Chapter 12 Flashcards
(28 cards)
People who lack capacity
Minors
Insane persons
Intoxicated persons
Infancy doctrine
Doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults
Disaffirmance
The act of a minor to rescind a contract under the infancy doctrine
Duty of restoration
A minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance
Duty of restitution
If a minor has transferred money, property, or other valuables to the competent party before disaffirming the contract, that party must place the minor in status quo
Ratification
The act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor
Parents’ liability for child contracts
Parents owe a legal duty to provide food, clothing, shelter, and other necessaries of life for their minor children
Emancipation
Act or process of a minor voluntarily leaving home and living apart from his or her parents
Necessaries of life
Food, clothing, shelter, medical care, and other items considered necessary to the maintenance of life
Mentally incompetent persons
Law protects people suffering from substantial mental incapacity from enforcement of contracts
Adjudged insane
Declared legally insane by a proper court or administrative agency
- contract entered into w adjudged insane is void
Insane but not adjudged insane
Being insane but not having been adjudged insane by a court or an administrative agency
- A contract entered into by such person is generally voidable
-Insane persons are liable in quasi contract to pay reasonable value
Intoxicated persons
A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence
- General rule Contract is voidable only if the person was so intoxicated when the contract was entered into that he or she was incapable of understanding or comprehending the nature of the transaction
Contracts Contrary to Law
Both federal and state legislatures have enacted statutes that prohibit certain types of conduct
Contracts to perform activities that are prohibited by statute are illegal contracts
Usury Laws
Law that sets an upper limit on the interest rate that can be charged on certain types of loans
Lenders who charge a higher rate than the state limit are guilty of usury
- intended to help unsophisticated people with loan sharks
Contracts in Restraint of Trade
Contracts like agreements to collude and reduce competition in markets
Gambling Statutes
All states prohibit or regulate gambling, wagering, lotteries, and games of chance States provide various criminal and civil penalties for illegal gambling
Indiana Gaming Regulatory Act (IGRA)
This law establishes a framework for permitting and regulating Native American gambling casinos.
Effect of illegality
Doctrine that states that the courts will refuse to enforce or rescind an illegal contract and will leave the parties where it finds them
In pari delicto
A situation in which both parties are equally at fault in an illegal contract
Exculpatory agreements
A contractual provision that relieves one (or both) of the parties to a contract from tort liability for ordinary negligence
Confidentiality Agreements
An agreement whereby individuals who are privy to a company’s secret or proprietary information agree not to disclose such information to any other party
Non-Solicitation Agreements
An agreement in which employees agree that they will not solicit the clients or customers of the employer for their own benefit or benefit of another company
Covenants Not to Compete
An agreement that a seller of a business or an employee will not engage in a similar business or occupation within a specified geographical area for a specified time following the sale of the business or termination of employment.
