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K LAW 4 - Capacity and Legality

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by

Carol Janssen

on 30 October 2018

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Transcript of K LAW 4 - Capacity and Legality

CONTRACTS

CAPACITY AND LEGALITY

Contracts contrary to public policy are void.

Unconscionable Contracts or Clauses.

Exculpatory Clauses.

Discriminatory Contracts.


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.



ILLEGAL CONTRACT


A contract to do something prohibited by federal or state statutory law is illegal and void.


LEGALITY

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
Insolvency


CAPACITY OF CORPORATIONS

Void.
Court previously adjudged person mentally incompetent and a guardian has been appointed.
Voidable.
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.
Valid.
If person is able to understand the nature and effect of entering into a contract yet lacks capacity to engage in other activities.
Lucid Interval.

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

ON DISAFFIRMANCE:
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.


MINOR’S OBLIGATIONS

VOIDABLE - - DISAFFIRMANCE

WHEN CAN A MINOR DISAFFIRM?


WHAT MUST THEY DISAFFRIM?
HOW DO THEY DISAFFIRM?


VOIDABLE CONTRACT
Valid contract that is legally defective and can be avoided (rescinded) by one of the parties.


VOID CONTRACT
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

ILLEGAL CONTRACTS:
Usury.
Gambling.
Sabbath Laws.
Licensing Statutes.
Contracts to Commit a Crime.


CONTRACTS CONTRARY TO STATUTE




Capacity: The legal ability to enter into a contractual relationship




CAPACITY

FREEDOM TO CONTRACT
WHO IS A MINOR?


CAN A MINOR CONTRACT?
HOW DOES MINORITY IMPACT THE CONTRACT?

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