Business Law Chapter 7.docx

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Western University
Management and Organizational Studies
Management and Organizational Studies 2275A/B
Cristin Keller

Business Law Chapter 7 Each of the parties must be legally able to go into contracts -Has “capacity” to be in contract: ability to enter into contract Minors/Infants  Infants- under age of majority  Online jurisdictional issues regarding age  Exception – necessities (food, shelter or any other basics of life – can be defined by judge) o Infant bound o Pay fair price only  If it is not one of these exceptions, an infant may get out of a contract (contract is void – we never had a contract to begin with)  If contract is void, put parties back to original position  The adult who contracts with the infant is always bounded  Adults bound o Voidable by minor  Exception – beneficial contracts of service (e.g. contracts of apprenticeship)  Ratification when reach majority o Expressly o Implied (by obtaining benefit) – when the infant turns 18 (and is obtaining benefit) – won’t be able to get out of contract o Complete  Cannot pick only the good terms  Voidable contract – there was a valid contract to begin with, but now there’s a problem with it – allow people to legally get out of it – i.e. if a car is sold, and then the car is sold to a third party, that car doesn’t have to be returned to the first person, because there was a contract to begin with o infant not being able to pay for a car may be able to get out of the contract  Void contract – never had a contract to begin with – there was a problem with the initial things (considerations, etc.) – i.e. if a car is sold, and then the car is sold to a third party, that car has to be returned to the person who sold it, because a contract has never been formed  Parent’s liability o Necessaries o Agency o Guarantee – guarantor says that he is willing to place himself in the contract if the minor can’t fulfill the contract – the guarantor may be able to turn around and sue the minor o Legislation Insanity and Drunkenness  Insanity o Person claiming insanity has onus to prove it o No understanding of the nature of the transaction – have to show you have no understanding of the transaction at all o Other person knew or should have known of insanity – have to prove it o May repudiate when sane o All of these are very hard to proof  Drunk o Treated like insanity Others of Limited Capacity  Corporations o Contracting powers of natural persons o Or in some jurisdictions, limits in constating documents  knowledge of limit  Crown bodies o Capacity to contract may be limited by legislation or by regulations  Enemy Aliens o Contracts
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