legality, and enforceability.

Contractual capacity is the legal ability to enter

into a contractual relationship.

A person who is determined by court to be mentally incompetent

can't enter into a valid contract.

In other situations, the capacity may exist

but the contract isn't legally binding.

We'll take a look at those situations.

Minors can enter into contracts, generally at the age of 18,

a person in emancipated and has a legal capacity

to enter any contract that an adult can.

However, a contract entered into by a minor is voidable

at the option of that minor and can be disaffirmed.

"Disaffirm" means "to avoid a contract."

The Majority Rule is that the minor has an obligation

only to return the goods or other considerations

subject to the contract, provided the goods

are still in the possession of the minor.

Minority Rule is that the minor must restore the adult

to the position held before the contract was made.

In other words, most states don't require the minor

to make the other party whole--

just return whatever they have left.

There are some exceptions.

Generally, a minor can disaffirm a contract,

even if they misrepresent their age.

However, there are some states that prohibit disaffirmance

and hold a minor liable once the minor commits fraud

by misrepresenting their age.

Contracts for necessaries-- things like food, clothing,

and shelter-- a minor could avoid

but somebody will be held responsible for it.

A contract could be ratified.

"Ratified" means to go ahead with a contract

instead of avoiding it.

And the author says it occurs when a minor

on or after reaching the age of the majority.

Well, technically, they would no longer be a minor so--

a minor who enters into a contract can ratify it

once they reach the age of majority

or for a reasonable period of time afterwards.

Now, that could be expressed or implied.

They could say that they don't wish to avoid the contract

or they could impliedly ratify it by just staying in it.

Generally, parents don't have a liability for contracts entered

into by minors unless they were required to co-sign.

Intoxicated persons could avoid a contract if they lack capacity

at the time the contract is made.

If they still have the capacity to understand

what they were doing, it would be valid.

One thing they could do is, after they sober up,

they could decide they want to remain in the contract.

So "voidable" means "at the option of the person

"who was intoxicated at the time."

If a person has been determined to be mentally incompetent

by a court, and a guardian has been appointed,

then any attempt for them to enter into contract is void.

If the person hasn't been declared to be incompetent

by a court, but does lack the mental capacity at the time

they entered into a contract, the contract is voidable.

If they did understand the nature and effect

of the contract, then the contract is valid.

Sometimes, this could be,

depending on the person's mental state--

in other words, if they have a lucid interval,

if they understand what they're doing, it would be valid.

If, at the time, they lacked the capacity,

then it would be voidable.

Look at the legality of the contract.

For a contract to be enforceable,

it must be for a legal purpose.

You could have a clause in the contract that's illegal

but the rest of the contract could be legal and enforceable.

Were a contract to commit a tort or a crime, it would be illegal.

Contracts contrary to statute.

If there's a federal or a state law that prohibits something,

you can't contract to do it and it would be void.

In other words, it would be not a contract from the start.

Usary-- which means charging an excessive interest rate

above the law-- would not be enforced.

Gambling would be another example of a contract

that wouldn't be enforced unless of course it's sanctioned

by the government.

In licensing statutes-- attempt to enter into a contract

without proper license could effect

the enforceability of the contract.

If the purpose of the licensing statute

is simply to generate revenue,

generally the courts will give a remedy.

However, if it's to protect the public safety--

for example, licensing for attorneys, doctors, etcetera--

then you're not going to be able to enter into contract

without that license.

Contracts that are contrary to public policy--

such as a restraint of trade-- are generally void.

However, a covenant not to compete could be enforceable

if it's geographic terms are reasonable

and the duration of time is reasonable.

A contract may not be enforced

if it's procedurally unconscionable--

meaning it has inconspicuous or small print

or difficult legalese,

that would depend on the party's lack of knowledge.

There's also substantive unconscionability

where the terms or conditions surrounding the contract

are oppressive or overly harsh,

don't provide a party with any remedy whatsoever.

The court may not enforce it.

Exculpatory clauses are clauses that release a party

from liability in the event of some kind of injury,

regardless of who's at fault.

The court will enforce them if it's not contrary

to public policy, not ambiguous,

and doesn't shield the party from intentional conduct.

So if there was a clause that said you could escape liability

even if you committed some intentional act

against someone else, the courts generally won't enforce those.

As we said earlier, illegal contracts are void.

Neither party would be able to collect

or recover in that situation.

There are some situations where the court has granted a remedy.

If there were some justifiable ignorance of fact

on an innocent party's behalf,

if one of the parties was part of a protected class,

if there was a chance to withdraw from an illegal agreement,

if part of the contract which was illegal

could be severed from the legal part,

or the contract was entered into under fraud,

duress, or undue influence.

Mistake could allow a party to avoid a contract.

We're talking about a mistake of fact, not value.

Not paying too much for something.

If it's a unilateral mistake,

generally the courts won't allow that party

to get out of the contract unless the other party

knew they were making that mistake

or it was something like a typo.

However, courts do allow the parties to back out

if there's a bi-lateral or mutual mistake.

This would be basically the parties not agreeing

to the same thing as the result of a mistake.

Fraudulent misrepresentation may make a contract voidable

by the innocent party.

It requires misrepresentation of a material fact,

an intent to deceive,

a reliance on that misrepresentation,

and an injury to the innocent party.

These are different ways that you

could have a misrepresentation of material fact.

It could be how the parties acted.

It could be an "expert" opinion--

typically, opinions by others would not be actionable.

It could be by law or by silence, even.

The party could fail to disclose something

that they have a duty to disclose.

For example, if they have a fiduciary relationship

and they fail to disclose material facts.

The intent to deceive is required-- a person does it,

makes the fraudulent misrepresentation,

knowing the fact is not true

or is reckless in their statements about it.

The other party-- the deceived party--

must justify and be reliant on the representation.

If they knew it not to be true, that wouldn't be justifiable.

And there has to be an actual injury,

so you could say something that's not true

and if the other party relied on it but wasn't injured,

that wouldn't fraudulent misrepresentation.

However, no proof of injury is required when the action

is to rescind the contract--

so, if you're just asking to back out.

Undue influence is when there's a special relationship

between the parties.

In that situation, the contract would lack voluntary consent

and would be voidable.

An example might be "attorney, client,"

"guardian, ward."

It's presumed that the weaker party

would be talked into doing something

that wasn't beneficial to him or herself.

Duress would be physically forcing

or threatening physical force.

That would make a contract voidable.

Threat of civil suit or not getting a good deal.

Economic duress generally isn't sufficient.

In some cases, another defense to enforceability

is the form that the contract is.

Some contracts required to be in writing

and signed by the party

against whom you're going to enforce it.

Here are the-- this is the statute of frauds, basically.

Here are the five areas.

Contracts involving the interest in land, the "One-Year" Rule,

collateral or secondary contracts,

promises made in consideration of marriage,

contracts for the sale of goods priced at $500 or more.

So, when we say "interest in land,"

we would mean land contract, leases, sale of land.

The "One-Year" basically says a contract

that cannot by, its performed terms,

be performed within a one year, need to be in writing.

Collateral or secondary contracts mean co-signing.

A co-signature should be in writing,

unless the purpose of the oral guarantee to pay the debt

to someone else is to benefit yourself.

Prenuptial agreements, promises made

in contemplation of marriage.

And contracts for the sale of goods priced at $500 or more.

So, if you were to look at a quiz question

and it was talking about an oral agreement for more than that,

then the statute of frauds would require it to be in writing.

There are some exceptions.

You know, the idea is that you wouldn't have anything

to prove that there was an agreement.

However, you could substitute that with partial performance,

maybe somebody's already shipped goods,

the other party's paid part of it.

An admission that there is an agreement in court.

Promissory estoppel, which we've talked about before.

Basically, the idea that although the whole agreement

isn't in writing, but there was a promise to the other party

and justifiably relied on, and other special exceptions

under the UCC.

The writing doesn't have to be too complex.

It just could be a written memorandum

or electronic signed by the party

against whom enforcement is sought.

It could be a fax, it could be an email.

Basically, it just has to have the essential terms.

Quantity needs to be in there.

We mentioned signature of the party

against who you're trying to enforce it.

Who the parties.

What the contract's about-- the subject matter.

And what consideration is being exchanged.

In the sale of land, it needs to state the price

and description with sufficient clarity.