Contract Capacity and Legality Case Study

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Contract-Capacity and Legality

Tommy McCartney, a minor, buys an automobile from a dealership owner for $6,000. Six months later, on realizing that he needs money to pay for his higher education, he returns the car to the dealership owner claiming a full refund. At the time of its return to the dealership owner, the car has already clocked eight thousand miles and in addition to having its tires worn out, it also has a number of dents on its fender (front).

Can Tommy legally escape his obligations in regard to the contract? On what basis might he be able to do so? Further, would it be considered ethical to allow Tommy to escape his obligations in regard to the contract?

Rule

Natural individuals who are past the majority age can enter into legally binding contracts as they are considered to have the full legal capacity to do so. However, in some instances, an individual may be presumed to have a limited contractual capacity if such an individual happens to be intoxicated, mentally unstable or of a minority age. Those taken to have no contractual capacity whatsoever include those for whom legal guardians have been appointed to act on their behalf and those who are considered to be habitual drunkards or insane (through adjudication).Buy full Download Microsoft Word File paper
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Case Study on Contract Capacity and Legality Assignment

Based on the particulars of this case, the legal capacity to contract as a vital element for a contract to be considered legally binding could be taken as a major consideration based on Tommy's age at the time of purchasing the automobile. In basic terms, any contract entered into with a person who happens to be a minor (below the majority age) is voidable. In that regard, a minor has an option of disaffirming or voiding contracts to which they are party. It can be noted that for a minor in this case to void a contract, he or she only needs to demonstrate an intention to do so through the use of actions or mere words. There are no other formalities required for the same to take place. The minor in this case must however avoid the contract in its entirety and not in portions. In most cases, the minor has some disaffirmance obligations which include the issuance of a disaffirmance notice to the competent party as well as the return of any contractual consideration (regardless of its condition) the minor may have taken possession of in the course of the contract. Under most circumstances, the other party to the contract does not have any recourse even if the minor returns the consideration in a worse condition than he or she received it. In such a case, the minor is entitled to a full refund if he or she wishes to rescind the contract with no further obligation owed to the other competent party. However, in some instances, the minor is taken to have a duty of restoration in that he or she must restore the consideration to the condition it was in at the time of the contract. The restoration figure in this case could be the difference between the value of the consideration at the time of the contract and its value at the time of its return. Whether the minor owes the other party restoration or not depends on the laws of the state.

However, when it comes to the right of a minor to disaffirm a contract, there are some exceptions. Though the intention behind allowing those who have not reached the majority age to disaffirm a contract is tailored to protect minors from unscrupulous competent parties, some instances bar minors from disaffirming a contract due to… [END OF PREVIEW] . . . READ MORE

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