Minors and Contractual Capacity

Natural persons[edit]
See also: Testamentary capacity

Standardized classes of person have had their freedom restricted. These limitations are exceptions
to the general policy of freedom of contract and the detailed human and civil rights that a person of
ordinary capacity might enjoy. Hence, for example, freedom of movement may be modified, the right
to vote may be withdrawn, etc. As societies have developed more equal treatment based on gender,
race and ethnicity, many of the older incapacities have been removed. For example, English
law used to treat married women as lacking the capacity to own property or act independently of
their husbands (the last of these rules was repealed by the Domicile and Matrimonial Proceedings
Act 1973, which removed the wife's domicile of dependency for those marrying after 1974, so that a
husband and wife could have different domiciles).
Minors and Contractual Capacity[edit]

A minor (typically under 18) can disaffirm a contract made, no matter the case. However, the entire
contract must be disaffirmed. Depending on the jurisdiction, the minor may be required to return any
of the goods still in his possession. Also, barter transactions such as purchasing a retail item in
exchange for a cash payment are generally recognized through a legal fiction not to be contracts
due to the absence of promises of future action. A minor may not disavow such a trade.[1]
 Disaffirmance - it must be timely. For example, a contract that goes beyond two years of
reaching the age of majority would be considered ratified. Minors are still allowed to disaffirm,
even if their age is misrepresented. They will not face tort violations. Some states don't allow
disaffirmance if the consideration cannot be returned.
 Obligations - most states hold that a minor only must return the goods (consideration) if the
goods are still in the minor’s possession. Many states are requiring that the minor restore the
adult (other party) to the state they were in before the contract was made. Minors are beginning
to be held responsible for damages, wear, tear, etc. of the good in question upon return. A suit
for tort is considered by some states to be an enforcement of the contract and is not allowed.
 Liability - for necessities, (1) the item contracted for must be necessary for minor’s existence,
(2) the value must be up to that of the current standard of living or financial/social status (not
excessive in value), (3) the minor must not be under the care of a parent/guardian who is
required to supply the item. A minor could be held liable for a contract for the purchase of luxury
items (those that are not in the financial/social/standard of living range).
 Ratification - accepting and giving legal force to an obligation. Express ratification (for a minor)
is expressly stating, orally or in writing that he/she intends to be bound by the contract. Implied
ratification is when the conduct of the minor is inconsistent with that of disaffirmance or when
minor fails to disaffirm an executed contract within a reasonable period.
Generally, the courts base their determination on whether the minor, after reaching the age of
majority, has had ample opportunity to consider the nature of the contractual obligations he or she
entered into as a minor and the extent to which the adult party to the contract has performed.[2] As
one court put it, "the purpose of the infancy doctrine is to protect 'minors from foolishly squandering
their wealth through improvident contracts with crafty adults who would take advantage of them in
the marketplace.'"[3]
Minor (law)[edit]
Main article: Minor (law)
The definition of an infant or minor varies, each state reflecting local culture and prejudices in
defining the age of majority, marriageable age, voting age, etc. In many jurisdictions, legal contracts,
in which (at least) one of the contracting parties is a minor, are voidable by the minor. For a minor to
undergo medical procedure, consent is determined by the minor's parent(s) or legal guardian(s). The
right to vote in the United States is currently set at 18 years, while the right to buy and
consume alcohol is often set at 21 years by U.S. state law. Some laws, such as marriage laws, may
differentiate between the sexes and allow women to marry younger. There are instances in which a
person may be able to gain capacity earlier than the prescribed time through a process
of emancipation. Conversely, many states allow the inexperience of childhood to be an excusing
condition to criminal liability and set the age of criminal responsibility to match the local experience
of emerging behavioral problems (see doli incapax). For sexual crimes, the age of
consent determines the potential liability of adult accused.
As an example of liability in contract, the law in most of Canada provides that an infant is not bound
by the contracts he or she enters into except for the purchase of necessaries and for beneficial
contracts of service. Infants must pay fair price only for necessary goods and services. However,
the British Columbia Infants Act (RSBC 1996 c.223) declares all contracts, including necessities and
beneficial contracts of service, are unenforceable against an infant. Only student loans and other
contracts made specifically enforceable by statute will be binding on infants in that province.
In contracts between an adult and an infant, adults are bound but infants may escape contracts at
their option (i.e. the contract is voidable). Infants may ratify a contract on reaching age of majority. In
the case of executed contracts, when the infant has obtained some benefit under the contract,
he/she cannot avoid obligations unless what was obtained was of no value. Upon repudiation of a
contract, either party can apply to the court. The court may order restitution, damages, or discharge
the contract. All contracts involving the transfer of real estate are considered valid until ruled
otherwise.
Insanity, mental illness, or mental/medical condition[edit]

See also: Insanity and mental disorder
Individuals may have an inherent physical condition which prevents them from achieving the normal
levels of performance expected from persons of comparable age, or their inability to match current
levels of performance may be caused by contracting an illness. Whatever the cause, if the resulting
condition is such that individuals cannot care for themselves, or may act in ways that are against
their interests, those persons are vulnerable through dependency and require the protection of the
state against the risks of abuse or exploitation. Hence, any agreements that were made are
voidable, and a court may declare that person a ward of the state and grant power of attorney to an
appointed legal guardian.
In England and Wales, this is a specific function of the Court of Protection, and all matters
concerning persons who have lost, or expect soon to lose, mental capacity are regulated under
the Mental Capacity Act 2005. This makes provision for lasting powers of attorney under which
decisions about the health, welfare and financial assets of a person who has lost capacity may be
dealt with in that person's interests.
In Ireland the Assisted Decision-Making (Capacity) Act was passed in 2015.[4] This Act addresses the
capacity of people with intellectual disabilities. The general principles are set out in section 8 of the
Act.
This sort of problem sometimes arises when people suffer some form of medical problem such as
unconsciousness, coma, extensive paralysis, or delirious states, from accidents or illnesses such
as strokes, or often when older people become afflicted with some form of
medical/mental disability such as Huntington's disease, Alzheimer's disease, Lewy bodydisease, or
similar dementia. Such persons are often unable to consent to medical treatment and otherwise
handle their financial and other personal matters. If the afflicted person has prepared documents
beforehand about what to do in such cases, often in a revocable living trust or related documents,
then the named legal guardian may be able to take over their financial and other affairs. If the
afflicted person owns his/her property jointly with a spouse or other able person, the able person
may be able to take over many of the routine financial affairs. Otherwise, it is often necessary to
petition a court, such as a probate court, that the afflicted person lacks legal capacity and allow a
legal guardian to take over their financial and personal affairs. Procedures and court review have
been established, dependent on the area of jurisdiction, to prevent exploitation of the incapacitated
person by the guardian. The guardian periodically provides a financial accounting for court review.
In the Criminal Law, the traditional common law M'Naghten Rules excused all persons from liability if
they did not understand what they were doing or, if they did, that they did not know it was wrong.
The consequences of this excuse were that those accused were detained indefinitely or until the
medical authorities certified that it was safe to release them back into the community. This
consequence was felt to be too draconian and so statutes have introduced new defenses that will
limit or reduce the liability of those accused of committing offenses if they were suffering from a
mental illness at the relevant time (see the insanity and mental disorder defenses).
Drunkenness or drug abuse[edit]

Although individuals may have consumed a sufficient quantity of intoxicant or drug to reduce or
eliminate their ability to understand exactly what they are doing, such conditions are self-induced
and so the law does not generally allow any defense or excuse to be raised to any actions taken
while incapacitated. The most generous states do permit individuals to repudiate agreements as
soon as sober, but the conditions to exercising this right are strict.[citation needed]
Bankruptcy[edit]
See also: Bankruptcy
If individuals find themselves in a situation where they can no longer pay their debts, they lose their
status as credit-worthy and become bankrupt. States differ on the means whereby their outstanding
liabilities can be treated as discharged and on the precise extent of the limits that are placed on their
capacities during this time but, after discharge, they are returned to full capacity. In the United
States, some states have spendthrift laws under which an irresponsible spender may be deemed to
lack capacity to enter into contracts (in Europe, these are termed prodigality laws) and both sets of
laws may be denied extraterritorial effect under public policy as imposing a potentially penal status
on the individuals affected.
Enemy aliens and/or terrorists[edit]
During times of war or civil strife, a state will limit the ability of its citizens to offer help or assistance
in any form to those who are acting against the interests of the state. Hence, all commercial and
other contracts with the "enemy", including terrorists, would be considered void or suspended until a
cessation of hostilities is agreed.

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Natural persons[edit]

See also: Testamentary capacity

Minors and Contractual Capacity[edit]

Insanity, mental illness, or mental/medical condition[edit]

Drunkenness or drug abuse[edit]

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