Contracts Outline

A. CAPACITY
1. Capability of a party to enter into a legally binding contract;
a) Here question not really whether a contract has come into being
b) More whether the contract the parties have purported to enter into is void ab initio, or voidable due to some incapacity/disability on the part of one party
c) If party legally incapable, modern result is that the contract is VOIDABLE, not void
(1) Thus contract not a nullity, but not enforceable against the impaired party if decides not to perform
2. Three main possibilities – incapacity due to age, mentalimpairment, or intoxication
3. Traditional: Presumption of Incapacity
a) Certain parties were deemed incapable of entering into contracts/denied the capacity to contract
(1) Infants (to protect them from improvident contracts they were at risk of due to immaturity)
(2) Married Women (were ‘one flesh’ with their husbands, and the husband was the head, and legal representative of that one flesh unit
(3) Persons of a certain race (racial prejudice)
4. Modern: Presumption of Capacity
a) All adults presumed to be legally competent untilsatisfactoryproof to the contrary is provided
(1) Burden of proof of incompetency on the person asserting the incapacity
B. Minority: The Infant Doctrine
1. Intent: protect minors from:
a) Their lack of judgment due to immaturity
b) Crafty adults that would take advantage of them
2. Minority
a) E.g. where underage – an ‘infant’, someone below the age of majority – usually 18 (R2nd §14), party regarded as not being ‘fully savvy’, and felt that should be allowed to choosebetween whether
(1) Feels transaction of benefit to him, and voluntarilyperform,
(2) Feels disadvantageous to her thus disaffirm the obligation and rescind the contract
(a) Note: may not get off scot free – may be required to make some restitution for what enjoyed already
(3) See generally R2nd § 12, 13
b) Traditional approach: determine if a transaction beneficial or prejudicial to the infant.
(1) If prejudicial, contract was VOID
(2) If contract for necessaries – items needed to live
(a) Determination of what necessariescouldvary depending on the station in life of the infant would be deemed to be for the benefit of the infant, thus would not be void, but VOIDABLE at the option of the infant
(3) If misrepresented age or willfully destroyed the goods could be held liable
(a) Prejudicial: contract still void, but may be liable in restitution for necessaries, or for tortiousconduct
(4) If uncertain as to benefit or prejudice, the contract would be deemed voidable
c) Voidable contract subjectto disaffirmation by infant
(1) Could rescind the contract if decided not to go through with it
(2) Must be done before majority, or a reasonable time after attaining majority
d) Thus had option of invoking advantageous contracts, yet could be relieved from disadvantageous contracts
e) Some felt unfair to innocent vendors
(1) Need to balance rights of minor v interest of innocent vendors
(2) Thus ideabegan to take root that minors should make restitution in some way for use of object/benefit received while in possession of the consideration of the contract
(a) i.e. should get less than the full purchase price paid if rescinds the contract
(i) The BENEFIT RULE – upon recession, full recovery of purchase priceless the minor’s use of the merchandise
(ii) DEPRECIATION/DETERIORATION RULE – price less minor’s use of the considerationreceived under the contract, or the depreciation or deterioration of the consideration while in her possession
(b) Contract must be one where
(i) Minor not “overreached” in any way
(ii) No undue influence
(iii) The contract must be fair and reasonable
(iv) The minor must have paid money on the purchase price
(v) Minor must have taken and used the article purchased
(3) Idea of such restitution not universally adopted
(4) More traditional rules still followed by some
(a) No restitution unless minor misrepresented his age, or willfully damaged the property
(b) Minor however expected to return as much of consideration a