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University of Dayton School of Law
Hallinan, Charles G.

Contracts Outline

– Competency to contract
o Minors
§ A K made by a minor is voidable at the minor’s option, although the minor may enforce the contract against the adult
§ In general, a minor is not even liable for the value of benefits she has rec’d under the K, although if she disaffirms the K she must return anything that she has rec’d under the K and still returns at the time of the disaffirmance.
§ A minor is liable in restitution for the reasonable value of the necessaries furnished to her
· Necessaries include food, clothing, shelter and whatever else is needed for the minor’s subsistence, health, comfort or education, taking into account the minor’s status, age and condition in life
§ Shield/sword doctrine: using the infancy doctrine as a shield to avoid paying but as a sword to defraud the other party
§ Damages in tort may be recovered in cases where the minor willfully destroys property or where he misrepresents a material fact
o Mental Incapacity
§ The traditional rule is that a person lacks the mental capacity to contract only if his mental processes are so deficient that he lacks understanding of the nature, purpose and effect of the agreement
§ Cognitive test: Majority test, psychological or emotional problems that affect a party’s judgment or reason don’t in themselves constitute mental incapacity for K law purposes. Rather the psychological condition must actually deprive the party of an understanding of what he is doing
§ Restatement Rule (Affective Test): a party lacks capacity if he is unable to act in a reasonable manner and the other party has reason to know of this condition
§ Effect of Incapacity: a K entered into by a person lacking mental capacity is voidable by him, but not by the other contracting party
§ A person who lacks mental capacity is liable in restitution for the value of any necessaries furnished to him
§ If the person has been adjudicated insane or mentally incompetent, his Ks are void
o Duress or Undue Influence
§ Duress refers to conduct by one person that overcomes the free will of another and therefore renders involuntary whatever transaction is invo

were available
§ That the party under duress was acting as a reasonably prudent person in yielding to coercion
§ Undue Influence
· Restatement: one party is under the domination of the other, or a relationship exists justifying that party’s assumption that the other wouldn’t act in a way inconsistent w/ his welfare
· More expansive definition: the wrongful taking advantage of another’s weakness of mind, or in taking grossly unfair advantage of another’s necessities or distress
§ Fraud
The misrepresenting party intends her assertion to induce the other party to enter an agreement and she either 1. knows or believes the assertion is untrue, 2. lacks confidence in the truth of the assertion but presents it as a fact, or 3. says or implies there is a basis for the assertion, such as personal knowledge or investigation, when the basis doesn’t exist