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Contractual Capacity

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Jacob Argenta

on 16 June 2013

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Transcript of Contractual Capacity

Intoxication can arise from:
Using alcohol such as beer or vodka,
Using drugs such as marijuana or cocaine,
or inhaling products such as glue or aerosols.
Courts uses same rationale for determining incapacity:
Can the person understand the consequences of their contractual acts.
Courts typically allow disaffirmance only for those who are so intoxicated they do not know they are contracting.
in a permanent state of alcoholism, that person's contracts are considered void.

The Intoxicated

After the age of majority, the power to disaffirm is immediately cut off if the person ratifies the contract.
Is acting toward the contract as though one intends to be bound by it.


The primary protection granted to those who lack contractual capacity
Means a refusal to be bond by a previous legal commitment
Generally when a Protected Party Disaffirms a contract:
By law the protected party is to receive back whatever they have put into the contract
The other party may or may not get back their consideration.

Protections For Those Who Lack Capacity

When doing Business w/organizations
Important to ensure that the person signing the contract has the scope of authority to bind the organization.

Contractual Capacity

Scope of Authority
Within the range of acts an organization has authorized a party to do.
Capacity to Contract can be created when the employer tells an employee that they are authorized to bind the organization.
Capacity can also be created when the organization leads others to believe that a person has certain authority

Who Has Contractual Capacity In Organizations

Formal Emancipation Vs. Informal Emancipation

Under contract law mental incapacity means that a person lacks the ability to understand the consequences of his or her contractual acts.
Permanently insane = complete lack of capacity
All contracts executed by this person are void.
If a judge rules that person was temporarily insane when a contract was made, then the contract is considered voidable.

The Mentally Incapacitated

Is the serving of the child-parent relationship. It ends the duty of the parent to support a child and the duty of the child to obey the parent.
Minors are bound to contracts if they are emancipated.


Things needed to maintain life
When the protected parties contract for such items they must at least pay a reasonable value for the necessaries even if they disaffirm the actual purchase contract.

Someone under the Age of Majority
Age of Majority = 18 sometimes 19, 21
State of being below the age of majority, ends the
day before the birthday of the age set as the age of majority.


Mentally Incapacitated

Parties who have these rights:

Contractual Capacity
Defined by law as the ability to understand the consequences of a contract.
This definition does not require that a person understand the actual terms of the contract which may be written in technical legal terminology
Nor does it mean that the person have merely the understanding of the terms.
Contractual Capacity
Means only that she or he possess the ability to understand them.
What is Capacity

Section 1

Contractual Capacity of Individuals and Organizations

Formal = court decrees the minor emancipated.
Informal = arises from the conduct of the minor and the parent. Evidence of informal emancipation:
the parent and minor agree that the parent will cease support
the minor marries
the minor moves out of the family home
the minor becomes a member of the armed forces
the minor gives birth
the minor undertakes full-time employment
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