Chapter 11 Competent Parties

CHAPTER 11 COMPETENT PARTIES 11.1 THE CAPACITY TO CONTRACT Parties to a contract must be competent in both age and mentality. ● A competent party is a person of legal age and at least normal mentality who is considered by law to be capable of understanding the meaning of a contract. ● A competent party is said to have contractual capacity— the ability to make a valid contract. ● A person who has not yet reached the age of majority is considered a minor, or an infant, in the eyes of the law. ● Minors and persons who are mentally ill or mentally challenged are usually considered incompetent and lacking in contractual capacity. As a result, they cannot make legally binding contracts, although they are not denied the opportunity to benefit from their legal rights. 11.2 MINORS’ CONTRACTS Until individuals reach what is known as legal age, or the age of majority, they are not legally required to carry out most of their contracts (such contracts are voidable) The legal age of majority varies from state to state. In many states it is 18, while in others it is 19 or 21. ● According to the interesting coming of age rule in common law, a person’s legal birthday is 12:01 a.m. of the day before his or her actual birthday. Thus, a person who celebrates his or her 18th birthday on April 26, for example, in a state where the age of majority is 18, would become an adult—and legally competent—at 12:01 a.m. on April 25. ● However, under the modern birthday rule, a person attains a given age on the anniversary date of his or her birth. ● Someone can reach legal age when they are emancipated - emancipation AVOIDANCE OF MINORS’ CONTRACTS In contracts between a minor and a competent person, only the minor has the privilege of disaffirmance, or avoidance of the contract; the competent party is bound. A minor may not disaffirm a contract for the sale or purchase of real estate. EXAMPLE 11.1 Blevins, a 45-year-old automobile dealer, agreed to sell Alvarez, a minor, a used car for $1,800. Before the car was delivered, Blevins received a higher offer from another person and attempted to cancel the contract with Alvarez on the grounds that the buyer was a minor. The law permits Alvarez to cancel, or disaffirm, the contract but not Blevins, who is considered a competent party. RATIFICATION OF MINORS’ CONTRACTS Whether the contract has not yet been performed (an executory contract) or has been fully performed (an executed contract), the minor may disaffirm the contract if he or she wishes. ● However, once the minor reaches the legal age of majority, the contract must be either ratified (i.e., agreed to) or disaffirmed within a reasonable time. ● if a reasonable period passes after a minor reaches legal age and he or she has said nothing about disaffirming the contract, it is considered ratified in the eyes of the law. ● When a contract is ratified, the entire contract must be ratified, not merely a part of it. DISAFFIRMANCE OF MINORS’ CONTRACTS An individual may disaffirm a contract—that is, state his or her intention either orally or in writing not to honor a contract that had been made before reaching legal age. ● Disaffirmance may be done before reaching the legal age or within a reasonable time after reaching adulthood. a sample letter of disaffirmance. In some states the minor may avoid the contract even if he or she falsely represented himself or herself as being of age. The minor may then be subject to criminal prosecution on the charge of fraud as well as civil liability (damages) for the tort of deceit. MINORS’ ENFORCEABLE CONTRACTS The law that protects minors from their contractual commitments is not intended to deny them the opportunity to enter into contracts for necessaries that are not provided by their parents, or a guardian. ● As a result of a minor’s emancipation, he or she assumes many of the rights and obligations of a person of legal age. Emancipation could result from marriage or from voluntary separation of a minor from his or her parents or guardians in order to assume adult responsibilities, such as financial independence. ● The law regards actions on the part of the minor that result in emancipation as abandonment— a surrender of the special protection given to minors by the law. 11.3 LIABILITY FOR MINORS’ TORTS AND CRIMES : minors are liable for their torts and crimes The law does not protect anyone, even a minor, who has committed a tort or a crime. Minors are protected against their own inexperience but not against their own wrongdoing. ● If a minor injures another person or damages another person’s property, he or she may be liable for such injuries or damages and may be prosecuted by the state in a criminal action. ● A minor also can be held liable if he or she makes damaging statements in writing (the tort of libel) or orally (the tort of slander). 11.4 CONTRACTS OF THE MENTALLY INCOMPETENT Persons of unsound mind are considered incompetent to make binding contracts because they are assumed to lack the mental capacity to safeguard their own affairs. Consequently, most of their contracts are considered voidable and cannot be enforced against them if they do not carry them out. ● A person who is mentally ill may sometimes have lucid periods during which he or she can exercise sound judgment. If the person entered into a contract during a lucid interval and the other party can prove it, such person will be held to the contract. ● A contract with a person who has been declared mentally incompetent by the courts is void even if the party who contracted with the incompetent individual did not know this fact. ● Any contracts the incompetent person makes thereafter, including contracts that have been made during lucid periods, are considered void, not simply voidable. CONTRACTS OF PERSONS AFFECTED BY DRUGS OR ALCOHOL If a person makes a contract while so intoxicated by alcohol or affected by drug use that he or she is unable to understand the nature and effect of the contract, it is voidable at his or her option. However, if the party, when no longer impaired, and within a reasonable time, chooses to carry out the contract, it has been ratified. If the contract is for necessaries, he or she must pay their reasonable value. If a contract does not involve necessaries, the person who wishes to disaffirm it on the grounds that he or she was intoxicated or affected by drugs when the contract was made must either return the other party’s consideration or prove that he or she lost possession of it while still impaired. Obviously, if the person disposed of the other party’s consideration after returning to normal, the law would not permit disaffirmance of the contract because the contract had been ratified by the intoxicated person after regaining the power to contract.