In: Finance
This is Legal environment in Business
questions
1. Certain persons by law do not have legal capacity to enter into contracts. Discuss this statement with reference to children and insane people indicating the instances where exceptions are granted for such persons if there are any.
In case of legally binding contracts, certain persons so not have the legal capacity to contract. These people are minors and mentally unsound. If they enter into contract, the contract becomes void.
Minor
A minor, that is those aged below 18 years lack the capacity to enter into a legal contract. If a minor enter into a contract, the minor can honor the contract or void it. There are exceptions to this. In some states, a minor cannot void the contract for necessities like food, clothing and housing. Also, if the minor turns 18 and had not voided the contract, such a contract is valid and enforceable by law.
Mentally unsound
If a mentally unsound person enters into a contract, the contract can be voided by the person or by the person’s guardian. Mental capacity is defined as the ability to understand the full meaning and effects of the contract. This is called the “cognitive test”. Some states use the “motivational test”. If there is motivation to enter into contract, then such contracts are legal.
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