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business law

Objectives. Understand the right of minors to disaffirm their contractsIdentify obligations that minors cannot avoidRecognize when a minor has ratified a contract. Objectives. Explain how intoxication affects the liability on a contractDiscuss the effects of mental incompetency on contractual liability.

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business law

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    1. Business Law Chapter 11 Capacity

    3. Objectives Explain how intoxication affects the liability on a contract Discuss the effects of mental incompetency on contractual liability

    4. Contractual Capacity The capacity required by the law for a party who enters into a contract to be bound by that contract.

    5. Capacity Minors Intoxicated persons Mentally incompetent persons

    6. Minors Age of majority – 18 years Ratifying – accepting and validating the contract Disaffirming – renouncing the contract Only the minor has the option

    7. Disaffirmance The legal avoidance, or setting aside, of a contractual obligation. The minor needs only to express an intention not to be bound by the contract. The disaffirmance needs to be timely. Cannot disaffirm without returning goods or paying for their reasonable use

    8. Disaffirmance Duty of Restitution Recognizes the legitimate interests of those who deal with minors Theory that the adult should be returned to the position held before contract If a minor disaffirms a contract, the entire contract must be disaffirmed.

    9. Disaffirmance Misrepresentation of age Ordinarily, minor can disaffirm Some states have a statute to prohibit disaffirmance No disaffirmance if fully executed, unless consideration can be returned Minor liable for damages

    10. Disaffirmance Liability for necessaries, insurance, and loans Liable for reasonable value of the goods Theory of quasi-contract Offset seller’s reluctance to deal with minors Insurance not a necessary Some jurisdictions prohibit disaffirmance Financial loans not a necessary

    11. Ratification The act of accepting and giving legal force to an obligation that previously was not enforceable. Minor who reaches the age of majority Express ratification Conduct By a failure to disaffirm within a reasonable time period

    12. Parents’ Liability Generally, parents are not liable Minor is held liable for torts committed Parents of a minor can also be held liable in certain circumstances Under direction of parent Performing an act requested by parent Parents liable in many states for a statutory amount for malicious acts committed by minor living at home

    13. Emancipation Release of a minor by parents Complete relinquishment of the right to the minor’s control, care, custody, and earnings Several jurisdictions permit minors to petition for emancipation themselves Removes lack of capacity Generally, emancipation does not affect contractual capacity

    14. Intoxicated Persons Can be either voidable or valid Voidable – the intoxicated person’s reason and judgment were impaired to the extent that he did not comprehend the legal consequences of entering into the contract Foolish or unfavorable terms does not mean the contract is voidable

    15. Mentally Incompetent Persons Can be void, voidable, valid If adjudged mentally incompetent and has a guardian appointed – void If not previously adjudged – voidable Ratification – mental competence or guardian ratifies Not legally mentally incompetent for contractual purposes – valid

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