated. Emancipation is the severing of the child-parent relationship. * Minors

* A minor naturally becomes emancipated upon reaching the age of majority. * Formal...
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