Book Opener

Other Contractual Capacity RulesAs you have seen, parties to a contract must have the capacity toenter into the contract. Under certain conditions, a minor may disaffirma contract into which he or she has entered. Other classes of personsare also able to avoid contracts.Mentally Impaired PersonsThe right given to minors to disaffirm contracts is also given to thementally impaired, and for the same reason. They are considered unableto make sound judgments. Before a guardian is appointed, a mentallyimpaired person’s contracts are voidable. A mentally impaired person isresponsible for the fair value of necessaries. If a mentally impaired personhas been declared insane or incompetent by a court action, and aguardian has been appointed to look after his or her affairs, the mentallyimpaired person’s contracts are absolutely valid.Intoxicated PersonsPersons who are intoxicated by alcohol or drugs at the time theyenter a contract are sometimes able to disaffirm those contracts. Theircontracts are treated in much the same way as the contracts of minorsand the mentally impaired. To disaffirm a contract for this reason, aperson must have been so intoxicated at the time of the contracting thathe or she did not understand the purpose, nature, or effect of the transaction.The judge or the jury must decide that question. Intoxicatedpersons, like minors and the mentally impaired, are responsible for thefair value of necessaries.Other Capacity LimitationsOther classes of persons lack the capacity to enter into certain typesof contracts. In a few states, convicts have certain limitations placed ontheir powers to contract. Aliens —people who are living in this countrybut owe their allegiance to another country—may also have limitationsplaced on their capacity to contract. In times of war, foreign-bornpersons who are designated as enemy aliens are denied certain legal capacities.Even in peacetime, some states prevent aliens from enteringinto certain types of contracts.When an international crisis calls for severe measures, the governmentmay freeze most or all of the assets belonging to a foreign nationon deposit in this country’s financial institutions. This drastic actionlimits the ability of the country owning the frozen assets to make contracts.Following the terrorist attacks of September 11, 2001, and thewars in Afghanistan and Iraq, many foreign assets in this country werefrozen. Some foreign nationals who remained in this country becameenemy aliens, and their capacity to contract was limited.Eat, Drink, andBe Merry?Pang Woo is a salesrepresentative for acarpet retailer. She isresponsible forcorporate accounts andselling to large officebuildings. Whenfinalizing contracts withclients, she likes to takethem out for lunch ordinner and a few drinks.She insists that theyeat, drink, and be merrybefore discussingbusiness. While she,herself, drinks very littlealcohol, she sees to itthat everyone else hasplenty. Only after herclients have had a fewdrinks will she finalize acontract. Are Ms. Woo’sactions ethical? Do theclients have an ethicalresponsibility to avoiddrinking before signinga contract?Chapter 7: Contractual Capacity 157