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Exam 16: Capacity and Legality

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Question 1

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A person who has the mental ability to understand his or her obligations under the contract is presumed to have capacity.

A) True
B) False

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Question 2

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[Irresponsible Teen] Rose is 17 in a state where the age of majority is 18. She purchased a prom dress from Your Special Day. She wore it to the prom and then attempted to return it to the store, claiming that she was a minor and that she was entitled to a refund. The dress had clearly been worn and had a purple stain which Rose claimed was from grape juice. Additionally, a few days before she turned 18, Rose purchased a used car from Sal's Car Savings. She had a deal whereby she paid $100 per month on the car. She drove the car and made payments for six months after she turned 18. Rose then returned the car to Sal's Car Savings, informed the owner that she was under 18 when she entered into the contract to purchase the car, and told the owner that she was returning the car for a full refund. Sal's Car Savings claimed the car was a necessary. Rose and her parents disagreed claiming that the parents were ready and willing to provide a car to Rose, and that she only purchased the car from Sal's Car Savings because she liked that particular style and color. When purchases of the dress and car were made, the sellers knew that Rose was under the age of 18. -Which statement about Rose's attempt to return the damaged dress is true?

A) In all states Rose has the right to keep the dress and get a refund.
B) In all states Rose must return the dress, but she has a right to a full refund.
C) Regardless of what she does with the dress, Rose has no right to a refund in any state.
D) In some states Rose would have an obligation of restitution to the store.
E) In all states Rose would have an obligation of restitution to the store.

F) A) and D)
G) C) and E)

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Question 3

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Explain Great Britain's approach to the age of majority.

Primarily for ________, most courts or state legislatures have determined that a minor should not have the right to disaffirm certain types of contracts including life insurance, health insurance, counseling, education loans and marriage contracts.

[Pedicurist license] Briana applied for a job at Nedra's salon as a pedicurist and signed an employment contract with Nedra. The contract contained a provision that stated, "Employee cannot be terminated for poor performance without prior notice and thirty days to improve performance." After Briana worked for Nedra for two months, Nedra noticed Briana did not follow standard public health procedures for pedicures. Nedra called the state licensing agency and found out that Briana's pedicurist license had expired ten years ago. Nedra's state requires that, in order to protect public health, all pedicurists must be licensed by the state in order to perform pedicures at salons within the state. Briana claimed that, according to the explicit terms of the contract, Nedra could not terminate her for poor performance without first giving her notice and thirty days to improve her performance. -Is the employment contract's provision, that Briana cannot be terminated without notice and thirty days to improve, likely enforceable?

Tillman entered into a contract with Paul to purchase a stereo. Tillman is 17 when he purchases the stereo and a month after he turns 18 he wants to disaffirm the contract, can he?

A statement releasing one of the parties to an agreement from all liability, regardless of who is at fault or what the injury suffered is, would be referred to as a[n] ________ agreement.

In most states, a person is given full legal capacity to enter into contracts when he or she becomes ________ before reaching the age of majority.

For purposes of determining capacity, intoxicated persons include those under the influence of alcohol, but not drugs.

As a general rule, most states will not allow a minor to disaffirm contracts for which of the following items?

A severable contract, also known as a(n) ________ contract, contains multiple parts that can each be performed separately.

[Poker dealer] Roland and Parna sign a contract for Parna to work as a poker dealer for a minimum of one year in Roland's casino. The contract includes a requirement for Roland to pay for a training program for Parna for the software system used throughout the casino. Parna completes the program and obtains a certificate. The week before Parna begins work at Roland's casino, their state passes a law that all poker dealers must be 21 years old. Parna, however, is only nineteen. -Is Roland required to employ Parna?

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous. -Tevis's assertion that he should be able to avoid the contract involving Flora because he was intoxicated is best supported by which of the following statements under the Restatement of Contracts, Section 16?

[Useless Friend] Antoine and Tevis are roommates. Antoine has Tevis sign a contract promising to wash Antoine's car once a week for $80 per month in payment. The contract incorporated by reference terms on the back. The terms on the back were in very small print and required Tevis to cook dinner for Antoine, do his laundry, and clean their apartment. Antoine is also very angry with his former girlfriend, Flora, and decides to start rumors that would constitute the tort of defamation. He spreads via SnapChat that Flora cheated on tests and stole from friends. Antoine wants to enlist the help of Tevis in smearing Flora but knows that Tevis would be hesitant to assist in his endeavors. One evening, however, Tevis comes home clearly intoxicated - a fact apparent to Antoine. Antoine has him sign a contract agreeing to defame Flora for $50. When he sobers up, Tevis tells Antoine that he was drunk and that he has no intention of defaming Flora, who also happens to be the best friend of Tevis's new girlfriend. He also finally takes a look at the contract involving work for Antoine and tells Antoine that the contract is outrageous. -Tevis's claim that he had no obligation to defame Flora is supported by which of the following statements?

Which of the following is true regarding Rose and her parents asserting that the car was a necessary?

[Motorcycle crash] Cassandra, who would be turning 18 in two weeks, wanted to purchase a motorcycle at Hal's Cycles. Hal explained she could pay monthly installments through a financing agreement, and that he needed an ID to verify she was at least 18 years old. Cassandra, who strongly resembled her older sister Alana, handed Alana's drivers' license to Hal, but Hal did not notice the license had the wrong name. The next day, when cruising in her new motorcycle, Cassandra crashed into Jonah, who was injured in the collision. The next month, Cassandra received a bill for the first installment of the motorcycle. Her parents also received a notice that they were being sued by Jonah because of Cassandra's collision. Realizing her parents would be upset that she purchased a motorcycle, Cassandra went to Hal to return the broken motorcycle and tell him she was a minor and she's not responsible for any payments under the financing agreement. -According to the majority rule, would Cassandra have the right to disaffirm the financing agreement?

If a contract contains an illegal clause or section in the contract, courts will generally sever the illegal clause or section and enforce only the legal portions of the contract.

As a general rule, parents are not liable for contracts entered into by their minor children.

Elise speaks very little English. Herman comes to her house to sell her life insurance. Herman persuades Elise to sign a contract for Elise to buy life insurance that she does not need for a price of $300 a month even though she only brings home $750 a month from her job. Under the contract, if she does not pay the $300 a month, Elise owes Herman $100. A court would find the terms of this contract ________.

In King v. Riedl, the plaintiffs claimed that the defendant did not have the right to proceed against them for sums allegedly owed, because the contractor was not licensed as a residential home builder (as required by state law) . What was the result on appeal?