Legal memorandum unit 9
Lack of contractual capacity
Contractual capacity refers to the bare minimum mental competence that is required by the law for a party or an individual to enter into a contractual obligation and be bound by it. In common law, “people who are mentally excluded in the contractual law” (Jeffery, Royal Institute of British Architects., & University of London 1989). The case investigated involves a party that was involved in the signing or entering into a contract when he was not on his senses. This was due to the fact that the individual was under the influence of alcohol hence making to lack contractual capacity.
The question presented
The case involves Mr. I. M. Bibe who is a 32-year-old marketing executive for a computer chip company. While drinking at lunch, Bibe entered into a contract to purchase a coffee shop form his co-worker, Mr. Lotts. Bibe seeks our advice as to whether he is bound to the contract. On March 25, 2011, Bibe and his co-workers went out to lunch around 12:30 p.m. to celebrate for reaching their sales and marketing goals for the third year in a row.While Mr. Bibe and the other co-workers drank the second bottle of wine, Lotts tied the asking price to the bonuses. Mr. Bibe finally told Lotts to put the offer in writing. Bibe agrees to purchase ‘The Coffee Shop’ at 12 N. Main Street for the sum of $300,000.” Lotts signed the paper and handed it to Bibe. While drinking, Mr. Bibe said: “Oh, why not? I’ve always wanted a profitable little side business.” and signed the paper. Mr. Lotts paid the bill for the salads and the wine. However, Bibe drove 20 miles home and took a nap. He woke up around 8:00 p.m. with a headache and remembered the events of the afternoon. He does not want to purchase the property. In this case, was Bibe bound to the contractual obligation?
Brief answer
Bibe was not bound by this contract because it was entered when he was under the influence of alcohol. Thus, this case was regarded to be under the category of the voidable contract where the party was intoxicated hence being incompetent.
Statement of facts
Looking at all the facts according to the case law, the court should consider regarding the issue of Bibe’s contractual capacity and concerning the issue of Lotts’ use of undue influence. The Contracts made by Bibe was under the category of the mentally incompetent parties which may be void, voidable, or valid, with variance to the conditions.
- Void Contract: A party who has been regard as being mentally bungling by a court of law previous to inward bound into a contract .The mentally incapacitated person cannot enter into any legally requisite contractual obligation. However, only in some cases such as where guardian is involved to represent the affected. Thus, the guardian or the representative could enter into the contractual obligation on behalf of the ineffectual party.
- Voidable Contract: This applies to a party that has been declared by the court to be mentally incompetent. Therefore, this adjustment is applicable in this case if the party at the time of contractual activity he was not aware or he was mentally influenced by other parties or by influence of a drug. This is also applicable where the parity at the time of entering the contract did not understand the purpose of the contract and the nature of the contract. In addition, if the party involved in exercise does not understand the consequences of the contract then he or she can be protected by the law. Therefore, “this exception of the option of disaffirming the contractual obligations applies only to the incompetent party” (Elias, Levinkind, & Stim 2007). However, in the contract the competent party will remain bound to the contractual obligation unless on the rampage that involves the disaffirmance of the minor’s.
- Valid Contract: An otherwise if “the party termed as incompetent party has the ability to understand the temperament, intention, and the penalty of entering into the contract can be bound by it” (Lund 2009).
Recommendations
The contract entered by Bibe is void and thus can be disqualified because it was entered when he was under the influence of alcohol. Hence this qualifies him to be mentally incompetent in the time of entering the contract. Therefore, he is not bound to the contractual obligation which he entered while he was mentally incompetent. Thus, the ruling of the court on Bibe’s case would be under voidable contract where the party was under influence of drugs. Hence, the contract can be terminated by the court due to the incompetency of the contracting party.
References
Elias, S., Levinkind, S., & Stim, R. (2007). Legal research: How to find & understand the law. Berkeley, CA: Nolo.
Jeffery, K. C., Royal Institute of British Architects, & University of London. (1989). The essentials of a legally binding contract. London, England: Royal Institute of British Architects.
Lund, M. (2009). Jagged rocks of wisdom-the memo :xx: Mastering the legal memorandum. Honolulu, Hawaii: Fine Print Press.
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