Term
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Definition
| The legal ability to enter into a contractual relationship. Capacity can be lacking with minors, intoxicated individuals, or mentally incompetent persons. |
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Term
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Definition
| Individual is no longer a minor. The age of 18. Some states state age of majority at marriage. Can also be stated age of majority with emancipation. |
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Term
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Definition
| Child's parent or legal guardian relinquishes the legal right to exercise control over the child. |
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Term
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Definition
| The legal avoidance, or setting aside, of a contractual obligation. Minor must express his or her intent, through words or conduct, not to be bound to the contract. Minor must disaffirm the entire contract, not merely a portion of it. If minor doesn't disaffirm, adult can still be bound by the contract. |
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Term
| When can a contract be dissafirmed involving a minor? |
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Definition
| Any time while still a minor and for some reasonable time after reaching the age of majority. This could be a couple months, but is usually decided by the court. |
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Term
| Minor's obligations on Disaffirmance |
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Definition
Majority Rule - Most states hold that the minor need only return the goods subject to the contract, provided the goods are in the minor's control.
Minority Rule - More states are placing additional duty on the minor to establish the adult party to the position held before the contract was made. |
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Term
| Exceptions to a minor's right to disaffirm |
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Definition
- Misrepresentation of Age - If minor lies about age before going under contract. Also can only disaffirm fully completed contracts if he can return the consideration received.
- Contracts for Necessaries - Items that fulfill basic needs like food and clothing. Minor entering this contract may disaffirm but is liable for the value of the goods received.
- Insurance and Loans - Only in some jurisdictions they cannot disaffirm. They could argue that something like life insurance is not considered necessary.
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Term
| 3 criteria to qualify as a contract of necessaries. Unless these 3 criteria are met, the minor can disaffirm the contract without being liable for the reasonable value of the goods used. |
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Definition
- Item contracted for must be necessary for the minor's subsistence.
- Value of the necessary item must be up to a level required to maintain the minor's standard of living or financial and social status.
- Minor must not be under the care of parent/ guardian who is required to supply this item.
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Term
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Definition
| Accepting and giving legal force to an obligation that previously was not enforceable. |
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Term
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Definition
| Individual, on reaching the age of majority, state orally or in writing that he intends to be bound by the contract. |
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Term
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Definition
| Minor, on reaching the age of majority, indicates an intent to abide by the contract. |
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Term
| Disaffirmance while Intoxicated |
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Definition
- An individual can disaffirm while intoxicated or shortly after becoming sober.
- Must be able to return all consideration given.
- Contracts for necessaries are voidable, but intoxicated person is liable for the value of the consideration.
- If individual still understood the terms of the contract while intoxicated, the contract can be enforceable.
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Term
| Contracts void due to mental incompetence |
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Definition
| Any contract entered into with a person determined to be mentally incompetent is VOID. Only an assigned guardian can enter into a contract on behalf of that person. |
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Term
| When is a contract voidable? |
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Definition
| The person didn't know he or she was entering into the contract or lacked the mental capacity to comprehend its nature, purpose, and consequences. Only the mentally incompetent person can avoid the contract, not the other party. |
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Term
| Are mentally incompetent persons liable for anything if they avoid the contract? |
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Definition
| Yes, they must return any consideration and pay for the reasonable value of any necessaries they receive, just like an intoxicated person. |
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Term
| When is the mentally incompetent person entered in a valid contract? |
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Definition
- If he was competent at the time the contract was entered into.
- If he experiences a LUCID INTERVAL - temporary restoration of sufficient intelligence, judgment, and will, during which he is considered to have full capacity.
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Term
| When is a contract discharged by law? |
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Definition
| When a statute goes into effect after a contract is entered into that renders the object or performance of the contract illegal to perform. |
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Term
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Definition
| Charging interest rates above the lawful maximum. Lenders can generally only recover principle and interest up to the maximum amount. Exceptions to usury exist with corporate loans and borrowers that wouldn't otherwise qualify for credit. |
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Term
| Blue Laws (Sabbath Day Laws) |
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Definition
| Prohibit formation or performance of certain contracts on a Sunday. These can typically be ratified on a weekday. Most states don't enforce these laws. |
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Term
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Definition
| Seller of a business agrees not to open a new store in a certain geographic area surrounding the existing store and create competition. Covenant must be ancillary (secondary or located in a clause) |
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Term
| Covenants not to compete in employment contracts |
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Definition
| People in management and middle/upper-level management positions agree not to work for competitors or not to start competing businesses for a specified period of time after termination of employment. |
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Term
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Definition
| Bargains in a contract are deemed so unscrupulous or grossly unfair as to be void of conscience. |
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Term
| Procedural Unconscionability |
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Definition
| has to do with how a term becomes part of a contract and involves factors that make it difficult for a party to know or understand the contract terms. Examples include inconspicuous print, unintelligible language, or lack of opportunity to read and understand the contract. |
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Term
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Definition
| One party writes the contract exclusively and presents it to the other party on a take-it-or-leave-it basis. There is no negotiation. |
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Term
| Substantive Unconscionability |
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Definition
| Contracts, or portions of, that are oppressive or overly harsh. |
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Term
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Definition
| Release a party from liability in the event of monetary or physical injury no matter who is at fault. These are usually only enforceable for companies like amusement parks, skydiving, skiiing, etc and when they aren't ambiguous, don't claim to protect against intentional harm, and don't contravene public policy. |
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Term
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Definition
Equally at fault. Both parties are equally at fault when a contract is written that contains any illegal terms or conditions. The contract is void and not upheld by the courts.
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Term
| Exceptions to illegal contracts - Restitution |
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Definition
- Justifiable ignorance of the facts - One party is innocent by ignorance - Trucker unknowingly carrying illegal goods can recover performance
- members of protected classes - Airline pilots exceeding monthly hours still get paid.
- Withdrawal from illegal agreement - Betting on boxers. Early withdrawal can get money back.
- Contract illegal though fraud, duress, or undue influence - Victim can get performance back.
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Term
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Definition
| Contract consists of separate elements of performance and consideration and can be divided into separate ones. |
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Term
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Definition
| May or may not consist of different elements of consideration or performance, but it must all be completed to be considered executed once consideration is given. |
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