Chapter 10

1. Chapter 10 Law of Capacity

2. What is Capacity? • Having the maturity and experience to protect self interest • The ability to understand that contract is being made & its general meaning • Who lacks capacity? • Minors • Intoxicated • Mentally incapacitated

3. Capacity RightsTwo basic protections granted to those who lack capacity • Necessaries vs. Non- necessaries • Necessaries = needed to maintain life • Non-necessaries = luxuries Read third column – page 143 • Disaffirmance • Returning consideration • Ratification • Acting in order to be bound to a contract

4. Minority Under 18- in most states Emancipation Severing child-parent relationship Both agree Marriage Moving out Military Children Full-time job Mental Incapacity Can the party understand? Intoxication Stricter standard b/c voluntary Protected Parties…

5. Which contracts can be disaffirmed? • Non-Necessaries • Can be disaffirmed if the party lack capacity What’s your Verdict – Page 143 • Necessaries • The right to pay “fair market value”

6. What’s your verdict? Against their parents’ wishes, Garcia and Wesly – both minors – left home. Together they signed a 12-month least to rent a nearby furnished apartment from Krohn at the bargain price of $350 a month. After three months, the teenagers ran out of money and returned to their homes. Krohn could not find new tenants. • Could he hold the minors liable for the rent?

7. Necessity? Or Non-necessity? • Non-necessity – • They did not HAVE to move out of parents house • Krohn could not hold them liable for the rent

8. Capacity in Organizations • Scope of authority • The ability to bind an organization to a contract

9. What’s your verdict Alicia was a wholesaler of flowers. Her friend, Caryn, worked for a grocery store as a checker. One day Alicia stopped by during Caryn’s break and asked if she could sell her flowers through that store. Caryn said yes and signed a contract to purchase 10 dozen roses for the store. When Alicia tried to deliver the roses, they were refused by the store and Alicia sued. • Is the store bound by Caryn’s contract? • No – Caryn was a cashier and did not have the “authority” to make this decision

10. What’s your Verdict? • While still a minor, Beach bought a stereo system on credit from McReam’s Electronic Cloud for $500. Beach paid $100 down and promised to pay $50 a month on the unpaid balance until the debt was paid. After making four payments, two of which were made after he reached the age of majority, Beach decided to disaffirm the contract and return the equipment. • Can Beach do this? • Next

11. Time of Disaffirmance & Ratification • Persons lacking contractual capacity can disaffirm a contract for non-necessaries • Any time while still under the incapacity • Within a reasonable time after attaining capacity

12. Time of Disaffirmance & Ratification • Ratification • Minor must ratify after reaching majority & may consist of… • Promise to perform • Act’s clearly indicating agreement • Back to Beach

13. Answer to What’s My Verdict….. • Beach ratified the contract by making payments after reaching majority…. • Sorry Beach…you cut off your power to disaffirm

14. Return of goods or services • In ALL states, when a minor disaffirms, anything of value the minor received must be returned • The minor is entitled to then get back everything that was given to other party

15. Return of goods or services • Loss of value • Most states… • If minor is unable to return exactly what was received under contract • They can still get back everything they gave • Includes returning damaged goods • Includes returning nothing because goods were lost or stolen • Some states… • A minor must return everything in same condition • If not minor must pay difference in value

16. What’s Your Verdict? • Lamon, a minor, bought a diamond ring and necklace for his fiancée, Morgan. He paid for the items in weekly installments of $10. On the day Lamon achieved majority, he and Morgan quarreled. Morgan returned the ring to Lamon but refused to part with the necklace. • Can Lamon return the ring to the jeweler and receive a refund for the ring and necklace?

17. Answer • Morgan was entitled to keep the necklace • It was a gift • Lamon could return the ring and demand a refund for both pieces • He is entitled to the money for the ring • In most states, he is even entitled to what he paid for the necklace

18. DEPENDS ON STATE Court approved Child actors Sports Major commitments Joining armed forces Educational loans Banking withdrawals Insurance Work related Reality sales Apartment rental Contracts that can’t be disaffirmed

19. Misrepresentation of age • Can usually disaffirm • But • May be held liable for tort of…? False representation

20. Enrichment Activity – Law of Capacity Cases involving minors have often made the news in recent years. Research Internet articles to investigate a case involving levels of mental capacity, emancipation, and /or intoxication. Research and gather information about the case. Did the minor go to jail? Was there a trial? Were they tried as an adult? Information should also include overview of the case, minor’s demographics, injury, trial details (if one took place), and verdict. Create a professional PowerPoint including this information. Your PowerPoint should only include approximately 6 -8 lines of information per slide. Use appropriate graphics and class vocabulary. Animate slide show professionally. Minimum of 5 slides

21. Wrap the chapter/unit • Analyze Real Cases • p.152 26-29 • Complete the Cases for Legal Thinking • P. 113, 127,141, 153