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Contracts II
University of Alabama School of Law
Rowley, Keith A.

Contract Avoidance
I. Nine questions for Contracts:
1. What law governs the transaction?
2. Did the parties form a contract? (offer, acceptance, consideration)
3. Is that contract enforceable? (formalities required like statute of frauds, formation defenses that would prevent this seemingly enforceable contract from being enforced like infancy, intoxication, etc.)
4. If we find that parties didn’t form a contract or was not enforceable, is there an alternative theory of enforcement? (promissory estoppel, quasi contract, unjust enrichment)
5. What were the terms of the agreement? (express, implied by fact, implied by law)
6. Was there a material breach of the contract by one of the parties?
7. Did breaching party have an excuse or a defense that would prevent breaching from being liable or reduce his liability?
8. What remedy or remedies is non breaching party entitled to as a result of the breach?
9. What rights or obligations if any does this contract impose on third parties?
II. “Void” vs. “Voidable” Contracts
a. “Void” Contract: One that is unenforceable as a matter of law (e.g., a contract for child prostitution).
i. There isn’t an option for this to be a contract
b. “Voidable” Contract: One that may be avoided by a party, as a matter of fact, on the basis of one of the foregoing defenses (e.g., a contract entered into by a minor for something other than “necessaries”)
i. A party’s acts or statements after her right to avoidance arises (e.g., ratification or reaffirmance) may cut off her ability to avoid a contract
ii. Party must actually take action to void the contract
iii. Contrast to Unenforceable Contracts
1. An unenforceable contract is one for the breach of which neither the remedy of damages nor the remedy of specific performance is available, but which is recognized in some other way as creating a duty of performance, though there has been no ratification. (§ 8)
III. Lack of Capacity (Formation Defenses)
a. Contractual Capacity: The minimum capacity required by law for a party to be bound to a contract he, she, or it is alleged to have made.
i. Because incapacity may be transient, capacity is tested at the time the contract is formed
ii. Court presumes person has contractual capacity unless member of certain groups
iii. Certain persons are generally not considered to have sufficient capacity to be bound by their contracts:
1. Minors
2. Mentally Ill or Incompetent Persons
3. Intoxicated Persons
4. Persons under guardianship
b. Infancy: : Unmarried minors are permitted to enter into any contract an adult can, provided that the contract is not one prohibited by law for minors (e.g., agreement to purchase cigarettes or alcohol).
i. Voidability: Unlike those entered into by adults, contracts entered into by minors are generally voidable by the minor
1. Infancy is judged at time of contract being made
2. VOID: some contracts made with children under a certain age are void per se (age varies by jurisdiction)
ii. Disaffirmance: Legally avoiding or setting aside a contract. In order for a minor to avoid a contract, she need only manifest her intention not to be bound by it
1. The minor m

tering into the agreement. However, some states
1. prohibit disaffirmance in all cases where the minor misrepresented his age;
2. prohibit disaffirmance in cases where the minor has engaged in business as an adult;
3. refuse to allow minors to disaffirm fully performed contracts, unless they can return all consideration received; or
4. Majority Rule: permit disaffirmance but subject the minor to tort liability for his misrepresentation
vi. Liability for Necessaries: A minor who enters into a contract to purchase food, shelter, clothing, medical attention, or other goods or services necessary to maintain his well-being will generally be liable for their reasonable value even if he disaffirms the contract
1. Could minor’s life be maintained properly and suitably without it?
2. Adult would have burden of proving this
vii. Parental Liability: As a general rule, parents are not liable for contracts made by their minor children unless:
1. a parent co-signs the contract, and thereby assume personal liability for its performance, even if their minor child disaffirms the contract; or
1. Giving some money to child to help with payment is not enough (Bowling v. Sperry)
the minor committed some wrongful act associated with the contract or at the direct ofa parent