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Chapter 13

LPP 255 Chapter Notes - Chapter 13: Standard Form Contract, Usury, Unconscionability

Law & Public Policy
Course Code
LPP 255

of 5
Contractual Capacity
oThe age of the majority (when a person is no longer a minor) is 18 years old
oTermination of minority
Some states is marriage
Emancipation- a child’s parent or legal guardian relinquishes the legal right to exercise
control of the child
A minor can petition a court to be treated as an adult
oA minor can enter into any contract an adult can provided the contract is not prohibited by law for
A contract entered into by a minor, is voidable at the option of that minor
Minor needs to manifest intention not to be bound by it
Disaffirmance= legal avoidance or setting aside of a contractual obligation
oMinor must express intent through words or conduct not to be bound in
the contract
Must disaffirm the entire contact, not a portion of it
Can be disaffirmed any time during minority or a reasonable
time after majority
2 months
A court will hold the contract ratified if an individual fails to
disaffirm in a reasonable amount of time after majority
Most states say that a minor need only to return the goods and they are entitled
to disaffirm
oSome courts hold the minor responsible for damage
Contracts to marriage, enlist cannot be avoided
oMisrepresentation of age
oNecessaries= whatever is reasonably needed to maintain the minors
standard of living
Contract of necessaries must have
1. The item contracted must be necessary for the
minors subsistence
2. The value of the necessary item must be
appropriate to maintain the minors standard of living
3. The minor must not be under the care of a parent
or guardian who is required to supply this item
oUnless these 3 are met, the minor can
disaffirm the contract without being liable
for the reasonable value of the goods used
Accepting and giving legal force to an obligation that previously was not enforceable
A minor who reached the age of majority can ratify a contract expressively or impliedly
Express ratification= the individual upon reaching age, states orally or in writing
that he or she intends to be bound by the contract
Implied ratification= take place when the minor on reaching age, indicates an
intent to abide by the contract
oGenerally, parents are not liable for contracts made by children as minors acting on their own
Businesses often require parents to sign
oCondition in which a persons normal capacity to act or think is inhibited by alcohol or some other
A contract entered by an intoxicated person can be either voidable or valid
Sufficiently intoxicated to lack mental capacity, the agreement may be voidable
even if it was purely voluntary
If the person understood the legal consequences despite intoxication, the
contract is enforceable
For a contract to be voidable, the person must prove that the intoxication impaired their
reason and judgment so severely that they did not comprehend the legal consequences
Difficult to determine
oIf a contract is voidable under intoxication the person can disaffirm it
while intoxicated or a short time after being sober
Contracts by intoxicated persons
Contracts by mentally incompetent persons
4th requirement for a valid contract to exist
Contracts that are contrary to statute= illegal
oContracts to commit a crime
Lender makes a loan at an interest rate above lawful maximum
Online gambling
Many sites are located outside the US, where gambling is legal
oLicensing statutes
Certain professionals must have a license
Contract with unlicensed professional when the statutes purpose is to protect the public
from unauthorized practitioners is illegal
Contract with unlicensed professional when the statutes purpose is merely to raise
government revenues is enforced
Landscape architect
Massage therapist
Contracts contrary to public policy
oNegative impact on society
oContracts in restraint of trade
Anticompetitive agreements
Public policy favors competition in the economy
Exception when the restraint is reasonable
Sale of an ongoing business and employment contracts
oCovenant not to compete is enforceable
oEnforcement problems
Unconscionable contracts
Oppressive bargains
Procedural unconscionability
oNo opportunity to read the contract or ask questions
oWeaker parties consent is not voluntary, bargaining power is not equal
Adhesion contract
Written exclusively by one party
Substantive unconscionability