Exam 14: Contractual Capacity

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

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

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

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.

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.

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

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

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.

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

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

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

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.

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?