Transcript Business Law Chapter 7 PPT
Contractual Capacity
Reasons why a minor may disaffirm a contract How minority is determined How contracts between minors are treated Other reasons related to capacity that can make a contract voidable
1.
2.
3.
4.
Alena Jake Arkadi Viktor Mr. Barenblatt When is a person considered a minor?
Why does the law permit minors to void their contracts?
Are there any exceptions to the rule that says that minors can void their contracts?
What individuals, besides minors, can void their contracts?
Have any of you ever signed a contract?
Can you name some of the protections afforded to minors who sign contracts?
Contractual Capacity
Capacity – the legal ability to enter into a contract
Minors don’t have full capacity contract to Scope of Authority – the range of acts authorized by an organization or individual
Treasurer President Agent Signs checks Can sign contracts Negotiate Contracts If you act outside your authority you can be held personally responsible!
Contractual Capacity
Rebuttable Presumption: the capacity to contract The law says people are permitted to presume the other party has
BUT , it can be challenged in court (Circumstances)
Concept plays key role in contracts
Especially ones made by minors Law permits minors to rescind or void their contracts within limits
Defined:
A person who has not yet reached the age of legal adulthood, known as the age of majority
No age of majority, then they are considered a minor
Commonly referred to as minority
Minority doesn’t end at age 18 Anything as a minor, alters capacity
History
In 1972, when the voting age was lowered from 21 to 18 most states lowered the age of majority.
Common acceptance of this idea means you turn the age of majority at the beginning of the day before your 18 th birthday
Emancipated minors Emancipated.
– Some states have declared minors who are no longer under control of their parents are
Basically means they are responsible for their contracts
A minor who leaves home or marries, giving up all rights to parental support, is considered Emancipated
Emancipated minors individuals are said to have abandoned – Such the protection afforded them as minors
Most merchants are reluctant to deal with these minors fearing the shield of minority “Charged as an Adult” Formal emancipated minors
All minors are held for torts.
Misrepresentation of age – considered fraud and you can be held responsible
To prevail all 5 elements of fraud must be present
Some states allow minors to be sued for fraud, others don’t
Still considered a crime to lie about one’s age to buy age restricted products-even PA
Why should minors be protected by the law when it comes to contracts?
Immaturity, inexperience, lack of education, naiveté
Should an adult who permits minors to use their IDs to misrepresent their age also be held liable?
Web Quest: Article Research
Using the Internet find a specific article on Adults helping minors with fraudulent ID issues etc…
Printout article
Read Article Be prepared to discuss your article
Voidable Contracts
Opening Scene:
Jake, who is 16, attempts to disaffirm his contract with the Buy a-heap used car lot. He gives a letter that states his intent to Mr. Barenblatt.
Example 1, pg. 151 Jake is a minor, and as a result, Buy-a-heap will have to comply with his request.
Second chance: By permitting minors to have the privilege of disaffirming contracts the law provides young people with a way to fix poor judgment Done through dissaffirmance – return of consideration/values
Usually by both parties return
Give back item Released contract
Disaffirming a Contract – minors must disaffirm all or none they engaged in.
of the contracts They may not be selective in what they disaffirm Generally, a person lacking contractual capacity can disaffirm a contract for non necessaries
any time while still under the incapacity within a reasonable time after attaining capacity
Not banking or marriage contracts
Disaffirming a Contract –
All States deny minors that court approved contracts, enlistments contracts, and educational loans can be disaffirmed
(Can’t be done!)
When the consideration by both parties has been given back, the contract is said to be disaffirmed
Return of Merchandise – if the minor still has the merchandise, he or she will have to return it
Even if the items contracted were damaged
Tendered “Offer of compensation”
Some states allow for deductions Minors have a “reasonable” amount of time after reaching majority to disaffirm their contracts
Not in Armed Forces
Disaffirming Contracts Made with other Minors
– when two minors contract, both have the right to disaffirm
Some states even allow minors to disaffirm real estate deals when they turn age of majority
Disaffirming Contracts Made with other Minors
– Example 2, pg. 153
Rob, who is 15, offered to sell his mountain bike to Corey, who is 16. Corey initially agreed to buy it but then change his mind
Ratification
After reaching the age of majority, a person can ratify contracts made during minority
Can be by actions/behavior
Ends privilege of minority
Only upon reaching majority Done orally, in writing, or by actions Promise to perform as agreed Can’t be revoked or withdrawn
Ratification
Colleen bought car when she was 17 years old.
She made a down payment Promised to pay balance over two years in installments After she reached 18, she continued to pay Her actions were considered ratification
Necessaries or Necessities: Defined as
Food, clothing, shelter, medical care
Things need to maintain life----
Example 3, pg. 156
A minor is held responsible for fair value of necessaries Necessaries are called necessities Under common law, one’s “station in life” has a bearing on whether an item is a necessary
Not the same for every person Example: $150 pair of custom-made shoes may be considered necessary for someone with a foot injury
In contrast, a designer pair would be considered a luxury
Contracts that cannot be disaffirmed
All States
(1) court-approved contracts (2) major commitments Armed services, education loans, marriage contracts
Most States
(3) banking contracts (4) insurance contracts (5) work-related contracts Engaged in business or trade
Some States
(6) sale of realty (7) apartment rental
Chapter 7 Work Packet
Complete work packet for chapter 7
Mental Impairment Intoxication Drug Use Alien Status Legal Age
Mental Impairment
Same rights given to minors Substantially, “Does the person understand” the consequences of actions?
Considered unable to make sound judgments
Before a guardian is appointed, any contracts are voidable for an mentally impaired person
Held responsible for fair value of necessaries
Intoxication & Drug Use
Must be at the time they enter contract into Treated the same as mentally impaired or minors Must be so intoxicated they didn’t understand the contract’s:
Purpose
Nature Effect
Alien Status
People who are living in this country but owe allegiance to another country Often give enemy status and denied certain legal protections Legal Age
Majority vs. Minority
You Be The Judge!
Joy and Raul woke up with severe headaches one morning after a night of partying and remembered they had married each other at an all-night wedding chapel.
Joy wants to void the marriage immediately.
Raul wants to stay married.
Can Joy avoid her marriage contract?
You Be The Judge!
To void a contract for this reason:
A person must have been so intoxicated at the time of the contracting that he or she did not understand the purpose, nature, or effect if the transaction The judge or jury must decide that question of intoxication Generally, you can’t disaffirm marriage contracts (Pre-nuptial)
You’re the Judge
Mary Robinson, a 17-year old high school graduate, applied to Ed Rice for a job and was hired on a one-year contract. Nothing was said about Robinson’s age, but when Rice discovered she was only 17, he discharged her. Did Rice have a legal right to do this? No! An adult who contracts with a minor is usually bound by that contract!
You’re the Judge
Patty Okari, 14, bought a video game at a store. A sign said: “No returns---All Sales Final” After using the game for a week, she returned it to the store and asked for a refund. Is she legally entitled to a
refund?
Yes! Minors may return goods other than necessaries and get their money back. In a few states, an amount may be deducted if the goods are damaged or soiled.
You’re the Judge
Ethel O’Conner bought a CD player on the day before her 18
Was she correct?
th birthday. That same day, she changed her mind and sought to return it and get her money back. She claimed that she could return the purchase because she was a minor.
No! Persons reach majority at the beginning of the day before their 18 th birthday.
Chapter 7 Packet Due @ Exam Time!
Exam: Next Class!