MANGMT 3540 1st Edition Lecture 11 Outline of Last Lecture I. Acceptance and Unilateral ContractsII. Introduction to Uniform Commercial CodeIII. Variations under the UCCIV. Firm OfferV. U.C.C. Acceptance – Sale of GoodsVI. Introduction to ConsiderationVII. Pre-existing duty ruleVIII. Exceptions to consideration ruleIX. Consideration under the U.C.C.Outline of Current Lecture X. Capacity to Contract: Levels of CompetenceXI. DisaffirmanceXII. RatificationXIII. Liability for necessariesXIV. Minors XV. Intoxicated PersonsXVI. Incompetent Persons Current LectureThese 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 CompetenceA. Full Competencei. All parties have full legal capacityii. Result: Contract is validB. No Competencei. One or more parties have been adjudicated mentally incompetentii. Result: Contract is void- not enforceable by either partyC. Limited Competencei. One or both are minors, highly intoxicated or mentally incompetent (without adjudication)ii. Result: contract is voidable by the person with the disabilityII. DisaffirmanceA. Definedi. Avoidance of a contract by a person with a legal disabilityB. Three Typical steps to disaffirmancei. Expressing the intent, by words or conduct, not to be bound to the contract while under a disability or within a reasonable time thereafterii. Restoration: requires return of property purchased before disaffirmanceiii. Restitution: requires payment for any damage to property prior to its returnIII. RatificationA. Express Ratificationi. Using specific language to manifest agreement to the contract after a legal disability is removedB. Implied Ratificationi. Failure to disaffirm within a reasonable time after the removal of a disability is an implied ratification (no longer voidable)IV. Liability for necessariesA. Necessaries definedi. Items necessary for health and maintenance, such as: food, clothing, medical care, etc.ii. Incompetent persons are often partially liable for necessaries so that theyhave more chance of receiving what they need to liveiii. Flexible standard: e.g. a car may be necessary if needed for a jobB. Effect of liabilityi. The person with the legal disability may still disaffirm the actual contractii. The person with limited competence is still liable for the reasonable valueof goods or services in quasi contract- a contract implied in law to avoid unjust enrichmentV. Minors A. Definition of a minori. Someone who has not reached age of majority (adulthood)ii. Missouri – age 18 for most purposesB. Three requirements for disaffirmancei. Express the intent to not be bound within the required time periodii. 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 allowedC. Three types of contracts not voidable because of minorityi. Marriageii. Joining the militaryiii. Student LoansD. 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 contractE. Minor’s liability for necessaries i. If a minor is NOT under care of a parent or guardian with ability to pay forthe minor’s needs, the minor must pay the reasonable value of necessariesii. Emancipation: minor not under care of parents or guardianVI. Intoxicated PersonsA. Definedi. Someone so intoxicated at the time of the contract that he/she does not understand the nature or substance of the transaction1. Nature: Doesn’t know it’s a contract2. Substance: Doesn’t know the subject matter or consequencesB. Problem of Proofi. 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 doingC. Three Requirements for Disaffirmancei. Express an intent not to be bound while intoxicated or within reasonable time after becoming soberii. Duty of restorationiii. Duty of restitutionD. Express or Implied Ratificationi. Express: specific language showing intent to go along with the contractii. Implied: occurs where there is a failure to disaffirm within a reasonable time after becoming soberE. Necessariesi. The intoxicated person is liable for the reasonable value of goods or services even if the contract I disaffirmed VII. Incompetent PersonsA. Definedi. Persons who at the time of the contract do not understand the nature or substance of the transaction because of a mental condition1. Adjudicated – contract is void2. Non-adjudicated – contract is voidable and may be disaffirmed by the incompetent partyB. Lucid Intervalsi. Periods when the person with the incapacity is clean-mindedii. Result where there has been no adjudication of incompetence: the contract is validC. Three Requirements for Disaffirmancei. Manifestation of intent – while incompetent or within a reasonable time after becoming competent ii. Duty of restorationiii. Duty of restitutionD. Express or Implied Ratificationi. Express: verbal statement showing intent to go along with the contractii. Implied: failure to disaffirm within reasonable time after mental capacity is restoredE. Necessariesi. The incompetent person is liable for the reasonable value of necessities even if the contract is