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LECTURE 9
LAW OF CONTRACTS [3]
CONTRACTUAL CAPACITY
DEFINITION
MINORS
Who is a minor?
MINORS (contd)
Restitution by Minor After Avoidance
When a minor disaffirms a contract the question what the minor must return to the
other contracting party
Minor still has what was received from the other party minor on avoiding the
contract - must return it to the other party or offer to do so
i.e. minor must put things back to the original position as it is called restore the
status quo ante
What if minor cannot return what has been received minors right to disaffirm the
contract is not affected
Minor can still disaffirm the contract and is required to return only what remains
The fact that nothing remains / what remains is damaged does not bar the right to
disaffirm the contract
Common law rule minors can refuse to pay for what has been received under a
contract or can get back what had been paid or given even though they do not have
anything to return or return property in a damaged condition
When a minor disaffirms a contract the other party must return the money / property
received
If property sold to third person who does not know the minority minor cannot
get property back
However minor is entitled to recover the propertys monetary value or money
received by the other party
MINORS (contd)
Contract for Necessaries
Minor can disaffirm contract for necessaries but must pay the reasonable value for
furnished necessaries
When a third person supplies the parents or guardian of a minor with goods or
services that the minor needs the minor is not liable for these necessaries
Why? bcoz contract between third person and parent or guardian of the minor
Common law parent liable for the medical expenses of the minor
Common law child can be held contractually liable for her necessary medical
expenses when parent is unable or unwilling to pay
MINORS (contd)
Ratification of Former Minors Voidable Contract
Former minor cannot disaffirm a contract that has been ratified after reaching majority
Fletcher V. Marshall (1994)
Any words or conduct of the former minor manifesting an intent to be bound by the
terms of a contract made while a minor
A person can disaffirm a contract any time during minority and for reasonable time
after that
Ratification can be done after attaining majority or else ratification voidable
Educational loan statutes in many states deprive a minor from doing this
Medical care
Contract made while running a business
Contract approved by a court
Contract made in performance of a legal duty
Contract relating to bank accounts
Insurance policies
MINORS (contd)
Liability of Third Person For a Minors Contract
Whether parents are bound and whether a person cosigning a minors contract is
bound if the contract is avoided
INCOMPETENT PERSONS
MENTALLY INCOMPETENT PERSONS
INTOXICATED PERSONS
INTOXICATED PERSONS
Capacity of a party to a contract and the validity of the contract are not affected by the
partys being impaired by alcohol at the time of making the contract so long as the
party knew that a contract was being made
Degree of intoxication a person does not know that a contract is being made the
contract is voidable by that person same as though the person was insane at the
time and did not know what he or she was doing
The courts treat impairment caused by the use of drugs the same as impairment
caused by the excessive use of alcohol
CASE STUDY
QUESTION 1
Jaclyn Smith, aged 22, entered into a contract with Conan Company
but later claimed it was not binding because she did not understand
several clauses in the printed contract. Is there a binding contract?
QUESTION 2
Edward made a contract while intoxicated . When he sobered up, he
immediately disaffirmed the contract for lack of capacity as the result
of his intoxication. Mayweather, the other contracting party claimed
that voluntary intoxication cannot void a contract. Could Edward
disaffirm the contract?