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Questions and Answers
What is the term for a minor's ability to cancel a contract?
What is the term for a minor's ability to cancel a contract?
Which situation represents a potential reason for a contract's unenforceability?
Which situation represents a potential reason for a contract's unenforceability?
What occurs to a contract that has an illegal purpose?
What occurs to a contract that has an illegal purpose?
Which type of mistake involves both parties misunderstanding a fundamental fact?
Which type of mistake involves both parties misunderstanding a fundamental fact?
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What does 'ratification' refer to in the context of contract law?
What does 'ratification' refer to in the context of contract law?
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What type of misrepresentation occurs when a party knowingly provides false information?
What type of misrepresentation occurs when a party knowingly provides false information?
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What is the legal term for a contract that is unenforceable due to unequal bargaining power?
What is the legal term for a contract that is unenforceable due to unequal bargaining power?
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Which of the following best describes severability in contract law?
Which of the following best describes severability in contract law?
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A minor has unlimited capacity to enter into any contract.
A minor has unlimited capacity to enter into any contract.
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A contract for a necessity can be enforced against a minor.
A contract for a necessity can be enforced against a minor.
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Procedural unconscionability relates to the terms of the contract being unfair.
Procedural unconscionability relates to the terms of the contract being unfair.
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An agreement to commit a crime makes a contract voidable.
An agreement to commit a crime makes a contract voidable.
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Undue influence can render a contract voidable due to the coercive actions of one party.
Undue influence can render a contract voidable due to the coercive actions of one party.
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Mutual mistake occurs when only one party is mistaken about a fundamental fact.
Mutual mistake occurs when only one party is mistaken about a fundamental fact.
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Contracts that are considered to violate public policy can still be enforced in court.
Contracts that are considered to violate public policy can still be enforced in court.
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Ratification occurs when a minor affirms a contract upon reaching the age of majority.
Ratification occurs when a minor affirms a contract upon reaching the age of majority.
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Study Notes
Capacity
- Minors have limited capacity to contract, meaning they can choose to void a contract.
- Disaffirmance is when a minor voids a contract.
- Minors can disaffirm contracts except for contracts for necessities.
- Ratification occurs when a minor reaches the age of majority and confirms a contract entered into while a minor.
- This occurs via words or actions.
- Parents are generally not liable for contracts entered into by a minor, unless the minor was acting as an agent.
- This exception can occur in situations where the parent cosigned the contract.
- Mentally incapacitated people have limited contract capacity.
- Intoxicated people lack capacity if the other party knew of their intoxication.
Legality and Unenforceability
- Contracts that violate state or federal statutes are unenforceable.
- Agreements to commit a crime or tort are unenforceable.
- Contracts for usurious loans (loans with an interest rate that exceeds state limits) are unenforceable.
- Contracts for gambling are unenforceable unless expressly authorized by a state.
- Contracts that violate public policy are also unenforceable.
- Restraint of trade contracts may be unenforceable.
Unfairness
- Unfairness can affect enforceability.
- Unconscionability is a defense to enforceability in contracts involving overreaching by a party.
- Procedural unconscionability involves unequal bargaining power.
- Substantive unconscionability occurs when the contract terms are unfair.
- Contracts of adhesion are typically written by one party and presented to the other party on a “take it or leave it” basis.
- Void ab initio means the contract is void from the beginning.
- In pari delicto occurs when parties are equally at fault and neither can seek judicial relief.
- Severability allows a court to strike out unenforceable parts of a contract while upholding the rest of the contract.
Reality of Assent
- Assent means the parties agree to the terms of the contract.
- If assent is absent, the contract can be rescinded (cancelled).
Mistake
- A mistake can be unilateral (only one party made the mistake) or mutual (both parties made the mistake).
- A unilateral mistake usually does not make the contract voidable, but a mutual mistake often does.
Misrepresentation
- Misrepresentation is a false statement made by one party to another that induces the second party to enter into the contract.
- Innocent Misrepresentation is an unintentional misstatement.
- Scienter means the person making the misrepresentation knew it was false or made the statement with reckless disregard for the truth.
- Negligent misrepresentation occurs when the statement is made carelessly.
- Fraudulent Misrepresentation is intentional.
- Intentional Misrepresentation requires intent to deceive.
- Concealment involves hiding material facts.
- Non-disclosure involves the failure to voluntarily disclose a material fact.
- Justifiable Reliance means the party making the claim relied on the statement.
Undue Influence
- Undue Influence occurs when a party takes advantage of a relationship to influence someone else to enter into a contract.
Duress
- Duress is a wrongful act that forces another to enter into a contract.
- This includes both physical and economic duress.
Capacity
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Minors
- Disaffirmance - Minors generally have the right to avoid contracts.
- Exceptions - Contracts for necessities (food, shelter, clothing) may be enforceable.
- Ratification - When a minor reaches the age of majority, they can choose to affirm contracts made as a minor.
- Parents' Liability - Parents are generally not liable for a minor's contracts, unless the minor is emancipated.
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Mentally Incapacitated Persons - Persons with mental incapacitation have limited capacity to contract unless they are determined by a court to be incompetent.
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Intoxicated Persons Individuals under the influence of drugs or alcohol may have limited capacity to contract if they are so impaired that they cannot understand the nature and consequences of their actions.
Legality and Unenforceability
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Contracts Violating Statutes - Contracts that are illegal under state or federal law are unenforceable.
- Examples: Agreements to commit crimes or torts, contracts violating licensing statutes, usury agreements, gambling contracts, and contracts violating blue laws.
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Contracts Violating Public Policy - Contracts that are against public policy, even if not illegal, may be unenforceable. Examples include contracts that restrain trade.
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Unfairness
- Unconscionability - Contracts that are so unfair that they shock the conscience of the court may be unconscionable. This may involve procedural unconscionability (a lack of meaningful choice), substantive unconscionability (terms that are unreasonably favorable to one party) or contracts of adhesion (take-it-or-leave-it contracts).
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Effects of Illegal Contracts
- Void ab initio - Contracts deemed illegal from the beginning.
- In pari delicto - Parties are equally at fault.
Reality of Assent
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Assent - Agreement to the terms of the contract. If there is no genuine assent, the contract may be voidable.
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Mistake
- Unilateral Mistake - One party is mistaken about a material fact and the other party knows or should have known about the mistake.
- Mutual Mistake - Both parties make a mistake about a material fact of the contract.
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Misrepresentation
- Innocent Misrepresentation - A false statement made without knowledge that it is false.
- Scienter - Knowledge of the falsity of a statement.
- Negligent Misrepresentation - A false statement made without reasonable care.
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Fraudulent Misrepresentation - A false statement made intentionally with the intent to deceive.
- Intentional Misrepresentation - A person intentionally makes a misrepresentation about a material fact.
- Concealment - A person deliberately hides a material fact.
- Non-Disclosure - A person fails to disclose a material fact that they have a duty to disclose.
- Intent to Deceive - The person making the misrepresentation must have an intent to deceive the other party.
- Justifiable Reliance - The innocent party must have reasonably relied upon the false assertion.
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Undue Influence - Contracts made under undue influence, where one party dominates another, may be voidable.
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Duress Contracts made under duress (coercion) may be voidable where one party forces another party into a contract by wrongful threats.
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Description
Explore the crucial concepts of capacity and legality in contract law, particularly focusing on minors and their ability to disaffirm contracts. Learn about the implications of ratification and unenforceability in illegal agreements. This quiz covers the essentials necessary for understanding these legal principles.
