Deck 14: Capacity to Contract

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.

Answer 1

False
Explanation: 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.

Answer 2

False
Explanation: 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.

Answer 3

True
Explanation: 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.

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.

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

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.

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.

Question 15

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.

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.

Question 18

A minor can disaffirm agreements to support their children.

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.

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.

Question 21

Which of the following contracts is void?

A)A contract made by an unemancipated minor.
B)A contract made by a person who has been adjudicated insane and institutionalized.
C)A contract made by a person under the influence of mind-altering drugs.
D)A contract made by a minor who receives no support from a parent or guardian.

Question 22

Which of the following characterizes emancipation?

A)It allows parents to receive services from the child.
B)It occurs only through parents' consent.
C)Most states grant an emancipated minor the capacity to contract.
D)There are no formal requirements for it.

Question 23

Which of the following is most likely to constitute ratification of a contract made by a minor?

A)Not performing one's duties under the contract after reaching the age of majority.
B)Nonperformance of the other party to the contract after the age of majority.
C)Failing to disaffirm a completely executory contract within one month after the age of majority.
D)Making an oral statement that "I will ratify the contract."

Question 24

Which of the following is a criticism of the traditional rule of restitution in the case of minors who have disaffirmed a contract?

A)It allows adults to ratify a contract with a minor.
B)It allows a minor to be exploited in a contract.
C)It does not allow a minor to disaffirm a bargain.
D)It is harsh on innocent adults who have dealt fairly with minors.

Question 25

Ted failed to disaffirm a contract during his minority or within a reasonable time after reaching majority.The contract was automatically:

A)ratified.
B)rescinded.
C)set aside.
D)made voidable at the option of the minor.

Question 26

A minor entered into a contract with GAM & Co.When he attains the age of majority,he wishes to enforce the contract.The adult party must:

A)perform the contract.
B)rescind the contract.
C)abandon the contract.
D)ratify the contract.

Question 27

Betty,age 16,buys a car and wrecks it one week later.She takes it back to the seller and demands all of her money back.According to the traditional rule,is she entitled to get all of her money back?

A)Yes,regardless of the condition of the car,because this was a void contract.
B)Yes,regardless of the condition of the car,because this was a voidable contract.
C)No,she is entitled to no remedy in this situation.
D)No,she is entitled to get some money back but less the value of the damage to the car.

Question 28

Tracy,aged 12,is named the sole inheritor of her family mansion,which is valued to be worth millions.She has disaffirmed the agreement on the advice of her uncle and guardian Pete.This automatically transfers the title to the latter.Which of the following statements is true of the case?

A)Tracy cannot disaffirm until she has reached majority.
B)Tracy's decision will be allowed by the family courts.
C)Pete has every right to Tracy's property and can take legal possession of it.
D)Tracy's decision is valid as long as it is in writing.

Question 29

Mike,a minor,buys some real estate as an investment.The contract obligates Mike to make monthly installment payments for 10 years.Mike reaches the age of majority one month after making the contract.After this,Mike makes 25 monthly payments under the contract,but then decides that he wants to rescind the deal.Which of the following is most true?

A)Mike can disaffirm.
B)Mike cannot disaffirm because contracts for the sale of land can only be disaffirmed before the age of majority.
C)Mike cannot disaffirm because contracts for the sale of land must be disaffirmed within one year of the age of majority.
D)Mike cannot disaffirm because he has already ratified the contract.

Question 30

The general rule is that,contracts entered into during minority can be disaffirmed as soon as they are formed.Which of the following is an EXCEPTION to the rule?

A)Contracts affecting investment.
B)Contracts affecting the title to real estate.
C)Contracts affecting necessary supplies to be provided to the minor.
D)Contracts affecting his/her employment as a child actor.

Question 31

What is the term for affirming a contract and surrendering the right to avoid a contract made while being a minor?

A)Ratification
B)Emancipation
C)Impairment
D)Duress

Question 32

In almost all states,the age of majority for contracting is ________.

A)18
B)19
C)20
D)21

Question 33

Shelly,aged 15,sells a car to Fiona,aged 25.Fiona in turn sells the car to Raphael.Under section 2-403 of the Uniform Commercial Code,if Shelly chooses to disaffirm the contract with Fiona:

A)Shelly can get the car back from Raphael.
B)Raphael will have to sell it back to Shelly.
C)Shelly can do so,since she is a minor.
D)Shelly needs to file a breach of contract against both Fiona and Raphael.

Question 34

A bargain is considered to be void if a court has ________ a person to be mentally incompetent at the time the bargain was formed.

A)ratified
B)adjudicated
C)disaffirmed
D)emancipated

Question 35

The right of minors to avoid a contract as a means of protecting themselves against their own improvidence and against overreaching adults is called:

A)emancipation.
B)ratification.
C)adjudication.
D)disaffirmance.

Question 36

Who among the following have the capacity to enter into a contract?

A)Persons suffering from mental illness
B)Adults that have divorced
C)Minors
D)Individuals severely intoxicated at the time of entering into a contract

Question 37

________ is the ability to incur legal obligations and acquire legal rights.

A)Capacity
B)Emancipation
C)Necessity
D)Disaffirmance

Question 38

________ makes any contract valid from its inception and can be done effectively only after a minor reaches majority.

A)Disaffirmance
B)Emancipation
C)Ratification
D)Consideration

Question 39

At 17 years old,Otto signed a contract to purchase a new Hummer by advancing a payment of $50,000.However,when Otto turned 20,he wished to disaffirm this contract.Does the law permit this?

A)Yes,because he was a minor when he signed the contract.
B)Yes,because he is not yet 21 years of age.
C)No,because a car is a "necessary."
D)No,because Otto implied his ratification.

Question 40

What is emancipation?

A)Termination of a case of fraud and misrepresentation.
B)Termination of a bargain that is considered void.
C)Termination of parental rights to control a child.
D)Termination of necessaries in a quasi-contractual case.

Question 41

Three days before she was judicially declared mentally incompetent and institutionalized,Irma bought a $50,000 automobile by cash and took delivery of it.Which of the following is true about this contract?

A)It is voidable at the discretion of the seller.
B)The contract is voidable due to Irma's institutionalization.
C)The contract cannot be disaffirmed because it was fully executed.
D)Irma ratified the contract by paying the price of the car.

Question 42

What remedy is provided by the states that allow disaffirmance to adults who suffer losses due to a minor's misrepresentation of age?

A)There is no remedy
B)Tort of necessaries
C)Tort of deceit
D)Emancipation

Question 43

Which of the following characterizes the effect of incapacity caused by mental impairment?

A)A person formerly incapacitated by mental impairment cannot ratify a contract if he/she regains his capacity.
B)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.
C)If a court has found a person mentally incompetent after holding a hearing on his mental capacity and has appointed a guardian for him,the contract is considered voidable.
D)The contracts of people who are suffering from a mental defect at the time of contracting are usually considered to be void.

Question 44

Which of the following is true of contracts involving people suffering from mental illnesses?

A)Contracts of people suffering from a mental defect at the time of contracting are usually considered to be enforceable.
B)A person disaffirming on the ground of mental impairment need not return any consideration given by the other party.
C)A person disaffirming on the ground of mental impairment is liable for the reasonable value of necessaries.
D)A person incapacitated by mental impairments cannot ratify a contract if he/she regains his capacity.

Question 45

A(n)________ is something that is essential for the minor's continued existence and general welfare that has not been provided by the minor's parents or guardian.

A)disaffirmance
B)necessary
C)estoppel
D)capacity

Question 46

Pat is a rich boy whose parents supply him with every conceivable necessity of life.While still a minor,Pat buys a coat on credit from a men's store for $5,000.After wearing the coat for a while,Pat decides that it bores him and that he would like to disaffirm.Which of the following is most likely to be true? Assume that Pat is still a minor.

A)Pat can disaffirm the contract,and he must return the coat.
B)Pat cannot disaffirm the contract,but he is liable only for the reasonable value of the coat.
C)Pat cannot disaffirm the contract,and he is liable for the full price of the coat ($5,000).
D)Pat can disaffirm the contract,but the store will sue him for deceit.

Question 47

Beth has just turned 17 years of age.She entered into a contract with ABC Corp.for the purchase of a used car,with full payment of $5,000 due in 30 days.This car is necessary for Beth to use as transportation to her job,which she needs in order to pay tuition at the university where she is a freshman.Beth's parents have refused to help her pay for college.Three days later,Beth changes her mind;she now wants to return the car because she has learned that it is worth only $4,000,which is in fact the reasonable value of this car.Assuming the car is legally classified as a "necessary" and Beth does not pay,and ABC Corp.sues,the outcome of this lawsuit will be that:

A)Beth must pay $5,000.
B)Beth must pay $4,000.
C)Beth does not have to pay for the car;she is entitled to the remedy of rescission because she is a minor.
D)Beth does not have to pay for the car;she is entitled to the remedy of punitive damages because ABC overcharged her.

Question 48

Which of the following characterizes the traditional rule regarding a minor who misrepresents his/her age?

A)He/she can be prosecuted for such an offense.
B)An adult can file a tort of deceit against such a minor.
C)An adult can seek compensation for any losses caused by such a minor.
D)A minor's right to disaffirm is valid in such a case.

Question 49

Which of the following is true of necessaries?

A)The liability for necessaries is quasi-contractual.
B)A minor is liable for the necessaries that he/she did not receive.
C)In case of a disaffirmance,the minor need not pay for any necessary.
D)An item is considered a necessary even if the minor already possesses it.

Question 50

Bill is 17 years old.His parents no longer support him.He purchases bread and eggs from a grocer on credit and fails to pay.Does the grocer have a right to payment from Bill for these items?

A)No,because Bill is a minor.
B)No,because these items are "necessaries."
C)Yes,because these items are "necessaries."
D)Yes,because Bill is emancipated.

Question 51

________ is a ground for lack of capacity only when it is so extreme that the person is unable to understand the nature of the business at hand.

A)Infancy
B)Intoxication
C)Misrepresentation
D)Duress

Question 52

Cathy,age 16,buys a 1973 Chevy Camaro from Mark,age 23,for $400.Cathy's indulgent parents,who give her everything she wants,loaned her the money for the car.The reason for Cathy's purchase is that all her friends have cars and she feels left out without one.One week after buying the car,however,Cathy changes her mind and tells Mark that she wants to disaffirm the contract.When Mark comes to pick up the car and give Cathy her money,Cathy changes her mind again,telling Mark,"I'll stick by the deal." However,when Cathy's parents gave her a new car for her 17th birthday,she finally decides to disaffirm once again.Which of the following is correct?

A)Cathy cannot disaffirm because the car is a necessary.
B)Cathy cannot disaffirm because she ratified the contract by saying "I'll stick by the deal."
C)Cathy cannot disaffirm because we have a sale of goods and Article 2 of the Uniform Commercial Code says that 16 is the age of contractual capacity.
D)Cathy can still disaffirm.

Question 53

Marlene,a self-employed 16-year-old whose parents are deceased,buys a dress on credit for $50.After receiving the dress and discovering that its reasonable value is only $25,Marlene tries to disaffirm the deal before paying the $50.In this case:

A)Marlene can disaffirm,and she is bound to pay the full $50.
B)Marlene can disaffirm,but she is only bound to pay $25.
C)Marlene can disaffirm,and she can return the dress without paying for it.
D)Marlene can disaffirm,and she can keep the dress without paying for it.

Question 54

Rebecca,a minor,rented an apartment from Jack for a period of one year when she had no place to stay.She disaffirmed the contract after four months,though she paid rent only for the first two months.Which of the following is true of the case?

A)Jack can recover the unpaid rent for two months.
B)Jack can recover rent for the whole year because he has suffered a loss.
C)Rebecca need not pay any rent because she has disaffirmed the contract.
D)Rebecca is not liable to pay any rent if she can prove that she is a minor.

Question 55

Russell,45,has been suffering from a mental impairment for a long time.He signs a contract to sell his villa for $1 million to Andre.When Russell's wife Katie,who is also his court-appointed guardian,gets to know of the deal,she wants to ends the contract.Which of the following statements is true?

A)Andre cannot claim the villa until he has paid for it.
B)Russell has the right to enter into such a contract.
C)Katie need not worry because the contract is void.
D)The court will give primary preference to Russell's opinion.

Question 56

The law makes individuals suffering from a mental illness lack capacity to enter into contracts because:

A)the mentally impaired tend not to vote in large numbers.
B)those with a mental illness would be at a disadvantage in their ability to protect their own interest in bargaining.
C)an individual cannot be on public assistance and be legally competent to enter into a contract.
D)there is fear that those with a mental illness would manipulate and harm those that they would enter into contracts with.

Question 57

On May 1,1985,Mint,a 16-year-old,purchased a sailboat from Sly Boats.Mint used the boat for six months,at which time he advertised it for sale.Which of the following statements is correct?

A)The sale of the boat to Mint was void,thereby requiring Mint to return the boat and Sly to return the money received.
B)Sly Boats has the power to recover the boat from Mint because he has advertised it for sale.
C)Mint's use of the boat for six months after the sale on May 1 constituted a ratification of that contract.
D)Mint may disaffirm the May 1 contract at any time prior to or within a reasonable time after reaching majority.

Question 58

In general,contracts made by mentally impaired persons:

A)can sometimes be ratified.
B)are unconditionally void.
C)are unconditionally voidable.
D)are voidable only if they involve necessaries.

Question 59

Sarah is 16 years old.She left home at age 15;her parents no longer support her.Sarah entered into a contract with Best Groceries for the purchase of $100 of groceries on credit.The groceries consisted of basic,necessary items.However,their reasonable value is only $80.If Sarah discovers that she has been overcharged and refuses to pay,Best Groceries is entitled to collect:

A)nothing.
B)$80.
C)$100.
D)$90.

Question 60

In January 2002,a court with the necessary subject-matter jurisdiction holds Marvin mentally incompetent and appoints a guardian for him.In November 2002,Marvin escapes his guardian's care and takes off on his own.While eating lunch with Clara,who knows about Marvin's condition,Marvin signs an agreement to sell a valuable property he owns.When he signs the contract,Marvin believes that he is the President of the United States signing an important treaty.The agreement between Marvin and Clara is best described as:

A)void.
B)voidable.
C)unenforceable.
D)perfectly valid,if the price Clara pays for the property is fair.

Question 61

Section 15 of the Restatement (Second)of Contracts provides that a person's contracts are voidable if she is unable to ________ in a reasonable manner in relation to the transaction and the other party has reason to know of her condition.

A)plan
B)speak
C)think
D)act

Question 62

In most states,the mere fact that a minor is ________ does not give him the capacity to contract.

A)living on his own
B)emancipated
C)paying his own expenses.
D)not in contact with his parents.

Question 63

In Rogers v,Household Life Insurance Co. ,the case in the text,why did the court decide that the insurance policy was void instead of voidable?

A)The appointment of a guardian with full powers represents that the ward lacks the capacity to contract as a matter of law.
B)The guardian cannot signup the ward for an insurance policy and make himself the sole beneficiary payable on death.
C)The guardian did not have the power to contract on his father's behalf.
D)Guardians can never signup the ward for an insurance policy.

Question 64

Which of the following would a court not likely consider when determining whether a given item is considered a necessary for a minor?

A)Age
B)Marital status
C)Family history
D)Station in life

Question 65

Sixteen-year-old Brent has lived on his own for two years and is considered emancipated by implied consent.Brent contracts with Dave for the purchase of a new mattress for $150.Dave delivers the mattress and sends Brent a bill in the mail.In the meantime,Brent finds out the reasonable value of the mattress is only $100.Brent feels that Dave took advantage of him and refuses to pay.Dave sues him for $150.Assuming the bed is considered a necessary,what amount,if any,is Dave entitled to?

A)The difference between the reasonable and actual price,$50.
B)The actual price,$150.
C)The reasonable price,$100.
D)Dave is not entitled to any money.

Question 66

Contracts made by severely intoxicated people:

A)are void rather than voidable.
B)can be disaffirmed anytime after he/she has regained his/her mental faculties.
C)cannot be ratified until the person has regained his mental faculties.
D)are always binding,because the law does not want to reward drug or alcohol abuse.

Question 67

When a minor enters into a contract,who can disaffirm the contract?

A)Neither party
B)Either party
C)The minor only
D)A court

Question 68

The test to determine whether a person has the mental capacity to contract is a(n)________ one.

A)objective
B)reasonable person
C)cognitive
D)intellectual

Question 69

When courts decide whether a person had the mental capacity to contract,they determine whether:

A)the person understands his actions on a day-to-day basis.
B)the person had a type of mental defect that would not allow him to appreciate the seriousness of his actions.
C)the person had sufficient mental capacity to understand the nature and effect of the contract.
D)the person has undergone any treatment.

Question 70

What is the term for a person who candidly paid valuable consideration without any notice of another's claim or any defects in the seller's ability to sell?

A)Good faith purchaser
B)Holder in due course
C)Bona fide buyer
D)Value buyer

Question 71

When a minor contracts for necessaries,he or she is liable for the ________ of the necessaries actually received.

A)reasonable value
B)actual value
C)estimated value
D)depreciated value

Question 72

Which of the following occurs when a child under the age of 18 gets married?

A)Disaffirmance
B)Adjudication
C)Ratification
D)Emancipation

Question 73

In the case in the text,Zelnick v.Adams,why did the court decide legal services were not necessary for the minor's "position and condition" under the circumstances?

A)There were other methods of relief for the minor instead of costly legal action.
B)The evidence was clear that the minor did not have a claim against the trust.
C)Any interest the minor had in the trust would not be realized for many years.
D)The minor had parents willing and able to pay legal fees.

Question 74

A person is under ________ if a court has found him/her mentally incompetent after holding a hearing on his/her mental capacity and has appointed someone to make decisions about the ward's person or property.

A)custody
B)guardianship
C)institutionalized care
D)duress

Question 75

If a state allows disaffirmance despite the minor's misrepresentation of age,which of the following would a court likely hold the minor responsible for?

A)Fines for fraud
B)Losses suffered by the adult
C)Punitive damages
D)Nothing

Question 76

Payne entered into a written agreement to sell a parcel of land to Stevens.At the time the agreement was executed,Payne had consumed alcoholic beverages.Payne's ability to understand the nature and terms of the contract was not impaired.Stevens did not believe that Payne was intoxicated.The contract is:

A)void as a matter of law.
B)legally binding on both parties.
C)voidable at Payne's option.
D)voidable at Stevens' option.

Question 77

________ refers to the position a person was in before the creation of the contract.

A)Restitution
B)Status quo
C)Estoppel
D)Bargaining position

Question 78

Which of the following is an example of a type of transaction that a minor can disaffirm?

A)Automobile loan
B)Marriage
C)Education loan
D)Life insurance contract

Question 79

In the case in the text,J.T.ex rel Thode v.Monster Mountain,LLC,why did the court deny the defendant's motion for summary judgment?

A)The pre-injury waiver did not contemplate the circumstances of the minor's injuries.
B)The minor did not sign the pre-injury waiver.
C)The pre-injury waiver that was signed by the minor's coach cannot bind the minor because the waiver was in favor of a for-profit entity.
D)The pre-injury waiver was invalid because the minor's coach instead of his parent or legal guardian signed it.

Question 80

Which of the following is true of contracts involving intoxicated parties?

A)The rules are similar to the ones for people with a mental incapacity.
B)Courts are generally sympathetic to people involved in such contracts.
C)A person incapacitated by intoxication can disaffirm at any period of time.
D)In most such cases,people have escaped their contractual obligations.