Capacity and Legality

• adjudged insane—A person who has been adjudged insane by a proper court or administrative agency. A contract entered into by such a person is void.
• competent party’s duty of restitution—If a minor has transferred money, property, or other value to the competent party before disaffirming the contract, that party must place the minor back into status quo.
• contract in restraint of trade—A contract that unreasonably restrains the trade.
• contracts contrary to public policy—Contracts that have a negative impact on society or interfere with the public’s safety and welfare.
• disaffirmance—The act of a minor to rescind a contract under the infancy doctrine. Disaffirmance may be done orally, in writing, or by the minor’s conduct.
• emancipation—When a minor voluntarily leaves home and lives apart from his or her parents.
• exculpatory clause—A contractual provision that relieves one (or both) parties to the contract from tort liability for ordinary negligence.
• gambling statutes—Statutes that make certain forms of gambling illegal.
• immoral contract—A contract whose objective is the commission of an act that is considered immoral by society
• in pari delicto—When both parties are equally at fault in an illegal contract.
• infancy doctrine—A doctrine that allows minors to disaffirm (cancel) most contracts they have entered into with adults.
• insane, but not adjudged insane—A person who is insane but has not been adjudged insane by a court or administrative agency. A contract entered into by such person is generally voidable. Some states hold that such a contract is void.
• intoxicated person—A person who is under contractual incapacity because of ingestion of alcohol or drugs to the point of incompetence.
• legal insanity—A state of contractual incapacity as determined by law.
• licensing statute—Statute that requires a person or business to obtain a license from the government prior to engaging in a specified occupation or activity.
• minor’s duty of restoration—As a general rule a minor is obligated only to return the goods or property he or she has received from the adult in the condition it is in at the time of disaffirmance.
• minor—A person who has not reached the age of majority.
• ratification—The act of a minor after the minor has reached the age of majority by which he or she accepts a contract entered into when he or she was a minor.
• regulatory statute—A licensing statute enacted to protect the public.
• revenue raising statute—A licensing statute with the primary purpose of raising revenue for the government.
• Sabbath law—A law that prohibits or limits the carrying on of certain secular activities on Sundays.
• usury law—A law that sets an upper limit on the interest rate that can be charged on certain types of loans.