Which of the following is true if a contract is disaffirmed on the basis of intoxication?

Chapter 7:�

Class Comments

�     ��Minors/Infants

Minors have historically been in a protected class and their contracts were �void.�� Under modern contract law, however, their contracts are �voidable� by members of the protected class.� In most states, minors are under 18.

Example:� Nile, a sixteen-year-old, agrees to buy Greg�s car.� In reliance on this agreement, Greg buys a newcar.� However, Nile subsequently tells Greg that he can�t buy the car; Greg has no legal recourse because as a minor, Greg can void the contract.

v                 Minority as a Defense (Shield)

A minor may disaffirm (deny) a contract during minority or within a reasonable time after reaching the age of majority.� Only the minor may disaffirm the contract and the other party cannot then enforce the contract.� Therefore, minority acts as a shield to a breach of contract action.

Restitution/Unjust Enrichment Action:� A party contracting with a minor cannot bring a claim for restitution or unjust enrichment.

Misrepresentation:� A party contracting with a minor could maintain an action for misrepresentation because a minor should not profit from fraudulent acts.

Example:� When Dean was 16, he purchased a car from a local dealer, representing to the dealer that he was 18.� When Alexander was 17, he disaffirmed the contract and discontinued payments.� Although the car dealer could not sue Alexander for breach of contract, they could maintain an action for misrepresentation.

Ratification/Confirmation:� If a minor does not disaffirm a contract within a reasonable time after reaching the age of majority, the court will consider this a ratification (confirmation/acceptance) of the contract provisions.

v                 Minority as Offense (Sword)

A minor who has entered into a contract may take the offensive:� disaffirming the contract (denying it) and arguing for return/restitution of the benefit conferred by the minor on another.� Interestingly, if the minor seeks to be returned to the pre-contract position ( get back what was his/hers), in exchange the minor only has to return what the minor received from the contract and what is still in his/her possession.

Key:� ONLY the minor can disaffirm the contract, not the other contracting party.

Example:� Ben, a sixteen-year-old purchased a pocket bike from Fred�s Electronics.� After driving the bike for 6 months, he decides that he would like to try an electric scooter.� Ben can return the bike on the basis of his minority, but the question remains if he will have to compensate Fred�s for the loss in value of the item to them (a new pocket bike vs. a used pocket bike).� Courts are divided on this issue, but most would require that Ben be liable for some portion of the bike.

v                 Recovery in Contracts with Minors

�         Necessaries

Minors are always liable for necessaries (BASIC food, clothing, and shelter).� Many state statutes require their parents or guardians to pay for such items used/consumed by the minor.

Example:� Is the following a �necessary?�:� Holly, a 17 year old, stayed in the Honeymoon sweet of the Bel Aire Hotel for one week.� The bill was $10,000.� Was this expense necessary?� Most courts would say, quite reasonably, no.� However, if the hotel was a Motel 6 charging $20.00 per night, courts would probably require reimbursement (to encourage such businesses to provide basic necessities for minors in need).

�         Mental Incapacity

Historically, a person who was mental incapacitated could not enter into a contract.� However, modern trends allow the mentally incapacitated to contract, however, the contract is voidable by one who is mentally incapacitated; however, the court may grant relief to the other party �as justice requires.�

Example:� Mindi believes that she is Batwoman; she dresses and talks like Batwomanand refers to herself as the �Batwoman.�� Paul, a used car salesman, sells Mindi a black corvette.� Mindi, who is dressed as Batwoman, that she loves her new �Batmobile� and is excited about its �superpowers.�� Paul figures that Mindi is a little off her rocker but sells her the car.� Mindi later disaffirms the contract on the basis of her mental delusion.� The court would allow her to void the contract.

�         Incapacity Due to Alcohol and/or Other Drugs

Incapacity due to intoxication is based upon the degree of incapacity.� If, from an objective standard, it is clear that the person is intoxicated or under the influence of drugs, they do not have the ability to enter into an enforceable contract.� However, the standard imposed by courts in these situations is strict:� The person who voluntarily intoxicated/influenced himself/herself generally bears the burden of proving:� (1) the degree of intoxication and (2) that the other party knew or had reason to know of the intoxication.

Example� Steven is an alcoholic who is able to consume a significant quantity of alcohol before he displays his intoxication.� After visiting his favorite �watering hole� oneday, Steven purchases a new car from a local dealer.� Steven crashes the car on the way home and wants to void his contract.� At trial, Steven claims that he was intoxicated based upon an objective standard.� However, the dealer testifies that Steven showed no signs of intoxication, that he test drove the car in a safeand reasonable manner, and that he negotiated the purchase price rationally.� It is unlikely that given such testimony, Steven could claim that the dealer knew or should have known of Steven�s intoxication.

Note:� Even if Steven could prove intoxication sufficient to void his contract, he would still be liable for restitution.

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What does it mean to Disaffirm a contract?

Which of the following is true of contracts entered into by minors?

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