Question 1

When a person lacks capacity to contract due to a mental impairment,the contract is void.In contrast,when a person lacks capacity to contract due to intoxication,the contract is voidable.

Accepted Answer

The rules governing the capacity of intoxicated persons are very similar to those applied to the capacity of people who are mentally impaired.The basic right to disaffirm contracts made during incapacity,the duties upon disaffirmance,and the possibility of ratification upon regaining capacity are the same for an intoxicated person as for a person under a mental impairment.

Question 2

Minors have the capacity to enter into contracts.

Accepted Answer

Minors do not have capacity to enter into contracts.

Question 3

Contract law provides those without the capacity to contract with the right to escape the legal consequences of contracts they enter during incapacity.

Accepted Answer

Contract law gives those without the capacity to contract the right to avoid (escape the legal consequences of)contracts that they enter during incapacity.This rule provides a means of protecting people who,because of mental impairment,intoxication,or youth and inexperience,are disadvantaged in the normal give-and-take of the bargaining process.

Question 4

The traditional rule is that,when the consideration given by the adult party under a minor's contract has been lost,damaged,destroyed,or has depreciated in value,the minor can disaffirm without compensating the adult for the loss in any way.

Accepted Answer

The traditional rule is that the minor who cannot fully return the consideration that was given to her is not obligated to pay the adult for the benefits she has received or to compensate the adult for loss or depreciation of the consideration.

Question 5

A contract made by a person who has been adjudicated to be insane and institutionalized or put under a guardian's care is void rather than voidable.

Accepted Answer

There are some individuals whose capacity is so impaired that they do not have the ability to form even a voidable contract.A bargain is considered to be void if,at the time of formation of the bargain,a court had already adjudicated (adjudged or decreed)one or more of the parties to be mentally incompetent or one or more of the parties was so impaired that he could not even manifest assent (e.g. ,he was comatose or unconscious).

Question 6

Emancipation is a formal agreement in writing to terminate a parent's right to control a child and receive services from him.

Accepted Answer

Emancipation does not have any formal requirements and can be implied by parent's actions/events.

Question 7

Generally,the age of majority for contracting purposes is 21 years.

Accepted Answer

At common law,the age of majority was 21.However,the ratification in 1971 of the Twenty-sixth Amendment to the Constitution giving 18-year-olds the right to vote stimulated a trend toward reducing the age of majority.

Question 8

Ratification of a contract with a minor has to be expressly made only in written form.

Accepted Answer

There are no formal requirements for ratification.Any of the former minor's words or acts after reaching majority that indicate with reasonable clarity his intent to be bound by the contract are sufficient.Ratification can be expressed in an oral or written statement,or,as is more often the case,it can be implied by conduct on the part of the former minor.

Question 9

A minor has the right to recover any consideration,including goods transferred to third parties.This includes even good faith purchasers.

Accepted Answer

Under section 2-403 of the Uniform Commercial Code,a minor cannot recover goods transferred to a good faith purchaser.

Question 10

The terms infants and minors refer to the same class of people.

Accepted Answer

Those who lack capacity to contract because they have not reached the age of majority are referred to as minors and/or infants.

Question 11

Ordinarily,an item is not considered to be a necessary if a parent or guardian already supplies the minor with similar items.

Accepted Answer

An item sold to a minor is not considered a necessary if the minor's parent or guardian has already supplied him with similar items.

Question 12

A minor's contract for necessaries makes the minor liable for the reasonable value of the necessaries furnished to him.

Accepted Answer

According to the law,a minor is liable for the reasonable value of those necessaries that he/she actually receives.

Question 13

When a person asserts he lacked capacity as the basis for a claim or defense,it is his responsibility for alleging and proving it.

Accepted Answer

The responsibility for alleging and proving incapacity is placed on the person who bases his claim or defense on his lack of capacity.

Question 14

A person who lacked capacity to contract due to mental impairment can ratify the contract once he/she regains his/her normal mental faculties.

Accepted Answer

If a contract is found to be voidable on the ground of mental impairment,the person who lacked capacity at the time the contract was made has the right to disaffirm the contract.A person formerly incapacitated by mental impairment can ratify a contract if he/she regains his/her capacity.

Question 15

Ratification makes a contract valid from its inception.

Accepted Answer

The act of affirming the contract and surrendering the right to avoid the contract is known as ratification.Ratification makes a contract valid from its inception.

Question 16

Once a contract made by a minor has been effectively ratified,it cannot be disaffirmed.

Accepted Answer

Ratification makes a contract valid from its inception.Because ratification represents the former minor's election to be bound by the contract,he cannot later disaffirm.

Question 17

Under the theory that alcohol and drug use should not be rewarded,today most courts say that contracts made by intoxicated people are perfectly binding,no matter how severe the intoxication is.

Accepted Answer

Contracts made under extreme conditions of intoxication are not legally binding.However,courts have always been less sympathetic about such people than with minors or those suffering from mental impairment.

Question 18

A minor can disaffirm agreements to support their children.

Accepted Answer

State law often creates statutory exceptions to the minor's right to disaffirm.These statutes prevent minors from disaffirming such transactions as marriage,agreements to support their children,educational loans,life and medical insurance contracts,contracts for transportation by common carriers,and certain types of contracts approved by a court (such as contracts to employ a child actor).

Question 19

Under the Restatement (Second)of Contracts,intoxication will make a contract voidable if the other party has reason to know that the intoxicated person is so intoxicated that he/she cannot understand or act reasonable in relation to the transaction.

Accepted Answer

The mere fact that a party to a contract had been drinking when the contract was formed would not normally affect his/her capacity to contract.Intoxication is grounds for lack of capacity only when it is so extreme that the person is unable to understand the nature of the business at hand.Section 16 of the Restatement (Second)of Contracts provides that intoxication is grounds for lack of capacity only if the other party has reason to know that the affected person is so intoxicated that he/she cannot understand or act reasonably in relation to the transaction.

Question 20

A person younger than the legal age of majority is generally held to lack capacity to enter a contract,even if he is married and employed full time.

Accepted Answer

In most states,the mere fact that a minor is emancipated does not give him capacity to contract.A person younger than the legal age of majority is generally held to lack capacity to enter a contract,even if he is married and employed full time.

Quiz 14: Capacity to Contract