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Exam 14: Capacity to Contract

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Question 1

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When a minor contracts for necessaries,he or she is liable for the ________ of the necessaries actually received.

A) reasonable value
B) actual value
C) estimated value
D) depreciated value

E) C) and D)
F) None of the above

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Question 2

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Three days before she was judicially declared mentally incompetent and institutionalized,Irma bought a $50,000 automobile by cash and took delivery of it.Which of the following is true about this contract?

A) It is voidable at the discretion of the seller.
B) The contract is voidable due to Irma's institutionalization.
C) The contract cannot be disaffirmed because it was fully executed.
D) Irma ratified the contract by paying the price of the car.

E) A) and B)
F) All of the above

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Question 3

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Which of the following is not considered when a court determines whether an incapacitated party can disaffirm a contract?

Shelly,aged 15,sells a car to Fiona,aged 25.Fiona in turn sells the car to Raphael.Under section 2-403 of the Uniform Commercial Code,if Shelly chooses to disaffirm the contract with Fiona:

In January 2002,a court with the necessary subject-matter jurisdiction holds Marvin mentally incompetent and appoints a guardian for him.In November 2002,Marvin escapes his guardian's care and takes off on his own.While eating lunch with Clara,who knows about Marvin's condition,Marvin signs an agreement to sell a valuable property he owns.When he signs the contract,Marvin believes that he is the President of the United States signing an important treaty.The agreement between Marvin and Clara is best described as:

After consuming a mind-altering drug,Hal buys some real estate from Edith for $100,000.Hal was completely wrecked when he made the deal,and could not understand what he was doing.Due to the after effects of the drug,Hal goes into a coma that lasts for one year.As soon as he awakes from the coma,Hal tries to disaffirm his contract with Edith.Edith maintains that Hal cannot disaffirm because he has ratified the contract.What should Hal argue in return?

Mike,a minor,buys some real estate as an investment.The contract obligates Mike to make monthly installment payments for 10 years.Mike reaches the age of majority one month after making the contract.After this,Mike makes 25 monthly payments under the contract,but then decides that he wants to rescind the deal.Which of the following is most true?

Ratification of a contract with a minor has to be expressly made only in written form.

The test to determine whether a person has the mental capacity to contract is a(n) ________ one.

The general rule is that,contracts entered into during minority can be disaffirmed as soon as they are formed.Which of the following is an EXCEPTION to the rule?

A minor can disaffirm agreements to support their children.

At 17 years old,Otto signed a contract to purchase a new Hummer by advancing a payment of $50,000.However,when Otto turned 20,he wished to disaffirm this contract.Does the law permit this?

The right of minors to avoid a contract as a means of protecting themselves against their own improvidence and against overreaching adults is called:

A person younger than the legal age of majority is generally held to lack capacity to enter a contract,even if he is married and employed full time.

Courts may sometimes be sympathetic to an adult who has suffered losses due to a minor who misrepresented his age.How so?

Which of the following is true of necessaries?

When a person lacks capacity to contract due to a mental impairment,the contract is void.In contrast,when a person lacks capacity to contract due to intoxication,the contract is voidable.

What is the term for a person who candidly paid valuable consideration without any notice of another's claim or any defects in the seller's ability to sell?

A minor has the right to recover any consideration,including goods transferred to third parties.This includes even good faith purchasers.

When a person asserts he lacked capacity as the basis for a claim or defense,it is his responsibility for alleging and proving it.