Capacity and Legality

1. see the additional materials to answer this question. Define capacity and discuss whether Della and Perry had capacity to enter into a contract. State the rule in the text from the Restatement of Contracts regarding when a contract can be disaffirmed and explain whether Della and Perry can disaffirm the contract based on that rule.

2. When Jasmine, age 17, gets her first paycheck from her first part time job, she runs out shopping and spends it all purchasing the following items:

a) Earrings

b) Tickets to a concert

c) Athletic shoes required for gym class (required for graduation from high school)

d) Medication recommended by her dermatologist for acne

e) A downpayment on a used car

When her mother finds out, she insists that Jasmine take back everything and get a refund because Jasmine is going to need to save every penny she earns for college. What items can she disaffirm because of her age? Does it make any difference if the items have been used or if she waits a month before she tries to return them?

3. What if she keeps the car until she is 18, and makes monthly payments, then what needs to be done to ratify the contract? Under what circumstances would Chelsea’s mother be liable for the car contract?

4. Explain whether each of the following contracts are unenforceable, and if so, identify the public policy reasons why.

a) A two week loan of $200 with an interest rate of 365% APR

b) The purchase of a slot machine for gambling at a neighborhood bar.

c) A contract to install a new roof with a contractor who is not licensed as a home improvement contractor in the city where the work is to be done.

d) An offer to sell a baby crib that has been recalled by the Consumer Product Safety Commission as unsafe.

5. When Alex lands his dream job as a commissioned sales representative for a national company after graduating, he is asked to sign a bunch of forms in the HR department and is only given 15 minutes before he needs to run to his next step in the orientation process. One of the forms he signs without reading is an employment contract with a covenant not to compete that prohibits him from working in any sales position anywhere in the Midwest for a period of 10 years, if he ever leaves this job, for any reason. When he is laid off a year later, he goes to work for a competitor and immediately gets threatened with a lawsuit for breaching his non-compete agreement. What legal defenses does Alex have to argue that the covenant should be unenforceable?

6. Kevin decided to start a small business conducting children’s parties in a renovated school bus that are held in the driveway of the child’s home. Different activities are available for different party themes, but all include active play that could result in a child being injured, so he included an exculpatory clause in the contract requiring the parents to “waive any and all liability, regardless of fault or injury suffered.” Define exculpatory clause and public interest (note that public interest does not have its ordinary meaning). Explain whether the clause is enforceable and protects Kevin or whether the clause is unenforceable leaving him at risk for a lawsuit if a child gets hurt.

7. Many businesses are now including a mandatory arbitration clause in their contracts to avoid going to court if a dispute arises with their customers. If a consumer wants to be able to sue a business in regular court instead of going to arbitration where consumers typically lose, a customer must prove the arbitration clause is both procedurally unconscionable and substantively unconscionable. Define procedural and substantive unconscionability. If an arbitration clause is found unconscionable, what legal argument can be made to enforce the rest of the contract terms?
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