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Certain people lack the legal ability to enter into a binding contract.In order for a contract to be legally binding, all of the individuals who signed the agreement must have "contractual capacity." Contractual capacity is a legal term that refers to the minimum mental capacity required to enter into an agreement. In other words, individuals who lack the capacity to contract are presumed to not know what they're doing, and they can "void," or set aside, the contract. The law recognizes three categories of individuals who lack the capacity to contract: minors, individuals with psychological disabilities, and intoxicated persons. If anyone from these categories enters into a contract, the agreement might be considered "voidable" by them. This protects the party who lacks capacity from being forced to go through with a deal that takes advantage of his or her lack of savvy. Let's look at some situations in which a person might lack the legal capacity to enter into a legally binding contract. Can a Minor Sign a Contract?Minors (those under the age of 18, in most states) lack the capacity to make a contract. So a minor who signs a contract can either honor the deal or void the contract. There are a few exceptions, however. For example, in most states, a minor cannot void a contract for necessities like food, clothing, and lodging. Also, a minor can void a contract for lack of capacity only while still under the age of majority. In most states, if a minor turns 18 and hasn't done anything to void the contract, then the contract can no longer be voided. Disaffirmance by a MinorA minor can "disaffirm," or set aside, a contract by stating their intention to not honor the contract. The minor can state this intention verbally (in words or in writing) or through actions that indicate the minor does not intend to honor the contract. For example, if a child entered into an agreement to mow his neighbor's lawn, and then the child sells his lawnmower, that action indicates his intention to disaffirm the contract. However, the disaffirmation must happen before the minor comes of age, and the minor can't pick and choose which parts of the contract to set aside. Further, if the minor paid provided consideration, such as money to the other party, the other party must give the consideration back to the minor following disaffirmation. Mental Incapacity and ContractsA person who lacks mental capacity can void, or have a guardian void, most contracts (except contracts for necessities). As with contracts with minors, the contract is voidable, and not automatically void. In other words, the person who lacked the capacity to enter the contract can either end the contract or permit it to go ahead as agreed on. In most states, the standard for mental capacity is whether the party understood the meaning and effect of the words comprising the contract or transaction. This is called the "cognitive" test. Some states use what's called the "affective" test: a contract can be voided if one party is unable to act in a reasonable manner and the other party has reason to know of the condition. And some states use a third measure, called the "motivational" test. Courts in these states measure capacity by the person's ability to judge whether or not to enter into the agreement. These tests may produce varying results when applied to mental conditions such as bipolar disorder. Can an Intoxicated Person Sign a Contract?People who are intoxicated by drugs or alcohol are usually not considered to lack the capacity to contract. Courts generally rule that those who are voluntarily intoxicated shouldn't be allowed to avoid their contractual obligations, but should instead have to take responsibility for the results of their self-induced altered state of mind. However, if a party is so far gone as to be unable to understand even the nature and consequences of the agreement, and the other (sober) party takes advantage of the person's condition, then the contract may be voidable by the inebriated party.
Minors and ContractsSource: Written by Margaret Fisher, Institute for Citizen Education in the Law, Seattle, Washington, to complement the student edition of Street Law (8th ed.). The Board for Judicial Administration, Public Trust and Confidence Committee member, Jennifer Garber, updated the lesson in 2019. For more information, contact the Administrative Office of the Courts (AOC), Temple of Justice, 415 12th AVe SW, PO Box 41174, Olympia, WA 98504-1174. For an electronic copy of this lesson, or to view other lesson plans, visit Judges in the Classroom on the Washington Courts Web site at: www.courts.wa.gov/education/. Objectives:
Grade Level: Grades 9-12 Time: One class period (approximately 50 minutes) Materials: One copy of Handout 1 (Can the Minor Cancel this Contract?) for each student Procedures:
Note: This lesson assumes the teacher has already taught the elements of a contract and the difference between void and voidable contracts.
Void means that the contract has no legal effect; it is as if the contract never existed. Voidable means that the contract can be declared invalid if one party chooses to do so. Contracts by minors for items that are not necessities are voidable. This means that minors can disaffirm their contracts provided that the contracts are not for necessities. When minors disaffirm their contracts, the contracts become invalid. Use of this Handout is to test for students' present knowledge of minors and contract law, and to use the debriefing as a way to educate students about the law. **************************************** ***************************************** In Washington State, certain, but not all, contracts of minors (persons under 18) are voidable, meaning that minors can get out of their contracts if they choose to do so. The minors cannot be forced to carry out the promises they made and may cancel or refuse to honor their contracts. Minors who void their contracts must return all money and property received because of the contract that is still within their control at the time they turn 18. Minors should realize, however, that voiding their contracts will result in very poor credit history that can affect their future financial affairs. The rule is designed to protect minors from being taken advantage of because of their age and lack of experience. However, minors will have an impossible time getting credit because of this rule. This is why most stores require a parent or other adult to co-sign any major contract. The adult co-signer is responsible for making payments if the minor doesn't honor his/her promise. The person with whom the minor contracted cannot cancel the contract simply because the other person is a minor. If a minor fails to disaffirm a contract within a reasonable time after reaching age 18, the contract cannot be cancelled. Minors are bound for contracts they make for necessaries, such as food, clothing, medical attention, and housing. (A car is not a necessary.) Minors are also bound for educational loans, provided the lender had written notice of enrollment. Minors married to someone 18 years or older are considered adults. Minors may enter into binding contracts for their child. Minors may not void contracts when they have misrepresented their age to the other party or they have operated a business as an adult and the other party reasonably believed the minor was capable of contracting. Additionally, minors may not enter into contracts with professional baseball teams without approval of the county prosecutor (and parent). Minors may not enter into contracts to bear children on behalf of others. HANDOUT 1Can The Minor Cancel This Contract?Directions: Read the situations that follow and decide whether or not the minor can void the contract (get out of the contract without a penalty). Give your reasons.
Is an exception to the minor's right to Disaffirm a contract?A minor or any other person who has not yet reached the legal age of majority is generally not legally required to carry out the terms of a contract. In most cases, a minor only needs to give the intention that they intend to disaffirm a contract. The other party, however, remains bound by the contract.
What statement is true about the ability of minors to enter into contracts?Minors Have No Capacity to Contract
In most states, minors under the age of 18 lack the capacity to make a contract and may therefore either honor an agreement or void the contract. However, there are a few exceptions to this rule. In most states, a contract for necessities (i.e. food and clothing) may not be voided.
Under which of the following contracts does a minor generally not have the right to Disaffirm quizlet?Minors can disaffirm contracts for necessaries. Minors do not have the right to void contracts for necessaries. Minors can be held liable for the reasonable value of necessaries.
Which of the following is true about a void contract?A “void” contract cannot be performed by either party. The law treats a void contract as if it had never been formed. For example, a contract is considered void if it requires a party to perform an impossible or illegal act.
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