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B-Law Exam 2
chapter 10
19
Management
Undergraduate 3
10/14/2012

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Term
capacity
Definition
is the requirement for a valid contract that all parties to the contract be of age and mentally cognizant of what is happening at the time the contract is
Term
incapacity
Definition
is the condition of someone who cannot enter a valid contract because he/she is mentally incompetent or is highly intoxicated at the time
Term
disaffirmance
Definition
is the avoidance of a contract by a person with a legal disability through expressing the intent not to be bound to the contract
Term
ratification
Definition
occurs if, after a legal disability is remover, the person who previously lacked capacity uses words or conduct to express agreement with a voidable contract
Term
necessaries
Definition
are items necessary for the health and maintenance of a person, such as food, clothing and medical care
Term
minor
Definition
someone under the age of majority. Typically the age of 18
Term
Three levels of competence
Definition
1. full competence
2. no competence
3. limited competence
Term
full competence
Definition
is a situation where all the parties to the contract have full legal capacity. contract is fully enforceable
Term
no competence
Definition
is a situation where one or more parties have been adjudicated mentally incompetent. contract is void
Term
limited competence
Definition
is a situation where one ore more parties are minors, highly intoxicated or mentally incompetent. voidable contract
Term
3 prerequisites which may be required for valid disaffermance
Definition
1. the person with the right to avoid the contract must express the intent, by words or conduct, not to be bound to the contract either while under a legal disability or within a reasonable time after the disability is removed.

2. the person with a legal disability must fulfill the duty of restoration. Restoration requires the return of any property or money received under the contract

3. in most circumstances the person with a legal disability must fulfill the duty of restitution by paying for any damages to the returned property
Term
Express ratification
Definition
means using specific language to manifest agreement to the contract after the legal disability is removed
Term
implied ratification
Definition
is the failure to disaffirm a contract within a reasonable time after the removal of a legal disability.
Term
three requirements for a minor to validly disaffirm contract:
Definition
1. the minor must express the intent to disaffirm;
2. in most states the minor must only fulfill the duty of restoration, but not the duty of restitution
3. the contract must be a type of contract for which disaffirmance is allowed.
Term
Highly intoxicated person may disaffirm a contract meeting 3 requirements:
Definition
1. expressing the intent to disaffirm
2. fulfilling the duty of restoration
3. fulfilling the duty of restitution
Term
lucid interval
Definition
is a period when the person with a mental incapacity is clear minded. this is a valid contract
Term
Illegal Agreements
Definition
one whose purpose or performance is illegal
Term
Types of illegal agreements
Definition
1. a violation of usury laws is an illegal agreement
2. gambling is typically illegal unless licensed, by the state, conducted by the state, or conducted to raise money for a nonprofit entity.
3. contracts in violation of blue laws are illegal
4. contracts by unlicensed professionals are illegal
5. contracts to perform illegal acts are illegal contracts
Term
blue laws
Definition
or sabbath laws, prohibit certain types of contracts from being entered into on sundays
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