Deck 14: Contractual Capacity

Question 1

Beth, at age 17, sells an antique pin she inherited. Even if the buyer resells the pin to someone who did not know that it was purchased from a minor, Beth can recover the pin from the third person if she changes her mind about
wanting to sell it.

Answer 1

False

Question 2

If Carrie, age 14, contracted to buy a fur coat by mail, the coat manufacturer would not have to send it since the contract was void.

Answer 2

False

Question 3

In general, minors have liability for their torts.

Answer 3

True

Question 4

A person under guardianship by court order has no contractual capacity.

Question 5

Sean had two beers and felt tipsy. He made a deal with Yoko to buy her stereo. He can avoid the contract because of lack of capacity.

Question 6

A few states, either by statute or court ruling, recognize a duty on the part of a minor to make restitution to the seller upon disaffirmance of a contract.

Question 7

By the majority view, a minor need only return any property he has received from the other party if the minor wishes to disaffirm the contract. He has no duty to return the property in the same condition in which he received it.

Question 8

At common law, a minor was a person who was under twenty-one years of age.

Question 9

Sally goes away to college at 17, lives on her own, and pays her own rent and electric bills. If she makes a contract to buy a television set, in most jurisdictions, she may assert her minority status and set aside the contract.

Question 10

Ratification makes a contract void from the beginning.

Question 11

In general, if a minor lies about her age in order to induce the seller to contract with her, she cannot disaffirm that contract.

Question 12

All states agree that a minor who has fraudulently misrepresented her age when entering into a contract has no power to disaffirm the contract.

Question 13

If a person is adjudicated insane and placed in care of a guardian, that person's contracts are void.

Question 14

In general, a minor may only disaffirm a contract after he has reached the age of majority.

Question 15

Kris, age 17, who looks 18 or older, makes a contract to buy a car from Maisie, who is the age of majority. Maisie finds out Kris's age. Maisie may avoid the contract even if Kris did not misrepresent his age.

Question 16

In a contract to sell necessaries to a minor, these goods and services are limited to medical care, food, and shelter.

Question 17

An intoxicated person must have been so intoxicated as to have been unable to understand the consequences of his actions or have been unable to act in a reasonable manner in order to avoid a contract.

Question 18

Jessica at the age of 15 entered into a contract to sell five acres of land to her uncle. She may disaffirm this contract at any time before reaching her majority.

Question 19

The doctrine of necessaries applies in the same way to minors and mental incompetents.

Question 20

Seventeen-year-old Teresa wants to disaffirm her student loan agreements. Most states will not allow her to avoid such contracts.

Question 21

Darrell goes to lunch with an office equipment salesman. After drinking two beers and eating a Reuben sandwich, Darrell signs a contract to purchase a $1200 machine for the office. Two hours later, he has second thoughts and decides a different machine might be a better buy, so he calls the salesman and wants to disaffirm the contract based upon intoxication. Darrell can avoid the contract on this basis.

Question 22

Ratification need not be express; it may be implied from the minor's conduct.

Question 23

In some states, minors are liable for contracts involving bank accounts and student loans and cannot avoid these contracts even though they can avoid other types of contracts.

Question 24

Persons who lack mental capacity at the time they enter into a contract may avoid liability under the agreement.

Question 25

All furniture, television sets, and appliances purchased by a minor for her apartment would be considered necessaries.

Question 26

Courts treat contracts of incompetents and intoxicated persons essentially the same, except they are stricter with
intoxicated persons because of intoxication's voluntary nature.

Question 27

Disaffirmance may be express, but it may not be implied.

Question 28

A mental condition that impairs a person's ability to act in a reasonable manner is one type of mental incompetence.

Question 29

Michael, a minor, rents a car to attend the senior prom at his high school. He signs an agreement stating that he will not take the car more than 100 miles from the rental agency. At 2:00
a. True
a.m., after he has had a few beers, his friends talk him into driving 200 miles to Chicago for the weekend. On the way, the car is involved in a minor traffic accident that damages the vehicle. In most courts, because the tort of negligence is related to the rental contract for the vehicle, Michael has no liability to the rental agency.
b. False

Question 30

A mental illness or defect of one of the parties to a contract automatically makes a contract void.

Question 31

A minor can ratify part of a contract and disaffirm another part of it.

Question 32

Emancipated minors have no ability to avoid contracts based upon their minority.

Question 33

Ratification of a contract, once effected, is final and cannot be withdrawn.

Question 34

An incompetent person who lacks understanding of a contract and its consequences can avoid it even if the other party had no reason to know of the incompetent's mental condition.

Question 35

An automobile may be considered a necessary item for a minor.

Question 36

If a person is unable to understand the nature and effect of entering into a contract, he or she can avoid it.

Question 37

Intoxicated persons are liable in quasi contract for necessaries purchased during their incapacity.

Question 38

Lydia makes a contract to purchase a used car on her seventeenth birthday. Six months later, her ratification of the contract can be effectively implied by her continuing payments.

Question 39

John is 17 years old and earns extra money by repairing cars. Nathan, who is 21, brings his car to John for repairs, and John ruins the brake system of the car, because of his inexperience. If Nathan sues John for negligence in performing the auto repair contract, in most states John will have no liability, because the tort of negligence and the auto repair contract are connected.

Question 40

A person taking a prescription medication will be treated the same as an incompetent under the cognitive ability test.

Question 41

The exercise of the power to avoid a contract is known as:

A) ratification.
B) disaffirmance.
C) ab initio.
D) restitution.

Question 42

Cheryl, age 16, ordered a new dress to wear to the school prom. She has contracted to pay $500 when the dress arrives. Before the dress arrives, Cheryl decides that the dress is too expensive. If she now wishes to cancel the order, Cheryl:

A) must pay $500 for the dress because the dress was specially ordered for Cheryl.
B) must pay $500 for the dress because clothing is classified as a necessity.
C) may disaffirm this executory contract.
D) must accept the dress and pay the reasonable value of the dress.

Question 43

Sixteen­year­old Laura's disaffirmance of a contract:

A) for a sale of land by her is not effective until after she reaches the age of majority.
B) is only effective if expressed in words in the particular form required by statute.
C) can only be effective if she is an "emancipated" minor.
D) must take place after she reaches the age of majority, regardless of the type of contract, since only then does she have capacity.

Question 44

Percy, age 17, purchased a used mobile home from a mobile home dealer for $20,000. This price, however, was twice the reasonable value of the mobile home. One month later, Percy wishes to disaffirm the contract. If the mobile home is considered a necessary, then:

A) Percy can disaffirm the contract based on the wrongful act of the dealer.
B) Percy can disaffirm the contract because the minor can live in an apartment rather than a mobile home.
C) Percy may keep the mobile home but is only liable for the reasonable value of the mobile home.
D) Percy must keep the mobile home and abide by the original terms of the contract.

Question 45

Todd, a minor, rents an automobile from Rosa, an adult. Todd damages the vehicle when he negligently backs into a pole. Under the majority view, can Rosa recover damages from Todd?

A) Yes, Todd breached his duty to exercise reasonable care and diligence to protect the automobile.
B) Yes, although Todd is a minor, it is well settled that minors are generally liable for their torts.
C) No, minors generally cannot be held liable for their torts.
D) No, his contractual immunity protects him from legal action by Rosa.

Question 46

Which of the following is least likely to be classified as a necessary for which a minor will be held liable on a contract?

A) A camera
B) School supplies
C) Boots for a snowy climate
D) An automobile

Question 47

Ratification can occur in which of the following ways?

A) Through express language
B) As implied from conduct
C) Through failure to make a timely disaffirmance
D) All of these.

Question 48

Robert is 17 years old. He lies to Bouyers Auto in order to induce it to sell him a new pickup. Bouyers falls for this lie and sells him the pickup. In most jurisdictions, Robert:

A) may disaffirm and get his money back.
B) may not disaffirm since he lied.
C) must restore Bouyers to its position before contracting with him.
D) will receive his money less depreciation.

Question 49

Mary, age 17, sold Mark, age 22, the briefcase she got for graduation. Mark's father liked it and bought it from him. If Mary decides to disaffirm the contract, will Mark's father have to return the briefcase to her?

A) Yes, the briefcase is not a necessary.
B) Yes, if Mark's father still has it.
C) No, her contract was with Mark and he cannot return goods he does not have.
D) No, if Mark's father bought it without knowing that Mary was a minor.

Question 50

Steve purchases a four-wheel drive truck from Belk Auto Sales. Steve is only 17 years of age. He wrecks the vehicle and attempts to disaffirm the contract and have Belk repay him all that he has paid. In the majority of jurisdictions, Steve:

A) would be out of luck.
B) must have the truck repaired.
C) will receive his money less the depreciation in value of the vehicle.
D) may simply return the vehicle and get his money.

Question 51

Which of the following would be a valid ratification? Two weeks after his eighteenth birthday, Jerry:

A) sells the motorcycle he contracted to buy when he was seventeen.
B) calls the bank to assure them that he will continue making payments on the loan agreement he signed a month before his eighteenth birthday.
C) makes a payment on the installment contract he signed a month before.
D) All of these.

Question 52

In which of the following situations would a minor be unable to disaffirm a contract which he had made?

A) Upon restoring the consideration received in a situation involving a fully executed contract
B) Where the minor wishes to affirm part of a contract and disaffirm another part of the same contract
C) During the time of his minority or for a reasonable time thereafter
D) None of these.

Question 53

Randy, a minor, buys a new four-wheel drive truck from the Jones Dealership. Randy sells this truck to his cousin, Steve, who is an adult. Steve conveys this vehicle to Arthur Smith. Arthur does not personally know Steve or Randy. Randy may:

A) recover the vehicle from Mr. Smith.
B) not recover the vehicle from Mr. Smith.
C) hold Steve liable in tort.
D) recover the reasonable value of the vehicle from Mr. Smith but not the vehicle itself.

Question 54

Ann, a minor, disaffirmed her agreement to buy $127 worth of cosmetics from Facial Glo Company. She had used up all the eye shadows, lipsticks, and powders. The general rule is that she may:

A) disaffirm, but she must pay the asking price of the cosmetics used.
B) disaffirm, but she has to return the makeup that is not used up.
C) not disaffirm without paying the value of used makeup.
D) not disaffirm because she has used the goods.

Question 55

Tim, who is a minor, enters into a contract with Violet, who is an adult. Which of the following is correct?

A) Violet may not disaffirm the contract.
B) Violet may disaffirm the contract at any time.
C) Violet may disaffirm the contract when Tim becomes an adult.
D) Tim may ratify the contract at any time during his minority.

Question 56

Fay, age 17, ordered a pair of skis on the installment plan. She paid $20 every month until she turned 18, the age of majority. The next day, she sold them to Sharon and disaffirmed the contract. Fay is:

A) still liable since she had to disaffirm before her 18th birthday.
B) still liable because selling the skis amounts to a ratification.
C) not liable because she disaffirmed the contract.
D) not liable because skis are not necessaries.

Question 57

Wanda at age 17 purchased an expensive stereo system from Stereo Sales. If Wanda wishes to ratify this contract, Wanda:

A) must reach the age of majority and ratify the contract as a whole.
B) may do so by express notification at any time before reaching the age of majority.
C) may at any time keep the stereo but avoid any remaining debt owed on the stereo.
D) may do so at any time by express or implied action before or after reaching the age of majority.

Question 58

Which of the following is not true regarding the contracts of incompetent persons?

A) An incompetent person is liable for necessaries.
B) Unlike a minor, an incompetent person can never ratify a contract.
C) To avoid a contract, a person need not be permanently incompetent.
D) A person is competent unless he is unable to understand the nature and effect of his act.

Question 59

Which of the following is not true regarding the contracts of intoxicated persons?

A) If an intoxicated person is unable to understand the nature and consequences of his act, then the contract is voidable.
B) The effect of intoxication is generally the same as that given to contracts that are voidable because of incompetency.
C) Slight intoxication will destroy one's contractual capacity.
D) Contracts made while a person is too intoxicated to act in a reasonable manner may be ratified when the intoxicated person regains his capacity.

Question 60

Anna is 88 years old and under the legal guardianship of her daughter. One day Anna receives a telephone call from a health insurance salesman and purchases a $400-a-month Medigap insurance policy. This contract is:

A) valid.
B) voidable.
C) void.
D) voidable only at the option of Anna.

Question 61

When a minor falsely advises the other party that he is of the age of majority and based upon that misrepresentation, the other party in good faith enters into a contract with the minor:

A) the minor has lost his right to disaffirm the contract because of the misrepresentation.
B) the adult party can recover damages from the minor in tort.
C) the minor is required to restore the other party to the position occupied before the making of the contract.
D) There is no uniform rule. States differ, and depending upon the state, any of these could be correct.

Question 62

What is the doctrine of liability for a tort connected with a contract?

Question 63

Donald, a minor, makes a contract with Albert, an adult, to buy a computer. One week later, Donald has his eighteenth birthday. If shortly thereafter Donald tells Albert he will pick up the computer the next week:

A) Donald has expressly ratified the contract.
B) the contract must be renegotiated, because Donald was a minor when it was made.
C) Donald can change his mind and avoid the contract, because it was made when he was a minor.
D) the contract is void ab initio, because Donald was a minor at the time it was made.

Question 64

Cheryl is a 17-year-old high school student who was elected homecoming queen and does part-time modeling to earn money for college. She has an important interview with a modeling agency and wants to make a good impression, so she withdraws $5,000 from her savings and buys a designer outfit and a fur coat for the interview. A week later, she returns the coat to the department store and says she would like her money back. The store is reluctant to take the items. What are Cheryl's rights? Explain your answer, citing relevant law.

Question 65

What are the ways in which a minor may ratify a contract? What are the ways in which a minor may disaffirm a contract? What is the effect of a minor misrepresenting age in order to enter into a contract?

Question 66

Compare the contractual liability of an intoxicated person to that of a person who is mentally ill. How are their situations similar? How are they different with regard to capacity?

Question 67

In most states, whether the time within which a minor disaffirms a contract constitutes a reasonable time is determined by:

A) state statute.
B) the UCC.
C) the facts and circumstances of the case.
D) common law, without regard to the unique facts of the case at hand.

Question 68

Gerard, an adult, contracts with Communiserve to purchase, in installments over a period of five years, a very large quantity of services that he will probably never need. Although Gerard understands what he is doing when he enters the contract, he has a mental condition that impairs his ability to act in a reasonable and rational way. Under the Restatement:

A) Gerard's contract is voidable at his option while it is entirely executory.
B) Gerard cannot avoid the contract if Communiserve had no reason to suspect Gerard's incompetency.
C) Gerard cannot avoid the contract if the terms are fair.
D) Gerard can only avoid the contract if the terms are grossly unfair.

Question 69

Name and briefly describe the three classes of persons who are legally limited in their capacity to contract.

Question 70

A contract by which of the following is void?

A) A fourteen-year-old girl.
B) A thirty-six-year-old man under a court-ordered guardianship for mental incompetency.
C) A thirty-year-old woman who, because of intoxication, is unable to understand the nature and consequences of signing the contract.
D) A twenty-five-year-old woman who is unable to understand the nature and effect of signing a contract because of a mental illness.

Question 71

Sixteen-year-old Trevor has run out of money while on a trip away from home. Mr. & Mrs. Height provide Trevor with food, a place to sleep, and bus fare home in exchange for Trevor's promise to send them $200 when he gets home. Is Trevor's promise enforceable?

Question 72

Harold, a minor, decided to trade his 1985 truck on a new, late-model car at the local dealership. One week after driving the new car, Harold decides that he cannot afford the payments. Harold now wishes to disaffirm his purchase and get his old truck back. The dealer informs Harold that the truck has been sold. Can Harold get the old truck back and disaffirm his contract with the dealer? Explain.