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Contractual Capacity

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

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Contractual Capacity

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  1. Contractual Capacity Business Law Chapter 7

  2. Opening Scene • Alena • Jake • Arkadi • Mr. Barenbalatt • Narrator

  3. 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

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

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

  6. Legal Age: Moved from 21-18 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

  7. 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

  8. 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

  9. 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

  10. 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

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

  12. 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

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