Chapter 10 Capacity And Legality The Final Elements

BUL4310: Legal EnvironmentChapter 10: Capacity and Legality: The Final ElementsThe Final ElementsIllegal agreement One that violates criminal law or tort law, a statute, and/or publicCapacity- The legal ability to enter a valid contractThe Nature of Capacity and MinorityWhen a minor indicates by a statement or act an intent not to live up to a contract, thatminor is entitled to return of everything given to the other party.Definition of MinorityMinority- A term that described who had not yet reached the ageMost states lowered the age of majority to 18 yearsSome states also tie the age of majority to high school graduationEmancipation and AbandonmentIn some jurisdictions, minors who become emancipated, that is, no longer under thecontrol of their parents, are responsible for their contractsThis responsibility means that they cannot void a contract, despite their apparent minorityIn certain states, minors are allowed to ask the court for a legally sanctionedemancipationEmancipated minors are said to have abandoned the usual protective shield givento themMisrepresentation of AgeMinors sometimes lie about their age when making a contractDespite this misrepresentation of age, most states will allow the minor to disaffirm or getout of the contractContractual Capacity of MinorsExecutory contracts, those that have not been fully performed by both parties, may berepudiated by a minor at any timeA promise to deliver goods or render services at some future time need not be carried outby the minor who decides not to do soContracts for NecessariesNecessaries- Those goods and services that are essential to a minor's healthIf a minor makes a contract for necessaries, he or she will be liable for the fair value ofthose necessariesOther Contracts Not VoidableMinors may not: BUL4310: Legal EnvironmentChapter 10: Capacity and Legality: The Final ElementsDisaffirm a valid marriageRepudiate an enlistment contract in the armed forces based on a claim ofincapacity to contractRepudiate payments for inoculations and vaccinations required for attendance at auniversity or college or required in securing a visa for travel in certain foreignlandsTerminate contracts with banks and other financial institutions for educationalloansShield or Sword DoctrineThe right to rescind contracts is given to minors as a protective device or "shield" againstthose unscrupulous adults who might try to take unfair advantage of the immaturity andinexperience of minorsAn unprincipled minor can take this safeguard, which is meant as a protective shield, andtransform it into a sword that violates the rights of the other partyThe courts can deny rescission rights to minors when they use it a weapon againstanother contracting partyVoidable Contracts and Innocent Third PartiesProvisions of the UCC protect the rights of an innocent third party who purchases goodsfrom an individual who originally purchased those same goods from a minorRatification and DisaffirmanceRatification-The willingness to abide by contractual obligations, also called affirmanceDisaffirmanceMay be implied by the acts of an individual after achieving majority, such as byfailure to make an installment paymentMay be by an oral or written declarationOther Capacity ProblemsPersons mentally impairedPersons legally insanePersons drugged or intoxicatedAgreements to Engage in Unlawful ActivityThe court will leave the parties to an illegal agreement where they placed themselvesIf an illegal agreement is still executory, the court will not order it performed or awarddamages for breach of contractIf the illegal agreement has been executed . the court will not award damages or assist inhaving it annulledAgreements to Commit Torts and Crimes BUL4310: Legal EnvironmentChapter 10: Capacity and Legality: The Final ElementsThe law will not uphold any contract that obligates one of the parties to commit a tortThe law cannot lend its approval to a contract that breaks the law. no matter howcomplete it is in relation to the elements of a valid contractAgreements Illegal under Statutory LawThese activities include usurious agreements, wagering agreements, unlicensedagreements, unconscionable agreements, and Sunday (Sabbath) agreementsUsurious AgreementsUsury The illegal practice of charging more than the amount of interest allowed by lawSpecial statutes, however, allow small loan companies, pawn shops, and other lendingagencies that accept high-risk applicants for credit to charge a higher rate of interestWagering AgreementsAny agreement or promise concerning a wager or some other form of gambling is invalidand may not be enforcedUnlicensed AgreementsCertain businesses and professions must be licensed before they are allowed to operatelegallyOne reason for requiring a license is to provide a source of revenue, part of which is usedto supervise the business or profession being licensedUnconscionable AgreementsA court will not enforce a contract or any part of a contract that it regards asunconscionableAn agreement is considered unconscionable if its terms are so grossly unfair that theyshock the courts conscienceSunday AgreementsState statutes and local ordinances that regulate the making and performing of contractson SundayUsually called blue lawsTwo rules usually observed:Agreements made on Sunday or any other day requiring performance on Sundaymay be ruled invalidAgreements made on Sunday for work to be done or goods to be delivered on abusiness day are valid and enforceableAgreements Contrary to Public Policy BUL4310: Legal EnvironmentChapter 10: Capacity and Legality: The Final ElementsPublic policy- The general legal principle that says no one should be allowed to do anything thatinjures the public at largeAgreements to Obstruct JusticeAgreements to protect someone from arrest, to suppress evidence, to encourage lawsuits,to give false testimony, and to bribe a jurorAgreements Interfering with Public ServiceThese agreements are illegal and voidContracts in this group include agreements to bribe or interfere with public officials, toobtain political preference in appointments to office, to pay an officer for signing apardon, or to illegally influence a legislature for personal gainAgreements to Defraud CreditorsAgreements that tend to remove or weaken the rights of creditorsSuch agreements are void as contrary to public policyAgreements to Escape LiabilityExculpatory agreement- One of the parties, generally the one who wrote the contract, will notbe liable for any economic loss of physical injury even if that party caused the loss or injurySale of BusinessWhen a business is sold, it is common practice for the agreement to contain covenantsthat restrict the seller from entering the same type of businessSuch restrictive covenants in a contract for the sale of a business will be upheld by thecourt if they are reasonable in time and geographical areaRestrictive Employment CovenantsA restrictive employment covenant is an employment contract that limits a worker'semployment options after leaving his or her present jobAlso called a noncomplete agreementThe court must make sure that the limits of a noncomplete:Are not overly broad, but just enough to protect her employerAre not so strict that they impose an undue hardship on the employeeDo not, in any way, cause injury to the public welfareNondisclosure AgreementsRequire employees to promise that, should they leave their present place of employment,they will not reveal any confidential trade secrets that they might learn while on theircurrent job BUL4310: Legal EnvironmentChapter 10: Capacity and Legality: The Final ElementsConsequences of IllegalityIn Pari delicto, contracts- When both parties to an illegal agreement are equally wrong in theknowledge of the operation and effect of their contractPartial Illegality in an AgreementIf the legal part of a contract can be removed from the illegal part, without changing theessential nature of the contract, then the agreement is said to be divisible