Discussion

Please research online a recent legal issue dealing with the topic of chapter 8- capacity and consideration.

Quickly summarize the issue, and provide a link for students who want to read about it.

Then use the knowledge the learned in Chapter 8 to debate  FOR and AGAINST the legal issue, arguing both sides.

SOURCE your LEGAL RESEARCH/ REFERENCES: Federal/ Local/ City Laws, Statutes, Codes, Cases, etc

Focus on LEGAL arguments like you were in court.

Chapter 8
Capacity and Consideration
I. Capacity to Contract
◼ Void Contracts
◼ Voidable Contracts
◼ Enforceable Contracts
◼ Persons of Unsound Mind
◼ Persons Incarcerated
Capacity
◼
Not everyone has the mental capacity to understand that
an offer and an acceptance generally forms a binding
contract, enforceable in court
◼
Adult – is an individual who is 18 years of age or older
◼
Minor – is an individual who is under 18 years of age
A. Void Contracts
◼
“a minor may make a contract in the same manner as an
adult, subject to the power of disaffirmance…” [Family Code
§ 6700]
◼
However, there are 3 types of contracts a minor may not
enter into:
1.
Give a delegation of power
2.
Make a contract relating to real property or any interest therein
3.
Make a contract relating to any personal property not in the
immediate possession or control of the minor
[Family C.§ 6701]
B. Voidable Contracts
◼
A minor also had the power to DISAFFRIM (void) the
contract [Family C.§6700]. To be effective, the
disaffirmance must be of the entire contract and not a part
of the contract.
◼
◼
◼
Express Disaffirmance
Implied Disaffirmance
The minor must return anything received from the other
contracting party under the terms of the contract if the minor
still has it in his possession
1. Minor as a Buyer of Goods
or Services
◼
If a minor purchases a bike for $900, a contract is
formed
◼
The contract is subject to disaffirmance at any time
while the minor is under 18 years of age
◼
After the minor turns 18, he must bring the bike back
within a reasonable period of time if he wishes to
disaffirm the contract
2. Ratification
◼
If a person after reaching the age of majority indicates
either expressly or impliedly that he is willing to be
bound by the contract made while a minor, then he
has made a RATIFICATION OF THE CONTRACT
◼
Merchants can refuse to sell to minors because
minors lack contractual capacity
C. Enforceable Minor Contracts
◼
A small number of contracts made by any minor are binding,
and minors who are emancipated may make binding
contracts like adults.
1.
Necessaries for Minors
2.
Contracts for Minor’s Medical Treatment
3.
Contracts for Attorney’s Fees
4.
Contracts for Art, Entertainment, and Professional Sports
5.
Plea Bargain
6.
Emancipated Minors
D. Persons of Unsound Mind
◼
The second fundamental requirement for capacity to
contract is that the contracting parties be of sound
mind at the time of contracting
1.
Insanity Means No Contractual Capacity (VOID)
2.
Contractual Capacity (MAY BE VOIDABLE)
3.
Due Process in Competence Determination Act
(VOID)
E. Persons Incarcerated
◼
A person imprisoned has the right to inherit, own,
sell, or convey real or personal property, including
all written and artistic material produced or created
by the person during the period of imprisonment
II. Consideration
A. The Concept
◼
Good consideration for a promise is any benefit
conferred, or agreed to be conferred, upon the
promisor, by any other person to which the promisor is
not lawfully entitled
◼
CONSIDERATION means that in order to get
something, you have to give up something
◼
To have an enforceable contract, it is necessary that
sufficient consideration be present [ CC§ 1550]
◼
Consideration can be as simple as exchanging
promises
◼
Bilateral vs. Unilateral consideration
B. Presumption of Consideration
◼
[CC§ 1614-1615]
◼
If the parties to the agreement put that agreement in
writing, there is a presumption that consideration exists
◼
A presumption shifts the burden of proof away from the
party for whom the presumption exists
C. The Value of Consideration
◼
Consideration does not have to consist of something that
has an economical dollar value attached to it
◼
What matters is that the parties exchanged promises that
had “value” to them
D. Gifts
◼
“A gift is a transfer of personal property, made
voluntarily, and without consideration” [CC§ 1146]
◼
Once a gift is given, it cannot be revoked by the donor
[CC§ 1148]
E. When Gifts May Be Revoked
1.
Impending Death
2.
Gifts in Contemplation of Marriage
F. Unrequested Merchandise
◼
If a seller tries to sell goods or merchandise by actually
sending the unordered item to an individual, hoping that
they will be paid, it is considered an unconditional gift to
the recipient, who has no obligation to pay the sender
[CC§ 1584.5]
G. Past Consideration or Moral
Consideration
◼
If a promise is made to do or not do something
based on an event or situation that has already
taken place, that promise is unenforceable
◼
Promises that are based upon the promisor’s
feeling of a moral obligation or duty are also NOT
enforceable
H. Illusory Promises
◼
If it appears that a party has incurred a legal detriment
as a result of the bargain, but upon close scrutiny it is
discovered that the party has not changed the legal
position at all from what it was prior to the bargain, then
the promise is ILLUSORY
I. Needs and Requirements
vs. Desires and Wants
◼
Enforceable
◼
◼
If you agreed to sell tires to a trucking company at a specific price in
return for which the trucking company agreed to purchase all the
tires it NEEDS for one year, there is an enforceable contract. The
trucking company gave up it’s legal right to buy tires from someone
else for one year.
Unenforceable
◼
If you enter into a bargain with a trucking company where you agree
to sell the trucking company tires for a specific price for one year and
the trucking company agrees to buy all of the tires that the company
may WANT during the next year, no enforceable contracts exists.
J. Pre-Existing Duties – No Consideration
For the Agreed Modification
◼
If you signed a contract with a builder to add a room
onto your house, he is legally obligated to fulfill his preexisting duty for the amount originally agreed to. He
may not ask for more money. You are not obligated to
give more consideration than you already agreed to.
K. Contract Modification Supported
By Consideration
◼
The parties to a contract are free to modify that contract,
and the modification is enforceable, provided
consideration exists
L. Unforeseen Conditions
◼
If, during performance of a contract, the party performing
encounters circumstances that were unforeseeable at the
time of contracting, which now impose a very substantial
hardship on that party to complete performance, he may now
ask for additional funds to finish performance. If you agree,
he is entitled to the additional funds as long as the condition
was UNFORESEEABLE.
M. Pre-Existing Duty to A Third Party
◼
If person “A” has a pre-existing duty, under contract with
person “B,” and then a 3rd party (“C”) makes an
additional promise to him based on the condition of the
original contract, the 3rd party is NOT obligated to fulfill
the promise since the person “A” had a pre-existing duty
under the original contract with person “B.”
N. Sale of Goods
◼
An agreement modifying a sales contract is binding on the
parties to that contract without consideration as long as the
modifications are made in good faith [UCC§ 1148]
O. Settlement of Claims
1.
Liquidated Debts
2.
Accord and Satisfaction
3.
Written Release as Full Satisfaction
4.
Unliquidated Claim
P. Revival of a Debt Barred By
Statute of Limitations
◼
When a debt has been barred by the running of the statute of
limitations, that debt becomes unenforceable in court
Q. Promissory Estoppel
◼
If the doctrine of promissory estoppel can be applied, the
promisor is prevented from using “no consideration” as a
defense when sued on the promise
Business Law RESOURCES and RECENT CA STATUTES – Business En��es
Business/ Law Resources:
Secretary of State: htps://www.sos.ca.gov/business-programs
Secretary of State -Business filings: htps://www.sos.ca.gov/business-programs/business-en��es/forms
CA Corpora�on Code: htps://leginfo.legislature.ca.gov/faces/codes.xhtml
Free textbook about Bus ines s Law es s entials des cribing the foundation and sources
that establish American law : https :/ / opens tax.org/ details / books / bus ines s -law-ies s entials
ABA: https :/ / www.am ericanbar.org/
CA Bar as s ociation: https :/ / www.calbar.ca.gov/
Recent CA statutes (Business Entities)
Chapter 151, Statutes of 2023 (SB 446, Wilk)
Adds provisions to the Nonprofit Corporation Law and the Cooperative Corporation Law,
which were previously passed for the General Corporation Law, that authorizes
otherwise lawful corporate actions, as defined, not in compliance, or purportedly not in
compliance, with the Nonprofit Corporation Law, the Cooperative Corporation Law, or
the articles, bylaws, or a plan or agreement to which the corporation is a party in effect
at the time of a corporate action, to be ratified, or validated by the superior court, in
conformity with certain procedures. The law requires, among other things, that the
ratification of a corporate action pursuant to these provisions be approved by the board
and, as applicable, approved by the members, and the articles, bylaws, and any plan or
agreement to which the corporation is a party in effect at the time of ratification, except
as specified. The law requires a corporation, if a corporate action ratified or validated
would have required the filing of an instrument with the Secretary of State or if the
ratification or validation would cause an instrument previously filed with the Secretary of
State to be inaccurate or incomplete in any material respect, to file a certificate of
ratification or certificate of validation to make, amend, or correct those instruments.
Chapter 115, Statutes of 2023 (AB 231, Chen)
Authorizes corporations conducting a meeting on or before December 31, 2025, to offer,
in addition to live audiovisual feed, an audio-only means of participation. Grants the
shareholder or proxyholder, or a member of a nonprofit public benefit corporation,
nonprofit mutual benefit corporation, nonprofit religious corporation, or cooperative
corporation, the right to choose whether to participate via audiovisual or audio-only
means and would prohibit the corporation from imposing any barriers on either mode of
participation. It would require a nonprofit public benefit corporation, nonprofit mutual
benefit corporation, nonprofit religious corporation, or cooperative corporation to verify
that person who has voted remotely is a member or proxyholder and provide members
and proxyholders a reasonable opportunity to participate in a meeting conducted by
remote communication, including an opportunity to read or hear the proceedings of the
meeting substantially concurrently with those proceeding
Chapter 31, Statutes of 2022 (AB 1802, Maienschein)
Adds language to further clarify how assets inadvertently or otherwise omitted from the
winding up process of a canceled limited liability company and later realized shall be
used. Specifically, such assets shall be used to discharge unsatisfied liabilities, if any,
known by the company, and any excess shall be distributed to the members. If assets
are inadvertently or otherwise omitted from the winding up, any person authorized to
wind up the affairs of a limited liability company that has filed a certificate of cancellation
(termination) under Section 17707.04 may use the assets to discharge the liabilities of
the limited liability company and may distribute to the members the remaining assets, if
any.
Chapter 217, Statutes of 2022 (SB 218, Jones)
Authorizes otherwise lawful corporate actions, as further defined by statute, not in
compliance, or purportedly not in compliance, with the General Corporation Law or the
articles, bylaws, or a plan or agreement to which the corporation is a party in effect at
the time of a corporate action, to be ratified, or validated by the superior court, in
conformity with certain procedures. In the event that the corporate action ratified or
validated would have required the filing of an instrument with the Secretary of State or if
the ratification or validation would cause any instrument previously filed with the
Secretary of State to be inaccurate or incomplete in any material respect, the
corporation must file a certificate of ratification or a certificate of validation to make,
amend, or correct those instruments.
Chapter 237, Statutes of 2022 (SB 49, Umberg)
Authorizes the conversion of a California corporation into a foreign other business entity
or foreign corporation, if also authorized by the laws of the foreign jurisdiction. A
Certificate of Conversion shall be filed with the California Secretary of State if a
California corporation is converting into a foreign other business entity or foreign
corporation.
Chapter 331, Statutes of 2022 (AB 2431, Committee on Banking and
Finance)
Makes certain clarifying changes to the required question on the Statement of
Information of a limited liability company regarding whether any manager or member
has an outstanding final judgment issued by the Division of Labor Standards
Enforcement or a court of law, from which no appeal therefrom is pending, for a
violation of any wage order or provision of the Labor Code. Note: this law change
requires the first Statement of Information filed in 2023 to be a complete Statement of
Information.
Chapter 617, Statutes of 2022 (SB 1202 Limón)
Makes various technical, non-substantive, and clarifying changes throughout the
Corporations Code in connection with the launch of the Secretary of State’s
(SOS) bizfile Online automated filing system for Business Entities, including, among
others, standardizing terms, making practices uniform across all business entity types,
and updating cross-references. Removes a prohibition on disclosing to the public the
name, address, and either the daytime telephone number or email address of an
association under the Commercial and Industrial Common Interest Development Act.
Business Law RESOURCES and RECENT CA STATUTES – Business En��es
Business/ Law Resources:
Secretary of State: htps://www.sos.ca.gov/business-programs
Secretary of State -Business filings: htps://www.sos.ca.gov/business-programs/business-en��es/forms
CA Corpora�on Code: htps://leginfo.legislature.ca.gov/faces/codes.xhtml
Free textbook about Bus ines s Law es s entials des cribing the foundation and sources
that establish American law : https :/ / opens tax.org/ details / books / bus ines s -law-ies s entials
ABA: https :/ / www.am ericanbar.org/
CA Bar as s ociation: https :/ / www.calbar.ca.gov/
Recent CA statutes (Business Entities)
Chapter 151, Statutes of 2023 (SB 446, Wilk)
Adds provisions to the Nonprofit Corporation Law and the Cooperative Corporation Law,
which were previously passed for the General Corporation Law, that authorizes
otherwise lawful corporate actions, as defined, not in compliance, or purportedly not in
compliance, with the Nonprofit Corporation Law, the Cooperative Corporation Law, or
the articles, bylaws, or a plan or agreement to which the corporation is a party in effect
at the time of a corporate action, to be ratified, or validated by the superior court, in
conformity with certain procedures. The law requires, among other things, that the
ratification of a corporate action pursuant to these provisions be approved by the board
and, as applicable, approved by the members, and the articles, bylaws, and any plan or
agreement to which the corporation is a party in effect at the time of ratification, except
as specified. The law requires a corporation, if a corporate action ratified or validated
would have required the filing of an instrument with the Secretary of State or if the
ratification or validation would cause an instrument previously filed with the Secretary of
State to be inaccurate or incomplete in any material respect, to file a certificate of
ratification or certificate of validation to make, amend, or correct those instruments.
Chapter 115, Statutes of 2023 (AB 231, Chen)
Authorizes corporations conducting a meeting on or before December 31, 2025, to offer,
in addition to live audiovisual feed, an audio-only means of participation. Grants the
shareholder or proxyholder, or a member of a nonprofit public benefit corporation,
nonprofit mutual benefit corporation, nonprofit religious corporation, or cooperative
corporation, the right to choose whether to participate via audiovisual or audio-only
means and would prohibit the corporation from imposing any barriers on either mode of
participation. It would require a nonprofit public benefit corporation, nonprofit mutual
benefit corporation, nonprofit religious corporation, or cooperative corporation to verify
that person who has voted remotely is a member or proxyholder and provide members
and proxyholders a reasonable opportunity to participate in a meeting conducted by
remote communication, including an opportunity to read or hear the proceedings of the
meeting substantially concurrently with those proceeding
Chapter 31, Statutes of 2022 (AB 1802, Maienschein)
Adds language to further clarify how assets inadvertently or otherwise omitted from the
winding up process of a canceled limited liability company and later realized shall be
used. Specifically, such assets shall be used to discharge unsatisfied liabilities, if any,
known by the company, and any excess shall be distributed to the members. If assets
are inadvertently or otherwise omitted from the winding up, any person authorized to
wind up the affairs of a limited liability company that has filed a certificate of cancellation
(termination) under Section 17707.04 may use the assets to discharge the liabilities of
the limited liability company and may distribute to the members the remaining assets, if
any.
Chapter 217, Statutes of 2022 (SB 218, Jones)
Authorizes otherwise lawful corporate actions, as further defined by statute, not in
compliance, or purportedly not in compliance, with the General Corporation Law or the
articles, bylaws, or a plan or agreement to which the corporation is a party in effect at
the time of a corporate action, to be ratified, or validated by the superior court, in
conformity with certain procedures. In the event that the corporate action ratified or
validated would have required the filing of an instrument with the Secretary of State or if
the ratification or validation would cause any instrument previously filed with the
Secretary of State to be inaccurate or incomplete in any material respect, the
corporation must file a certificate of ratification or a certificate of validation to make,
amend, or correct those instruments.
Chapter 237, Statutes of 2022 (SB 49, Umberg)
Authorizes the conversion of a California corporation into a foreign other business entity
or foreign corporation, if also authorized by the laws of the foreign jurisdiction. A
Certificate of Conversion shall be filed with the California Secretary of State if a
California corporation is converting into a foreign other business entity or foreign
corporation.
Chapter 331, Statutes of 2022 (AB 2431, Committee on Banking and
Finance)
Makes certain clarifying changes to the required question on the Statement of
Information of a limited liability company regarding whether any manager or member
has an outstanding final judgment issued by the Division of Labor Standards
Enforcement or a court of law, from which no appeal therefrom is pending, for a
violation of any wage order or provision of the Labor Code. Note: this law change
requires the first Statement of Information filed in 2023 to be a complete Statement of
Information.
Chapter 617, Statutes of 2022 (SB 1202 Limón)
Makes various technical, non-substantive, and clarifying changes throughout the
Corporations Code in connection with the launch of the Secretary of State’s
(SOS) bizfile Online automated filing system for Business Entities, including, among
others, standardizing terms, making practices uniform across all business entity types,
and updating cross-references. Removes a prohibition on disclosing to the public the
name, address, and either the daytime telephone number or email address of an
association under the Commercial and Industrial Common Interest Development Act.
Chapter 8
Capacity and Consideration
I. Capacity to Contract
◼ Void Contracts
◼ Voidable Contracts
◼ Enforceable Contracts
◼ Persons of Unsound Mind
◼ Persons Incarcerated
Capacity
◼
Not everyone has the mental capacity to understand that
an offer and an acceptance generally forms a binding
contract, enforceable in court
◼
Adult – is an individual who is 18 years of age or older
◼
Minor – is an individual who is under 18 years of age
A. Void Contracts
◼
“a minor may make a contract in the same manner as an
adult, subject to the power of disaffirmance…” [Family Code
§ 6700]
◼
However, there are 3 types of contracts a minor may not
enter into:
1.
Give a delegation of power
2.
Make a contract relating to real property or any interest therein
3.
Make a contract relating to any personal property not in the
immediate possession or control of the minor
[Family C.§ 6701]
B. Voidable Contracts
◼
A minor also had the power to DISAFFRIM (void) the
contract [Family C.§6700]. To be effective, the
disaffirmance must be of the entire contract and not a part
of the contract.
◼
◼
◼
Express Disaffirmance
Implied Disaffirmance
The minor must return anything received from the other
contracting party under the terms of the contract if the minor
still has it in his possession
1. Minor as a Buyer of Goods
or Services
◼
If a minor purchases a bike for $900, a contract is
formed
◼
The contract is subject to disaffirmance at any time
while the minor is under 18 years of age
◼
After the minor turns 18, he must bring the bike back
within a reasonable period of time if he wishes to
disaffirm the contract
2. Ratification
◼
If a person after reaching the age of majority indicates
either expressly or impliedly that he is willing to be
bound by the contract made while a minor, then he
has made a RATIFICATION OF THE CONTRACT
◼
Merchants can refuse to sell to minors because
minors lack contractual capacity
C. Enforceable Minor Contracts
◼
A small number of contracts made by any minor are binding,
and minors who are emancipated may make binding
contracts like adults.
1.
Necessaries for Minors
2.
Contracts for Minor’s Medical Treatment
3.
Contracts for Attorney’s Fees
4.
Contracts for Art, Entertainment, and Professional Sports
5.
Plea Bargain
6.
Emancipated Minors
D. Persons of Unsound Mind
◼
The second fundamental requirement for capacity to
contract is that the contracting parties be of sound
mind at the time of contracting
1.
Insanity Means No Contractual Capacity (VOID)
2.
Contractual Capacity (MAY BE VOIDABLE)
3.
Due Process in Competence Determination Act
(VOID)
E. Persons Incarcerated
◼
A person imprisoned has the right to inherit, own,
sell, or convey real or personal property, including
all written and artistic material produced or created
by the person during the period of imprisonment
II. Consideration
A. The Concept
◼
Good consideration for a promise is any benefit
conferred, or agreed to be conferred, upon the
promisor, by any other person to which the promisor is
not lawfully entitled
◼
CONSIDERATION means that in order to get
something, you have to give up something
◼
To have an enforceable contract, it is necessary that
sufficient consideration be present [ CC§ 1550]
◼
Consideration can be as simple as exchanging
promises
◼
Bilateral vs. Unilateral consideration
B. Presumption of Consideration
◼
[CC§ 1614-1615]
◼
If the parties to the agreement put that agreement in
writing, there is a presumption that consideration exists
◼
A presumption shifts the burden of proof away from the
party for whom the presumption exists
C. The Value of Consideration
◼
Consideration does not have to consist of something that
has an economical dollar value attached to it
◼
What matters is that the parties exchanged promises that
had “value” to them
D. Gifts
◼
“A gift is a transfer of personal property, made
voluntarily, and without consideration” [CC§ 1146]
◼
Once a gift is given, it cannot be revoked by the donor
[CC§ 1148]
E. When Gifts May Be Revoked
1.
Impending Death
2.
Gifts in Contemplation of Marriage
F. Unrequested Merchandise
◼
If a seller tries to sell goods or merchandise by actually
sending the unordered item to an individual, hoping that
they will be paid, it is considered an unconditional gift to
the recipient, who has no obligation to pay the sender
[CC§ 1584.5]
G. Past Consideration or Moral
Consideration
◼
If a promise is made to do or not do something
based on an event or situation that has already
taken place, that promise is unenforceable
◼
Promises that are based upon the promisor’s
feeling of a moral obligation or duty are also NOT
enforceable
H. Illusory Promises
◼
If it appears that a party has incurred a legal detriment
as a result of the bargain, but upon close scrutiny it is
discovered that the party has not changed the legal
position at all from what it was prior to the bargain, then
the promise is ILLUSORY
I. Needs and Requirements
vs. Desires and Wants
◼
Enforceable
◼
◼
If you agreed to sell tires to a trucking company at a specific price in
return for which the trucking company agreed to purchase all the
tires it NEEDS for one year, there is an enforceable contract. The
trucking company gave up it’s legal right to buy tires from someone
else for one year.
Unenforceable
◼
If you enter into a bargain with a trucking company where you agree
to sell the trucking company tires for a specific price for one year and
the trucking company agrees to buy all of the tires that the company
may WANT during the next year, no enforceable contracts exists.
J. Pre-Existing Duties – No Consideration
For the Agreed Modification
◼
If you signed a contract with a builder to add a room
onto your house, he is legally obligated to fulfill his preexisting duty for the amount originally agreed to. He
may not ask for more money. You are not obligated to
give more consideration than you already agreed to.
K. Contract Modification Supported
By Consideration
◼
The parties to a contract are free to modify that contract,
and the modification is enforceable, provided
consideration exists
L. Unforeseen Conditions
◼
If, during performance of a contract, the party performing
encounters circumstances that were unforeseeable at the
time of contracting, which now impose a very substantial
hardship on that party to complete performance, he may now
ask for additional funds to finish performance. If you agree,
he is entitled to the additional funds as long as the condition
was UNFORESEEABLE.
M. Pre-Existing Duty to A Third Party
◼
If person “A” has a pre-existing duty, under contract with
person “B,” and then a 3rd party (“C”) makes an
additional promise to him based on the condition of the
original contract, the 3rd party is NOT obligated to fulfill
the promise since the person “A” had a pre-existing duty
under the original contract with person “B.”
N. Sale of Goods
◼
An agreement modifying a sales contract is binding on the
parties to that contract without consideration as long as the
modifications are made in good faith [UCC§ 1148]
O. Settlement of Claims
1.
Liquidated Debts
2.
Accord and Satisfaction
3.
Written Release as Full Satisfaction
4.
Unliquidated Claim
P. Revival of a Debt Barred By
Statute of Limitations
◼
When a debt has been barred by the running of the statute of
limitations, that debt becomes unenforceable in court
Q. Promissory Estoppel
◼
If the doctrine of promissory estoppel can be applied, the
promisor is prevented from using “no consideration” as a
defense when sued on the promise