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K LAW 4 - Capacity and Legality
Transcript of K LAW 4 - Capacity and Legality
CAPACITY AND LEGALITY
Contracts contrary to public policy are void.
Unconscionable Contracts or Clauses.
Ks CONTRARY TO PUBLIC POLICY
Contracts in Restraint of Trade
Anti-Competitive Agreements are void.
Exception: Covenant not to Compete with the Sale of Business.
Possible Exception: Covenant not to Compete in Employment.
A contract to do something prohibited by federal or state statutory law is illegal and void.
CORPORATIONS TREATED AS AN ARTIFICIAL PERSON WITH CAPACITY TO ENTER INTO CONTRACTS LIMITED ONLY BY –
The law in the state where incorporated
Their Articles of Incorporation and other founding documents
CAPACITY OF CORPORATIONS
Court previously adjudged person mentally incompetent and a guardian has been appointed.
If the person does not know he or she is entering into the contract or lacks the mental capacity to comprehend its nature, purpose, and consequences.
If person is able to understand the nature and effect of entering into a contract yet lacks capacity to engage in other activities.
MENTALLY INCOMPETENT PERSONS
At the time of entering into the contract, the person did not understand the legal consequences of their actions. If so, the K is voidable.
Determination made on objective indications.
If voidable the intoxicated person:
Option to disaffirm, or
Ratify the contract expressly or impliedly
CAPACITY OF INTOXICATED PERSONS
In most states, minor need only return the goods (or other consideration)
In increasing number of states, the minor must restore the adult to the position held before the contract was made.
VOIDABLE - - DISAFFIRMANCE
WHEN CAN A MINOR DISAFFIRM?
WHAT MUST THEY DISAFFRIM?
HOW DO THEY DISAFFIRM?
Valid contract that is legally defective and can be avoided (rescinded) by one of the parties.
No contract exists.
CAPACITY AND MINORS
Contracts for Necessaries.
A minor may disaffirm contracts for food, clothing, and shelter but must pay the reasonable value of goods or services.
LIMITATIONS ON DISAFFIRMANCE
Contracts to Commit a Crime.
CONTRACTS CONTRARY TO STATUTE
Capacity: The legal ability to enter into a contractual relationship
FREEDOM TO CONTRACT
WHO IS A MINOR?
CAN A MINOR CONTRACT?
HOW DOES MINORITY IMPACT THE CONTRACT?