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Chapter 9 Legal Capacity to Contract.docx

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Management (MGS)
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Chapter 9 The Minor or Infant  Certain classes of promisors must be protected as a matter of public policy, either for reasons of their inexperience or immaturity o Infants: a person who has not reached the age of majority  Minors should not be bound by their promises, they are not liable on most contracts that they might negotiate  Law attempts to balance the protection of the minor with the need to contract by making only those contracts for necessary items enforceable against a minor Enforceability and the Right of Repudiation  The enforceability of any contract for non-necessary goods will depend to some extent on whether the contract has been fully executed by the minor  If the contract made by the minor has been fully performed then the minor may very well be bound by the agreement, unless he or she can show that he or she had been taken advantage of by the merchant, nor can return all the goods purchased to the other party.  If the contract has not been fully performed, then the agreement may be voidable at the minor’s option  Adult with full capacity to contract is bound in every case by the contract negotiated with an infant, since the adult person has no obligation to do business with an infant unless the adult wishes to do so. o Assumes the risk that the minor might repudiate the agreement  The law provides that an infant will be bound by contracts for necessaries, and will be liable for a reasonable price for the goods received or the services supplied Criteria for Necessary  Contracts of employment or apprenticeship are contracts considered to be beneficial to minors, and are enforceable against them o Even some educational ventures can be held enforceable The effect of Repudiation  The general rule relating to contracts that have not been fully performed for non-necessary goods or services that the minor or infant may repudiate the contract at any time, at his or her option. o Even if terms are very fair to the infant o The minor is entitled to a return of any deposit paid to the adult contractor o If minor has purchased the goods on credit and taken delivery, the minor must return the goods before the merchant is obliged to return any monies paid o Any damage of goods not in direct result of the minor’s deliberate acts is not recoverable by the merchant o If the minor deliberately misrepresents the use intended for the goods, and the goods are damaged, then the merchant may be entitled to recover the loss by way of an action for tort. Fraudulent Misrepresentation as to Age  Protection extended to a minor under rules of contract may not be used by a minor to perpetrate a fraud on an unsuspecting merchant  An adult entering into a contract with a minor where the minor has represented himself as having attained the age of majority will not be permitted to hold the minor to the contract  The mere fact that a minor misrepresents their age does not generally alter the fact that the minor cannot be bound in a contract for non-necessaries  For non-necessary goods where the minor has falsely represented that they are of full age when, in fact, they are not, the merchant may be entitled to recover the goods on the basis of the minor’s fraud. Ratification and Repudiation  Repudiation: the refusal to perform an agreement or promise o When the minor has entered into a contract of a continuing or permanent nature under which the minor receives benefits and incurs obligations, the contract must be repudiated by the minor within a reasonable time after attaining the age of majority  Otherwise contract will become binding for balance of the term  Ratification: the adoption of a contract or act of another by a party who was not originally bound by the contract or act Statutory Protection of Minors  Minors Engaged in Business  Contracts of employment, if they are lawful and contain terms that are not onerous, are generally binding on minors  The law does not support the thesis that an infant must, of necessity, engage in business activity as a principal o Partnerships/sole-proprietorship  Since it is not necessary for an infant to engage in business, any attempt to purchase business related goods will be treated by the courts as a contract for non-necessaries. o Renders contract voidable at the option of minor o If minor has not taken delivery of the goods ,they can repudiate the contract o If the infant merchant sells goods, they are not obliged to perform the contract if they do not wish to
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