MANGMT 3540 1st Edition Lecture 11 Outline of Last Lecture I Acceptance and Unilateral Contracts II Introduction to Uniform Commercial Code III Variations under the UCC IV Firm Offer V U C C Acceptance Sale of Goods VI Introduction to Consideration VII Pre existing duty rule VIII Exceptions to consideration rule IX Consideration under the U C C Outline of Current Lecture X Capacity to Contract Levels of Competence XI Disaffirmance XII Ratification XIII Liability for necessaries XIV Minors XV Intoxicated Persons XVI Incompetent Persons Current Lecture These notes represent a detailed interpretation of the professor s lecture GradeBuddy is best used as a supplement to your own notes not as a substitute I Capacity to Contract Levels of Competence A Full Competence i All parties have full legal capacity ii Result Contract is valid B No Competence i One or more parties have been adjudicated mentally incompetent ii Result Contract is void not enforceable by either party C Limited Competence i One or both are minors highly intoxicated or mentally incompetent without adjudication ii Result contract is voidable by the person with the disability II Disaffirmance A Defined i Avoidance of a contract by a person with a legal disability B Three Typical steps to disaffirmance i Expressing the intent by words or conduct not to be bound to the contract while under a disability or within a reasonable time thereafter ii Restoration requires return of property purchased before disaffirmance iii Restitution requires payment for any damage to property prior to its return III Ratification A Express Ratification i Using specific language to manifest agreement to the contract after a legal disability is removed B Implied Ratification i Failure to disaffirm within a reasonable time after the removal of a disability is an implied ratification no longer voidable IV Liability for necessaries A Necessaries defined i Items necessary for health and maintenance such as food clothing medical care etc ii Incompetent persons are often partially liable for necessaries so that they have more chance of receiving what they need to live iii Flexible standard e g a car may be necessary if needed for a job B Effect of liability i The person with the legal disability may still disaffirm the actual contract ii The person with limited competence is still liable for the reasonable value of goods or services in quasi contract a contract implied in law to avoid unjust enrichment V Minors A Definition of a minor i Someone who has not reached age of majority adulthood ii Missouri age 18 for most purposes B Three requirements for disaffirmance i Express the intent to not be bound within the required time period ii Fulfill only the duty of restoration under the majority rule the rule in most states a minority of states would also require duty of restitution such as paying for any damages to an item purchased iii Must be a type of contract for which disaffirmance is allowed C Three types of contracts not voidable because of minority i Marriage ii Joining the military iii Student Loans D Minor s misrepresentation and disaffirmance i What if a minor lies about his or her age ii Most states require the minor who lies about age to either fulfill the contract or to pay least the reasonable value of goods or services in quasi contract E Minor s liability for necessaries i If a minor is NOT under care of a parent or guardian with ability to pay for the minor s needs the minor must pay the reasonable value of necessaries ii Emancipation minor not under care of parents or guardian VI Intoxicated Persons A Defined i Someone so intoxicated at the time of the contract that he she does not understand the nature or substance of the transaction 1 Nature Doesn t know it s a contract 2 Substance Doesn t know the subject matter or consequences B Problem of Proof i Lucy v Zehmer the fact that Zehmer was high as a Georgia pine and thought it was all a joke was not enough to avoid land contract where he apparently knew what he was doing C Three Requirements for Disaffirmance i Express an intent not to be bound while intoxicated or within reasonable time after becoming sober ii Duty of restoration iii Duty of restitution D Express or Implied Ratification i Express specific language showing intent to go along with the contract ii Implied occurs where there is a failure to disaffirm within a reasonable time after becoming sober E Necessaries i The intoxicated person is liable for the reasonable value of goods or services even if the contract I disaffirmed VII Incompetent Persons A Defined i Persons who at the time of the contract do not understand the nature or substance of the transaction because of a mental condition 1 Adjudicated contract is void 2 Non adjudicated contract is voidable and may be disaffirmed by the incompetent party B Lucid Intervals i Periods when the person with the incapacity is clean minded ii Result where there has been no adjudication of incompetence the contract is valid C Three Requirements for Disaffirmance i Manifestation of intent while incompetent or within a reasonable time after becoming competent ii Duty of restoration iii Duty of restitution D Express or Implied Ratification i Express verbal statement showing intent to go along with the contract ii Implied failure to disaffirm within reasonable time after mental capacity is restored E Necessaries i The incompetent person is liable for the reasonable value of necessities even if the contract is disaffirmed