LAW 505-002 – Contracts I

Incapacity


Restatement Second of Contracts § 12

Capacity to Contract

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  1. No one can be bound by contract who has not legal capacity to incur at least voidable contractual duties. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances.
  2. A natural person who manifests assent to a transaction has full legal capacity to incur contractual duties thereby unless he is
    1. under guardianship, or
    2. an infant, or
    3. mentally ill or defective, or
    4. intoxicated.
Infancy

A person under the age of 18 can only make voidable contracts for things that are not "necessaries."

Restatement Second of Contracts § 14

Infants

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Unless a statute provides otherwise, a natural person has the capacity to incur only voidable contractual duties until the beginning of the day before the person's eighteenth birthday.

Mental Illness
Restatement Second of Contracts § 15

Mental Illness or Defect

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  1. A person incurs only voidable contractual duties by entering into a transaction if by reason of mental illness or defect
    1. he is unable to understand in a reasonable manner the nature and consequences of the transaction, or
    2. he is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition.
  2. Where the contract is made on fair terms and the other party is without knowledge of the mental illness or defect, the power of avoidance under Subsection (1) terminates to the extent that the contract has been so performed in whole or in part or the circumstances have so changed that avoidance would be unjust. In such a case a court may grant relief as justice requires.
Intoxication
Restatement Second of Contracts § 16

Intoxicated Persons

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A person incurs only voidable contractual duties by entering into a transaction if the other party has reason to know that by reason of intoxication

  1. he is unable to understand in a reasonable manner the nature and consequences of the transaction, or
  2. he is unable to act in a reasonable manner in relation to the transaction.
Public Policy
Restatement Second of Contracts § 178

When a Term Is Unenforceable on Grounds of Public Policy

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  1. A promise or other term of an agreement is unenforceable on grounds of public policy if legislation provides that it is unenforceable or the interest in its enforcement is clearly outweighed in the circumstances by a public policy against the enforcement of such terms.
  2. In weighing the interest in the enforcement of a term, account is taken of
    1. the parties' justified expectations,
    2. any forfeiture that would result if enforcement were denied, and
    3. any special public interest in the enforcement of the particular term.
  3. In weighing a public policy against enforcement of a term, account is taken of
    1. the strength of that policy as manifested by legislation or judicial decisions,
    2. the likelihood that a refusal to enforce the term will further that policy,
    3. the seriousness of any misconduct involved and the extent to which it was deliberate, and
    4. the directness of the connection between that misconduct and the term.
Restatement Second of Contracts § 198

Restitution in Favor of Party Who Is Excusably Ignorant or Is Not Equally in the Wrong

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A party has a claim in restitution for performance that he has rendered under or in return for a promise that is unenforceable on grounds of public policy if

  1. he was excusably ignorant of the facts or of legislation of a minor character, in the absence of which the promise would be enforceable, or
  2. he was not equally in the wrong with the promisor.
Restatement Second of Contracts § 199

Restitution Where Party Withdraws or Situation Is Contrary to Public Interest

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A party has a claim in restitution for performance that he has rendered under or in return for a promise that is unenforceable on grounds of public policy if he did not engage in serious misconduct and

  1. he withdraws from the transaction before the improper purpose has been achieved, or
  2. allowance of the claim would put an end to a continuing situation that is contrary to the public interest.