Chapter 14 & 15 Flashcards
Emancipation of a minor
When minority status is terminated by a legal guardian by relinquishing their right to control the child.
Elements of minor disaffirmance
1) A minor must express their intent to disaffirm thorough words or conduct
2) Minor must disaffirm the entire contract, not just parts of it
3) Only minor can disaffirm, adult cannot
4) Minor must return both parties to status quo
How long can a minor disaffirm a contract?
Throughout minority and for a reasonable time after turning 18 (6 months)
General rule regarding minor disaffirmance if they lied about their age
Minors can disaffirm even if they lied about their age, but some states prohibit disaffirmance in the case of fraud by a minor.
Instances where minors cannot disaffirm
1) Marriage and armed services contracts
2) When a minor enters a contract for necessaries, they can disaffirm but remains liable for the reasonable value of the goods already received.
Ratification
The act of accepting or confirming a contract that was previously not enforceable.
When can a minor ratify a contract?
A minor can ratify a contract they entered into as a minor once they turn 18, either expressly or impliedly.
Parent liability in minority contracts
General Rule: Parents are not liable for contracts entered into by their children acting on their own.
Exception: necessaries and when parents co-sign
Test for valid capacity of intoxicated person
1) While intoxicated, did they understand the nature of the transaction?
2) While intoxicated, did they understand the legal consequences of their actions? If no to either, than they lacked capacity.
Court presumptions when considering the capacity of an intoxicated party
1) Courts presume the contract is valid;
2) Court looks for objective indications to determine the lack of capacity.
How long does a party proven to be intoxicated have to disaffirm the contract?
Must disaffirm while still intoxicated or for a reasonable time after becoming sober. Must also return all consideration received.
Contracts formed by a party previously deemed mentally incompetent are:
Automatically void.
A guardian appointed by the court can enter contracts on their behalf.
Ex. Britney Spears dad
A party who has not been deemed mentally incompetent can rescind a contract if they:
1) Did not know they were entering into a contract; or
2) Lacked the mental capacity to understand its nature, purpose, and consequences
*These must be true AT TIME OF ENTERING THE CONTRACT
Contracts formed with a mentally incompetent party are voidable by
Only the mentally incompetent party
Lucid Interval
Mentally incompetent people can enter a contract if they had capacity when they entered it.
Contract for the sale of organs in Texas
Lacks legality, illegal in Texas, so the contract is unenforceable.
Usury
A contract that exceeds the maximum interest rate. In Texas, the max rate is 10%
Usurious contracts are usually not voided, just changed to a 10% rate by the court.
Gambling contracts
Illegal in all states. Even if gambling is permitted.
Contracts with unlicensed parties
1) If the purpose of the license is to protect the public (accountant, lawyer), than the contract is illegal and unenforceable.
2) If the purpose of the license is revenue raising (hunting/fishing), a court may enforce it and fine the unlicensed party.
Contracts in Restraint of Trade
Contract where 2 parties agree not to compete against each other with the sole objective to limit competition. Illegal and void.
Covenant not to Compete - Sale of business or employment requirements
To be enforceable, geographic and time restrictions must be reasonable.
Covenant not to Compete against “common callings” are illegal. In Texas “common calling” includes doctors and lawyers.
2 Types of Unconscionable Contracts
1) Procedural Unconscionability: Party’s lack of understanding deprived him of any meaningful choice.
2) Substantive Unconscionability: When contracts - or portions of contracts - are oppressively harsh.
Components that fall under Procedural Unconscionability
1) Inconspicuous print (small font)
2) Unintelligible language
3) Lack of opportunity to read the contract or ask questions about its meaning
4) Disparity between the parties
5) Adhesion Contracts that unreasonably favor the drafter
Adhesion Contract
Contract that is exclusively written by one party and presented on a “take it or leave it” basis. Those that unreasonably favor the drafter are unconscionable.
