chapter 9 we deal with the second two requirements of contract law which are cover capacity and legality so contractual capacity is when the person has a mental status that they understand what what they're getting themselves into by signing this contract so miners people under the age of 18 are allowed to legally enter into contracts however it is voidable by the miner say with a person under the age of 18 enters into a contract with a person over the age of 18 the person that's an adult cannot void the contract but the miner can then we'll also talk about people who are mentally incompetent at the time that they sign the contract those could be voidable as well and then obviously we have to have legal purpose so the miners write to void that contract is called their right to discipline the age of maturity so say for some reason the the miner goes out and gets an apartment before the age of 18 maybe they started high school early and they graduated and they're 17 they could go get that apartment and if the landlord would allow them to sign that lease they could move in and start paying the rent well then say when they turn 18 they decide oh I don't like this apartment anymore well they could void that contract as long as they contacted the land low landlord and said I want to just affirm this contract I'm now an adult they they would no longer be liable they would have to pay for what they used so the this ability to disent get the miners off without paying it just does not for future liability standpoints things that they have to pay in the future they can get out of those and and they can they could do it verbally call the landlord and say hey I know I'm going to be a part of it or by actions and actually just move out and make that next payment all property has to be returned to the other party that is called restitution when you return the property they do they again they have to be they have to pay for those necessities so that's what this liability for a necessity necessaries are saying that if they have a contract for food or shelter or clothing or medical attention they will be like liable for what they use they just are disapper mning that future liability now on the other hand if they don't want to disappear man if they don't want to avoid it they want to continue on with this contract then they call that ratification so once that miner turns the age of 18 they can make their next payment on that lease and they've now ratified that contract and they are liable for the future rental payments because now they are of legal age and they made that decision to continue on with that lease or whatever contract they're involved in then we get into mentally people who are who don't have them the mental capacity to understand the consequences of their actions so that could be intoxicated people so you know if you are so drunken and I think that's why Las Vegas has made some changes to their to their marriage laws because they would have people who enter into a marriage contract I mean marriage basically is a legal contract intoxicated and then they wake up the next morning and say oh my god what did I do I did not comprehend the consequences of my actions so now I think there's like a 24-hour waiting period and things like that before the marriage can happen but maybe say you're you go out and you buy a car and you are intoxicated and you sign the agreement and everything then the next day you go in and say hey I didn't know what I was getting myself into so again you'd have to do it in a reasonable time upon sobering-up and that would be the contract would be avoidable by that person who does not understand the consequences of their action so then when we get into this this mentally incompetent person's there's different levels if the person has has a court-appointed guardian so it's gone to courts the courts have said hey list this person is not mentally stable they cannot make these types of decisions on their own and there's a specific Guardian a parent a brother or sister whoever has been appointed to look over that person then that mentally competent incompetent person cannot even enter into a contract it's a it would be a void contract because they do not have legal capacity if they are not that you know so maybe they've just suffered from some mental illness maybe they're on disability but I mean it's not to the point where they have a guardian they could enter into a valid contract it could be voidable if at the time that they entered into the contract they did not understand the consequences the nature and the purpose the scope of that contract and then as soon as they maybe go home and talk to somebody else they realize oh I can't do that that becomes avoidable if they do understand the consequences of those actions when they sign that contract then it is a valid contract okay then our last requirement for a valid contract is legality so it has to be something that is legal in the federal and state law if it is illegal then it's a void contract so some common examples I gave the example of like selling marijuana and that's something that's going to be legal probably in more States but right now it's still not legal in the state of Ohio if you entered into a contract to purchase marijuana that is not a legally valid contract you couldn't take that to court but some common ones that are listed here on this slide are Ussuri which is in a legal rate of interest so a lot of times those like payday loan places some of those have shut down because they were charging illegal rates of interest so I think in the state of Ohio the interest rate cannot be more than 24 percent well if you really did the math of the amount of time that you borrowed the money and the amount of interest that they charged you they were charging you well more than 24 percent and that was illegal so some of them did shut down because I think they couldn't afford to do it um in the legal ways I'm gambling is another thing that we've had some of those gambling places that we have had in our areas those have shut down and I think it's because there are there was some gambling that was legal in some that was not legal so they had machines or tables or whatever that were not legal in the state and they got caught and they got shut down contrary contracts are contrary to public policy so there's two that are common in business there's the covenant not to compete in the sale of a business and a covenant not to compete in employment so if you are so say like I'm I'm a CPA so say I had my own CPA business and I want to retire I could sell that business to to another CPA who wants to you know just kind of step into a business that's already has customers and already operates but because it's kind of a personalized service my customers probably picked me if I would in turn say oh I've changed my mind now I don't want to retire and I open another CPA business 20 miles away in six months chances are all those customers are going to follow me so then the person basically bought nothing so then what you would do is you'd have that person sign a covenant not to compete so so you cannot open another accounting business in a 50 mile radius in five years so it has to be reasonable so again if I said in a 300 mile radius for 10 years that's not reasonable what the courts would do is they would just reform the contract they wouldn't say well the contract is void they'd say the contract is still legitimate but we're just going to reform it to say maybe that reduced the mileage and reduce the timeframe so then it doesn't stop me from ever opening an accounting business I just can't do it close to this business that I sold if you were like a sales rep many times if you leave or when you actually probably when you get hired when you get hired for the company they will make you sign this covenant not to compete so it will say that you may not go to work for our competitor or start a similar business for a reasonable period of time and again in a reasonable geographic area because they don't want you to come in get all their trade secrets get all their information get access to all their customer lists and then go start your own business and then start to compete with them so those are both things that could be signed in the business there's also unconscionable contracts and exculpatory clauses so an unconscionable contract is one that is so oppressive to one party so it's so unfair that that one party is is going to suffer then they may step in and say no that probably that person does not have to fulfill their end of the deal it's an unconscionable contract there can be a sculptor it clauses where it releases one party from liability so you know some of them may be kind of legit so like I give the example of amusement parks or skydiving racetracks things where you are assuming the risk if you're going to participate in that so you know that there's a chance if you go on one of these crazy tall rollercoasters or those demon drops that drop you down you could possibly have a heart attack so you and you are taking that risk going on that or if you're pregnant you could harm your baby so there are signs about those things as you're lining up to take those rides so you're assuming the risk if it was something that was you know totally negligent of the of the amusement parks fault or negligence on the skydiving something not quite normal you could still sue them if they are negligent but if it's really just you had a heart attack on that ride you probably are not going to be able to sue the amusement park because you did assume the risk then we get into ascent so ascent goes back to do I have genuine agreement was there really genuine agreement so then there's a couple different types of mistake situations it could be mistake of a future value and that contract is going to be enforceable so so say maybe you take a tip from your stockbroker that says hey you know by Amazon stock because I think they're gonna go up double in the next year well then you buy that stock and darn it Amazon doesn't go up double maybe it goes down well you can't go back and Sue and say hey you know I thought it was gonna double that's a risk that you took there no one knows the future value everybody's just estimating if it's a mistake of a material fact then that is that is one that does release the parties if it was just one-sided which is a unilateral mistake then that person has the right to cancel the contract so say you know say you're buying something online and you're looking at the pictures and you feel it is made of something you know it's it's a metal product and then it really comes to you and it's plastic and you you you know nowhere in it did you give you the specifications you could back out of that return it and say I didn't understand I thought it was metal it's not if it's bilateral where both parties are confused then either party can get out if it's just unilateral only the one person that's that's confused could could void the contract then there's fraudulent misrepresentation so we talked about fraud when we talked about our torts but a fraud is a misrepresentation of a material fact with the intent to deceive an innocent party relied on this misrepresentation and suffered some sort of injury so if it's a fraudulent contract then the innocent party can rescind it cancel that contract they can seek they can they would seek to be restored a restitution have whatever they paid return to them and they could actually sue under tort law and seek damages for any lost revenues or time or whatever um then undue influence and duress I talked about these you know I've hinted at these in the past that there's not true agreement if there's undue influence or duress but you do want to understand those so the innocent person the person who genuinely did not agree to it because they were under undue influence so maybe it's a parent who influences you a husband and attorney there's some sort of a special relationship with this person and they're putting pressure on you to enter into this contract then you agree because you feel forced well that is undue influence and it could be voided by you or duress duress is a threat of physical harm or extortion in some way so they say I'm going to come back and hurt your family if you don't sell me this car for cheap that would be you you're going to do it because you're scared but you could avoid that contract because you were under duress at the time and the last thing that we that we touched on in the last chapter was to say that certain contracts have to be in writing to be enforceable it's covered under the statute of frauds so the list of it is any properties that or any contracts that deal with real property so mortgage mortgages that you're going to enter into home sales or purchases those have to be in writing to be enforceable if the contract cannot be completed within a year it's considered a long term contract those long term contracts also have to be in writing to be enforceable collateral so like you're gonna cosign on a loan so say here's you know your child goes and gets a vehicle loan in you're a cosigner that can't just be verbal you have to put it in writing to say I will be liable on this loan or I will be liable on this lease agreement that has to be in writing prenuptial agreements because again it's going to be a he-said she-said kind of a disagreement if it goes bad those prenuptial agreements have to be in writing to be enforceable and any contracts of sale of goods that are over five hundred dollars have to be in writing to be enforceable so a lot of times that's just going to be a receipt that you sign but that still is in writing okay so that kind of completes the requirements of contract law the next chapter we will get into some more details of what happens if the contract doesn't pan out the way that we hope it would