Contracts II Outline
Knapp, Crystal, and Prince – 5th Edition
Chapter 7 – Avoiding Enforcement
I. Minority and Mental Incapacity
A. Minority Rule – a.k.a. the Infancy Doctrine.
1. Classical Approach – minors are incapable of creating an enforceable K. If the seller never check age and minor tries to rescind the K, it’s tough shit for the seller.
2. Modern Approach – Minor should not be able to recover full purchase price once he has already paid for/used the merchandise, absent any showing of fraud or imposition by the seller.
3. Recision (Ex Ante Position)– a K with a minor is VOIDABLE. The minor can demand recision, (which means to put the parties back in the Ex Ante Position) — to put the parties back into the situation they were in before the agreement. Problem – what if the value has decreased?
4. 2 Modern Rules:
a. Benefit Rule – recovery of full purchase price is subject to a deduction for minors USE of the merchandise.
b. Use Rule – minors recovery of full purchase price is subject to a deduction for the depreciation in value of merchandise.
*Both pretty much same thing.
5. Exceptions to the Modern Approach:
a. If the minor lies, or misrepresent his/her age – no minority defense.
b. Necessaries – Items one needs to Live – child is liable for these.
**Classical approach would say the K is still voidable if the child misrepresents his age, but there would be a separate action in tort.
6. When will minor not be able to recover?
a. Minor Misrepresents his/her age.
b. Once he/she has reached majority, must disaffirm the K w/n reasonable time or lose that option.
B. Mental Incapacity
1. Distinguished from Minority Doctrine:
a. Minors can disaffirm even if restoration cannot be made.
b. Mentally incapacitated person must still make restoration to other party, UNLESS special circumstances are present (e.g., bad faith).
2. Two Tests Under Rest. § 15
a. Cognitive Test – § 15(1)(a) — Can the person understand the nature and consequences of the K.
red, consider the reasons behind it.
iii. Always compare the total amount in debt v. the offered settlement . . . how close are they?
iv. Are there any reasonable alternatives? Remember, alternatives can be combined w/ offered settlement and, if taken together, the person is close to being fully compensated, there is arguably no economic duress.
B. Undue Influence
a. Undue Susceptibility (works on a continuum)
i. Total weakness (total weakness of mind/understanding).
ii. Lesser Weakness (vulnerability in the moment).
b. Excessive Pressure (also exists on a continuum)
i. 7 Factors: (Don’t need all 7 – just enough to show excessive pressure under the circumstances).
(1) Discussion of transaction at unusual or inappropriate time.
(2) Consummation of transaction in unusual place.