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Chapter 10
CAPACITY
Incapacity
• Individuals in certain protected classes are
legally incapable of incurring binding
contractual obligations. Those persons may
assert the defense of incapacity and the
contract is voidable at their option.
Protected Classes
• I. MINORS
• II. Incompetent Persons
• III. Intoxicated Persons
Minors
• Age of majority in most states is 18.
Married persons under 18 are considered
adults.
• Infants (minors) lack capacity to enter into a
contract binding themselves. A contract
entered into between an infant and an adult
is voidable (NOT VOID) by the minor but
binding on the adult. Minors, or their
guardians, may disaffirm or repudiate the
obligation.
Ratification
• Minors may ratify a contract only after turning 18, or
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for a reasonable period after turning reaching
majority.
Ratification may be express, or implied from
conduct, i.e., a minor keeps the consideration for
an unreasonable period of time after turning 18; a
minor continues to use the property or accepts
benefits from the deal)
Selling the property to a third person constitutes
ratification.
Ratification is final and can’t be withdrawn.
Ratification must be of the “whole” contract - all
or nothing.
Minor’s Right to Disaffirm
• If contract is still executory, and no one has performed,
minor can always disaffirm.
• If executed contract, minor may still disaffirm but minor
is obligated to return the consideration/property.
• If executed contract but the property is wrecked, or used,
the minor’s rights vary by State:
– Minor may disaffirm contract and return the wrecked or
used property in exchange for all value paid. If the
consideration is used up, lost or destroyed, minor does
not have to pay the other party.
– Minor may disaffirm the contract and return the
wrecked or used property. But, minor has a duty of
restitution and must pay for the reasonable use or
depreciation of the property. Minor must return the
seller to approximately the same position as if the sale
had never occurred.
Minor’s Duty to Third Parties
• Once a minor sells goods to an adult, the adult has
obtained a “voidable” title, rather than a “good” title.
Minors can repudiate and recover possession from the
adult.
• Under old law, if the property was then sold to a “good
faith purchaser for value”, the minor could still avoid the
contract and recover the property.
• UCC has modified this rule with respect to sale of goods, a
person with voidable title has power to transfer valid title
to a GFP.
• Common law rule still applies to sales of real property by
minors. A minor may rescind her deal from the GFP. And,
the adult still remains liable on the deed to GFP
Necessaries
• Minors, intoxicated, incompetents, must
pay for reasonable value of necessaries.
• Food
• Clothing
• Medical services
• Textbooks
• Cameras, stereos, boats, etc. are NOT
necessaries
Minor “Lies” about Age
• Majority Rule - Minor can still disaffirm
• Minority View - Minor may NOT disaffirm
if adult reasonably relied on
misrepresentation. Leave parties alone.
• Other states - Minor must restore other
party to his original position, and allow
defrauded party to recover damages.
Incompetents
• An incompetent is
one whose mental
capacity is such
that (s)he is unable
to understand the
nature an
consequences of
his/her acts.
Incompetents under Guardianship
• If there is a guardian
appointed, a contract
by the incompetent
(person adjudged
insane), is VOID.
• Guardian may ratify
the contract, if so
desired.
• Incompetents, like
minors,liable for fair
value of necessaries.
Mental Illness/Defect
• Contract is voidable if
person is unable to
comprehend the nature
and effect of his acts.
• A person who has a
mental defect and is
able to understand
what he is doing, but
unable to control his
behavior in a
reasonable manner,
may repudiate if other
party didn’t know
about condition.
Intoxication/Prescribed
Medications
• Voidable if it can be
shown that the
intoxicated person’s
reason and
judgment were
impaired to such an
extent that he did
not understand the
legal consequences
of his actions. Must
disaffirm promptly.