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Chapter 14 - CapacityCapacity – the ability to incur legal obligations and acquire legal rightsWho doesn’t have capacity?- Minors (called infants)- A person suffering from a mental illness or defect- Intoxicated persons (also includes people under the influence of drugs)o In the old days, women were viewed as incapable of being able to enter into contracts (changed view)o Women were treated as convictsWhat is the effect of not having capacity?- The contract is voidable at the option of the person who does not have capacity; not voided at the other endo Example: Justin Beiber entered into contracts as a minor (age 15), he is now 16, he could get out of these contracts because he entered into the contracts lacking capacity; the- In a few limited situations, the contract is void (void contract – agreement that creates no legal obligations); three situations:1. Have a mentally impaired person who has been determined by court to be impaired before they enter into the contract2. Comatose person3. Unconscious personMinors’ right to disaffirm- Exercise of right to avoid contract is disaffirmance- Personal to the minor – only the minor or a legal representative of the minor has the right to disaffirm o Example: Nick Jonas could not disaffirm for Joe- Any act or words that communicate the minors desire to disaffirm the contract can constitute disaffirmance- Some contracts that minors cannot get out of simply because they are minors (may be other ways); four exceptions:1. Marriage 2. An agreement to support kids3. Education loans4. Insurance contracts- Who is a minor?o Back in the day, you were a minor if you were under 21o Today, in almost every state a minor is anyone who is under 18- Emancipation – determination of the parents right to control a child; happens in two situations:1. Parental consent2. When you get marriedo In most states, the fact of emancipation does not give capacity to minors Example: say Justin Beiber gets married, has a kid at 17, working full-time – does he have capacity to enter into contracts?- No, could still get out of his contracts on the basis that he is a minor- Time of disaffirmance? When can a minor disaffirm:o With one exception, a minor can disaffirm at any timeo One exception is real estate (title to real estate) Cannot disaffirm a contract if you are a minor that gives you the title to real estate; cannot get out of the contract until no longer a minor (age of 18)o General rule: if you’re going to disaffirm, you have to disaffirm at a reasonable time after you turn 18 (no rule about how much time) What happens if you don’t disaffirm and you continue to accept the benefits of the contract?- That means you ratified the contract and you can’t get out of it- Duties upon disaffirmance:o Obligations of a minor who disaffirms If neither party has performed, there is nothing to decide Suppose one or both parties had provided consideration- Example Miley buys a Lamborghini before she turns 18; a year later she wants a new car – she has to give back the car; how much money does she get back?o Suppose she damages the car, she does not get back the full purchase price- Point of the Dodson Caseo Minor buys a new car, damages it and wants full purchase priceo Gets back the fmv at the point at which you returned the car taking in count the damageo Minor has to give back consideration, if he or she damages the consideration in any way, must give back- States have difference rules about depreciation Leases- Minor who enters into a lease; breaks the lease- Can the landlord come after you and get damages against you for breaching the leaseo General rule: disaffirming minors are required to pay the reasonable value of items that have been furnished to them as necessaries (food, clothing, medical care, shelter, and basic education) – “quasi contractual”- Weaver case*o Minor wins because the housing was not regarded as necessary because the minor did not need the rental apartment – she was not kicked out by her parents and could go back to her house to liveo Because the rental housing was not necessary, she was not responsible for paying the remainder of the lease- Effect of misrepresenting your age (i.e. fake ID)o Suppose you have a fake ID, you lease a car, and then you wreck the car You try to disaffirm the contract and get your money back There is a split: half the states say a lying minor can disaffirm a contract, the other half say the lying minor cannot disaffirm Either way, the minor must reimburse the car company for the damagesMentally impaired people- Includes:o Mental illnesso Brain damageo Mental retardationo Senilityo Dementia- Basic test: does the person have sufficient mental capacity to understand the nature and effect of the contract they entered in to?- Three situations where contract is void instead of voidable- If fail to disaffirm within a reasonable time after regain capacity, will be deemed to have ratified- Suppose suffering from dementia, conned into buying a Lamborghini; want to get out of it – obligations:o Must give back the considerationo If crashed the Lamborghini and you knew buyer had dementia at time of sale, do not have to pay for damages and can get back the full purchase price Contracts of Intoxicated Persons- If you are intoxicated, can you get out of the contract after you sober upo General rule: intoxication from drugs or alcohol is a basis for arguing that you don’t have capacity and therefore you can get out of the contract only when the intoxication is so extreme that the intoxicated person is unable to understand the nature of the contract he/she entered into- Courts are extremely unsympathetic to the argument of


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UMD BMGT 380 - Chapter 14 - Capacity

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