Deck 14: Contractual Capacity

Question 1

Mel is 17 years old but looks older than 18. He makes a contract to buy a car from Maisie, who is the age of majority. When Maisie finds out Mel's age, she may avoid the contract even if Mel did not misrepresent his age.

Answer 1

False

Question 2

Seventeen-year-old Teresa wants to disaffirm her student loan agreements. In most states, she will not be allowed to do so.

Answer 2

True

Question 3

To avoid a contract, an intoxicated person must have been so intoxicated as to be unable to understand the consequences of his actions or unable to act in a reasonable manner.

Answer 3

True

Question 4

By the majority view, a minor need only return any property he has received from the other party if the minor wishes to disaffirm the contract. He has no duty to return the property in the same condition in which he received it.

Question 5

All states agree that a minor who has fraudulently misrepresented her age when entering into a contract has no power to disaffirm the contract.

Question 6

The contracts of a person who is adjudicated insane and placed in care of a guardian are void.

Question 7

If a person with a mental condition that impairs her ability to act in a reasonable manner enters a contract that is grossly unfair, the contract is voidable.

Question 8

In general, if a minor lies about her age in order to induce the seller to contract with her, she cannot disaffirm that contract.

Question 9

In a contract to sell necessaries to a minor, these goods and services are limited to medical care, food, and shelter.

Question 10

Carlie contracted to purchase an entertainment center while she was 16. She can ratify the contract the following year.

Question 11

At common law, a minor was a person who was under the age of twenty-one years.

Question 12

Natalie, age 17, rented a power washer and while using the machine, she negligently damaged it beyond repair. Under the majority view, the rental company can successfully sue Natalie for damages on a tort theory of negligence since it is well settled that minors are liable for their torts.

Question 13

If Carrie, age 14, contracted to buy a fur coat by mail, the coat manufacturer would not have to send it since the contract was void.

Question 14

Sally goes away to college at 17, lives on her own, and pays her own rent and electric bills. If she makes a contract to buy a television set, in most jurisdictions, she may assert her minority status and set aside the contract.

Question 15

The doctrine of necessaries applies in the same way to minors and mental incompetents.

Question 16

Jessica at the age of 15 entered into a contract to sell five acres of land to her uncle. She may disaffirm this contract at any time before reaching her majority.

Question 17

Contractual incapacity excuses a minor from an obligation to pay for necessaries.

Question 18

Contracts of a ward may be ratified by his guardian during the period of guardianship.

Question 19

Ratification makes a contract void from the beginning .

Question 20

In most states, determining what is a reasonable time for disaffirmance depends on circumstances rather than a statutorily prescribed time period.

Question 21

Ratification of a contract, once effected, is final and cannot be withdrawn.

Question 22

In some states, minors are liable for contracts involving bank accounts and student loans and cannot avoid these contracts even though they can avoid other types of contracts.

Question 23

If a person is unable to understand the nature and effect of entering into a contract, he or she can avoid it.

Question 24

If a minor sells property that the buyer then resells to a good faith purchaser for value and the minor then disaffirms the sales contract, under both the traditional view and the UCC, the minor can recover the property from the good faith purchaser for value since the minor has the power of avoidance and both purchasers had only voidable title.

Question 25

Michael is 17 years old and earns extra money by repairing cars. Nathan, who is 21, brings his car to Michael for repairs, and Michael ruins the brake system of the car because of his inexperience. If Nathan sues Michael for negligence in performing the auto repair contract, in most states Michael will have no liability, because the tort of negligence and the auto repair contract are connected.

Question 26

A disaffirmance must come either during a minor's minority or within a reasonable time after he reaches majority.

Question 27

The minority of states require that the minor, when effecting a disaffirmance of the contract, pay at least a reasonable amount for the use of the property or the amount by which the property depreciated while in the hands of a minor.

Question 28

Joe is mentally impaired from the effects of a prescribed medication. If he makes a contract while under this impairment, the contract would be voidable if he cannot comprehend the subject of the contract, its nature, and its probable consequences, even if the other party does not know or have reason to know of his mental condition.

Question 29

Intoxicated persons are liable in quasi-contract for necessaries purchased during their incapacity.

Question 30

An automobile will never be considered be a necessary item for a minor.

Question 31

A minor can ratify part of a contract and disaffirm another part of it.

Question 32

Ratification does need to be express; it may be implied from the minor's conduct.

Question 33

Courts treat contracts of incompetents and intoxicated persons essentially the same, except they are stricter with intoxicated persons because of its voluntary nature.

Question 34

In the Keser v. Chagnon case, the Colorado court found that disaffirmance two months after reaching majority was within a reasonable time and that, since Chagnon had obtained the contract by false representation of his age, he could not recover his full consideration upon disaffirmance.

Question 35

A binding promise or agreement requires that the parties to the agreement have contractual capacity.

Question 36

A mental condition that impairs a person's ability to act in a reasonable manner is one type of mental incompetence.

Question 37

If Marie, a minor, disaffirms the purchase of her new car that she has recently wrecked, in most jurisdictions she need only return the damaged vehicle to validly disaffirm the contract.

Question 38

Emancipated minors have no ability to avoid contracts based upon their minority.

Question 39

Disaffirmance must be express; it may not be implied.

Question 40

Sixteen-year-old Todd's parents provide adequate food, lodging, and clothing for him, but he sees a sweater he wants and purchases it. In all states, the sweater is considered a necessary since it is an item of clothing.

Question 41

Robert Briscoe is 17 years old. He lies to Bouyers Auto about his age in order to induce them to sell him a new pickup truck. Bouyers falls for this lie and sells him the pickup. Under the prevailing view, Robert:

A) may disaffirm and get his money back.
B) may not disaffirm since he lied.
C) may only receive a portion of his money.
D) will receive his money less depreciation.

Question 42

Under the Uniform Commercial Code, when the minor has sold goods and the buyer has resold them to a good faith purchaser for value:

A) the minor can disaffirm and recover the property.
B) both the purchaser from the minor and the good faith purchaser for value acquire legal title.
C) the good faith purchaser for value acquires legal title.
D) the good faith purchaser for value receives a voidable title.

Question 43

In which of the following situations would a minor be unable to disaffirm a contract which he had made?

A) Upon restoring the consideration received in a situation involving a fully executed contract.
B) Where real property is involved, upon reaching the age of majority.
C) During the time of his minority or for a reasonable time thereafter.
D) Where the minor wishes to perform part of a contract and disaffirm another part of the same contract.

Question 44

Which of the following is untrue regarding the contracts of intoxicated persons?

A) If an intoxicated person is unable to understand the nature and consequences of his act, then the contract is voidable.
B) The effect of intoxication is generally the same as that given to contracts that are voidable because of incompetency.
C) Slight intoxication will destroy one's contractual capacity.
D) To make a contract voidable, a person need not be so drunk that he is totally without reason or understanding.

Question 45

Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive, and she now wishes to cancel the order. Cheryl:

A) must pay $500 for the dress because the dress was specially ordered for her.
B) must pay $500 for the dress because clothing is classified as a necessary.
C) may disaffirm this executory contract because, while clothing in general is classified as a necessary, a new prom formal would probably not be classified as a necessary.
D) must accept the dress and pay the reasonable value of the dress.

Question 46

Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Randy may:

A) recover the vehicle from Mr. Smith.
B) not recover the vehicle from Mr. Smith.
C) hold Steve liable in tort.
D) recover the reasonable value of the vehicle but not the vehicle itself.

Question 47

Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?

A) Violet may not disaffirm the contract.
B) Violet may disaffirm the contract at any time.
C) Violet may disaffirm the contract when Tim becomes an adult.
D) Tim may ratify the contract at any time during his minority.

Question 48

At age 17, Wanda purchased an expensive sound system from Lectronic City. If Wanda wishes to ratify this contract, Wanda:

A) must reach the age of majority and ratify the contract as a whole.
B) may do so by express notification at any time before reaching the age of majority.
C) may at any time keep the sound system but avoid any remaining debt owed on it.
D) may do so at any time by express or implied action before or after reaching the age of majority.

Question 49

Which of the following is untrue regarding the contracts of incompetent persons?

A) An incompetent person is liable for necessaries.
B) Unlike a minor, an incompetent person can never ratify a contract.
C) To avoid a contract, a person need not be permanently incompetent.
D) Under the cognitive ability test, a person is incompetent if he is unable to understand the nature and effect of his act.

Question 50

Joanne, a minor, sold her laptop computer to Bruce, an adult. Bruce then sold the laptop to Anna, also an adult, who had no knowledge of the fact that the original owner was a minor. Under the Uniform Commercial Code, Joanne may:

A) avoid her contract with Bruce and recover her laptop.
B) not avoid her contract with Bruce and may not recover her laptop.
C) register with the UCC filing department and require that if Anna sells the laptop she must give Joanne the rights of first refusal.
D) None of these.

Question 51

The exercise of the power to avoid a contract is known as:

A) ratification.
B) disaffirmance.
C) ab initio.
D) restitution.

Question 52

Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdictions, Steve:

A) would be out of luck.
B) must have the truck repaired.
C) will receive his money less the depreciation in value of the vehicle.
D) may simply return the vehicle and get his money.

Question 53

Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, is twice the reasonable value of that mobile home. Several months later, Percy wants to disaffirm the contract. If the mobile home is considered a necessary item:

A) Percy can disaffirm the contract based on the wrongful act of the dealer.
B) Percy can disaffirm the contract because the minor can live in an apartment rather than a mobile home.
C) Percy is only liable for the reasonable value of the mobile home.
D) Percy must keep the mobile home and abide by the original terms of the contract.

Question 54

Fourteen-year-old Marsha bought $120 worth of video games at a local store, using her own money. Her parents insisted that she return the items and get her money back. Which of the following is true?

A) If there is a conflict, the store's return policy will override Marsha's right of disaffirmation.
B) In most jurisdictions, Marsha may get her money back only if she has not opened or damaged the merchandise in any way.
C) In a majority of jurisdictions, Marsha may get her money back even if she cannot return the merchandise.
D) In most jurisdictions, Marsha may get some of her money back but she must pay the reasonable value of the goods if that differs from the contract price.

Question 55

Ratification can occur in which of the following ways?

A) Through express language.
B) As implied from conduct.
C) Through failure to make a timely disaffirmance.
D) All of these.

Question 56

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. This contract is:

A) valid.
B) voidable.
C) void.
D) unenforceable.

Question 57

Donald, a minor, makes a contract with Albert, an adult, to buy a motorcycle. One week later, Donald has his eighteenth birthday and shortly thereafter tells Albert he will pick up the motorcycle next week. In this case:

A) Donald has expressly ratified the contract.
B) the contract must be renegotiated, because Donald was a minor when it was made.
C) Donald can change his mind and avoid the contract, because it was made when he was a minor.
D) the contract is void ab initio , because Donald was a minor at the time it was made.

Question 58

Melody, age 17, makes a contract with Seung, who is an adult. Melody:

A) may exercise the power of avoidance, called disaffirmance, while still a minor, and thereby be released from any liability on the contract.
B) may ratify the contract while still a minor, thereby surrendering the power of avoidance.
C) has entered a void contract since she lacked capacity.
D) may disaffirm only after reaching the age of majority.

Question 59

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold the skis to Sharon and disaffirmed the contract. Fay is:

A) still liable since she had to disaffirm before her 18th birthday.
B) still liable because selling the skis amounted to a ratification.
C) still liable because she used the skis.
D) not liable because skis are not necessaries.

Question 60

Which of the following is least likely to be classified as a necessary item for which a minor will be held liable on a contract?

A) A camera.
B) School supplies.
C) Clothing.
D) An automobile.

Question 61

While she was 17, Trina purchases a laptop computer. Discuss the implications of her actions as to whether she can disaffirm the contract of purchase if she: (a) tries to sell the computer one year later; (b) continues to use the computer for eighteen months; or (c) has not yet made all of the payments when she turns 18, but continues to make monthly payments.

Question 62

Harold, a minor, decided to trade his 1992 truck on a new car at the local dealership. One week after driving the new car, Harold decides that he cannot afford the payments. Harold now wishes to disaffirm his purchase and get his old truck back. The dealer informs Harold that the truck has been sold. Can Harold get the old truck back and disaffirm his contract with the dealer? Explain.

Question 63

In the First State Bank of Sinai v. Hyland case, the Supreme Court of South Dakota held:

A) Mervin's obligation on a promissory note was void due to his alcohol-related incapacity.
B) Mervin ratified his voidable contract by conduct, making it a fully valid legal obligation.
C) the alcohol intoxication of a party to a contract does not affect the contract's enforceability.
D) Mervin could only use express language to ratify a contract formed while he was incapacitated by alcohol use.

Question 64

Discuss the concept of ratification and the ways in which a minor may ratify a contract. Give an example.

Question 65

What are the ways in which a minor may disaffirm a contract? What is the effect of a minor's misrepresenting age in order to enter into a contract? Explain.

Question 66

The case of In re The Score Board, Inc. involved the issue of:

A) a minor's liability for misrepresentation of age.
B) whether an incompetent person's contracts are void or voidable.
C) ratification of a contract upon attaining majority.
D) liability for necessaries.

Question 67

When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party enters into a contract with the minor:

A) the minor has lost his right to disaffirm the contract because of the misrepresentation if the adult party in good faith reasonably relied on the misrepresentation.
B) the adult party can recover damages from the minor in tort.
C) the minor is required to restore the other party to the position occupied before the making of the contract.
D) There is no uniform rule. States differ, and depending upon the state, any of the above could be correct.

Question 68

In Berg v. Traylor , the court found that:

A) a minor may not disaffirm an agreement signed by a parent.
B) the disaffirmance of an agreement by a minor does not operate to terminate the contractual obligations of the parent who signed the agreement.
C) Craig could not disaffirm the contract to secure personal management services because it was a contract to provide his and his family's necessaries.
D) Craig, an infant, could not disaffirm in this case because it would cause undue hardship on the other party.

Question 69

Compare the liability of an intoxicated person to that of a person who is mentally ill. How are their situations similar? How are they different with regard to contractual capacity?

Question 70

Cheryl is a 17-year-old high school student who was elected homecoming queen and does part-time modeling to earn money for college. She has an important interview with a modeling agency and wants to make a good impression, so she withdraws $5,000 from her savings and buys a designer outfit and a fur coat for the interview. A week later, she returns the coat to the department store and says she would like her money back. The store is reluctant to take the items. What are Cheryl's rights? Explain.

Question 71

What are the two tests for mental competency?

Question 72

What is the doctrine of liability for a tort connected with a contract?

Question 73

Discuss a minor's duty to a seller upon disaffirmance of a contract for the sale of goods.

Question 74

Discuss the effect of a court's declaring someone incompetent and appointing a guardian.