MODULE 23 CONTRACTS 131

I
(a) By words, either orally or in writing but must ratify all, or
(b) By actions that indicate ratification
(c) Ratification prior to majority is not effective
(6) If minor misrepresents hislher age when making contract, courts are split on effect
(a) Some courts allow minor to disaffirm contract anyway but allow other party to sue for
fraud

(b) Some allow minor to disaffirm if minor returns consideration in similar condition
(c) Other courts will not allow minor to disaffirm especially if it was a business contract
(7) A minor usually is liable for own torts (civil wrongs), but this may depend on his/her age
(above 14 commonly liable)

(a) Parents are not liable for torts of minors unless they direct or condone certain conduct or
were negligent themselves

c. Incompetent persons
(1) Contract by person adjudicated insane is void
(a) Insane person need
not return consideration

(2) If contract is made before adjudication of insanity, it may be voidable by incompetent person
(a) Where courts hold such agreements voidable, restitution is condition precedent to disaffir-
mance

d. Legal capacity of one intoxicated is determined by his/her ability to understand and by degree of

intoxication

(1) Contracts are enforceable, in general, unless extent of intoxication at time contract made was
so great that intoxicated party did not understand terms or nature of contract-then
contract
voidable at option of one intoxicated if s/he returns items under contract

e. Corporations contract through agents and are limited by their charters

5 . Legality . .
a. Agreement is unenforceable if it is illegal or violates public policy
b. When both parties are guilty, neither will be aided by court (i.e., if one party had already given

some consideration, slhe will not get it back)

(1) But if one party repudiates prior to performance, slhe may recover hislher consideration
EXAMPLE: X contracts to buy stolen goods from Y. If X pays Y but then repents and
refuses to accept the
stolen goods, X may recover the money he paid Y.

c. When one party is innocent, s/he will usually be given relief

(1) A member of a class of people designed to be protected by statute is considered innocent (e.g.,
purchaser of stock issued in violation of blue-sky laws)'

d. Types of illegal contracts

(1) Agreement to commit crime or tort
(a) If agreement calls for intentional wrongful interference with a valid contractual relation-
ship, it is an illegal agreement

1] However, a sale of a business containing a covenant prohibiting seller from owning or

operating similar business as well as the termination of an employee who has
agreed
not to compete are legal and enforceable provided the agreement
a] Protects legitimate interests of buyer or employer without creating too large a bur-
den on seller or employee (based on ability to find other work)

b] Is reasonable as to length of time under the circumstances to protect those inter-

ests

c] Is reasonable as to area to protect interests of same area

EXAMPLE: Seller of a small bakery agrees not to compete in Washington, DC, for six months.