Capacity And Capacity And Genuine AgreementGenuine Agreement

6 parts to a Contract6 parts to a Contract

Offer AcceptanceCapacity Genuine Agreement Consideration Legality

Genuine AgreementGenuine AgreementA valid offer has been made by the offeror, and a valid acceptance has

been exercised by the offeree

MistakeMistake

Unilateral Mistake– An error on the part of one of the parties – Cannot get out of contract – Types:

Nature of the Agreement– Signing a contract you don’t understand or have not read – This applies to signing a contract in a language you don’t

understand Identity of a Party

– Bound by contract with face to face meetings – May be able to void a contract made NOT face to face

Bilateral Mistake (Mutual Mistake)– Both parties are mistaken– Types:

Possibility of Performance– Contract is impossible to perform Either party can void

contract

Subject Matter– Either party can void contract

FraudFraud

Deliberate deception for an unfair or unlawful gain – Deliberate: Done with or marked by full

consciousness of the nature and effects; Deception: The fact or state of being deceived

– Gain: To secure as profit or reward

In order to prove fraud, you must prove the above 3 definitions

Proving Fraud:1. False Representation of Fact

1. Must be a material (important) fact

2. Concealment (nondisclosure) may be considered false representation

2. Representation Known to be False

3. False Representation Intended to be Relied Upon

4. False Representation Actually Relied Upon

5. Resulting Loss

Innocent MisrepresentationInnocent Misrepresentation

Make an innocent statement of supposed fact that turns out to be false

Injured party has the right to rescind (take back) the offer No rights to damages

DuressDuress

Overcoming a person’s will by use of force or by threat of force or bodily harm

Economic Duress– Threats to a person’s business or income

Actual physical harm will void the contract Threat of physical harm will make contract

voidable A threat of exercising one’s legal right is NOT

duress Ex Threatening to sue someone and you have right to sue, is NOT duress

Undue InfluenceUndue Influence

Unfair and improper persuasive pressure within a relationship of trust

Match the column on left with Match the column on left with who they have undue who they have undue

influence over in the right influence over in the right column?column?

1. Doctor

2. Lawyer

3. Parents

4. Teacher

1. Student

2. Children

3. Client

4. Patient

Answers: 1-4, 2-3, 3-2, 4-1

Capacity to ContractCapacity to Contract

Capacity – legal ability to enter a contractMajority – age of legal adulthoodMinor – not yet reached legal age (minority)NC Age of Majority = 18 years oldVoidable Contracts – minors may disaffirm

or avoid their contracts if they so choose Infancy = minority = minor = under 18 yrs

old

Capacity to ContractCapacity to Contract

Returning Merchandise – must be returned if disaffirming a contract

Tender – offer to returnMisrepresenting Age – fraud

- if contract disaffirmed, you may be sued for fraud

Capacity to ContractCapacity to Contract

Disaffirming the Whole Contract - can’t disaffirm parts of a contract

-- must disaffirm all or none

Disaffirming Contracts made with Minors – both can disaffirm contact

Ratification of Contracts with Ratification of Contracts with MinorsMinors

Ratify – approve contract

- after reaching majority age, a minor can ratify a contract made while he or she was a minor

- ratification ends all rights given to a minor Contracts for Necessaries – necessities – food,

clothing, shelter, and medical care

- responsible for the fair value of item

Ratification of Contracts with Ratification of Contracts with MinorsMinors

Special Statutory Rules – minors have capacity to buy car/life insurance

- married = adult

- limited capacity if you own a business

- renting apartment is a necessity

Other Contractual Capacity Other Contractual Capacity RulesRules

Mentally impaired persons – if declared insane:Prior to guardian being appointed – Contract is

voidableAfter guardian appointed - all contracts are void

Intoxicated person – must not understand the purpose, nature, or effect of the transaction

- fair value of necessities

Other Capacity LimitationsOther Capacity Limitations

Convicts have certain limitationsAliens – people who live in U.S. but own

allegiance to a different country - limited capacity ex: war