Chapter 14
CONTRACTUAL CAPACITY
A. Minors
1. Liability on Contracts
a. Dissaffirmance
b. Ratification
2. Liability for Necessaries
3. Liability for Misrepresentation of Age
4. Liability for Tort Connected with Contract
B. Incompetent Persons
1. Person Under Guardianship
2. Mental Illness or Defect
C. Intoxicated Persons
Cases in This Chapter
Berg v. Traylor
In re The Score Board, Inc.
Zelnick v. Adams
First State Bank of Sinai v. Hyland
Chapter Outcomes
After reading and studying this chapter, the student should be able to:
Explain how and when a minor may ratify a contract.
Describe the liability of a minor who (a) disaffirms a contract or (b) misrepresents his age.
Define a “necessary” and explain how it affects the contracts of a minor.
Distinguish between the legal capacity of a person under guardianship and a mentally incompetent
person who is not under guardianship.
Explain the rule governing an intoxicated person’s capacity to enter into a contract and contrast this
rule with the law governing minors and incompetent persons.
TEACHING NOTES
A binding promise or agreement requires that the parties to the agreement have
contractual capacity. Persons who are legally limited in their capacity to contract
include minors, incompetent persons, and intoxicated persons.
A. MINORS
A person who is under the age of majority (usually 18 years).
*** Chapter Outcome ***
Explain how and when a minor may ratify a contract.
Describe the liability of a minor who (a)disa$rms a contract or (b) misrepresents his age.
Liability on Contracts
A minor’s contract, whether executory or executed, is usually voidable at his or
his guardian’s option.
Disarmance — either express or implied, as long as it shows an intention not
to be bound.
A minor may disa$rm most contracts at any time before reaching the age of
majority, and in some cases within a reasonable time after reaching the age of
majority, if she did not ‘rst ratify the contract after she came of age.
Rati!cation — After a minor becomes of age, she may choose to adopt or ratify
a contract, which makes the contract binding ab initio (from the beginning).
NOTE: See textbook discussion of a minor’s right to disarm and recover property that has already
been sold to a second buyer.
CASE 14-1
BERG v. TRAYLOR
Court of Appeal, Second District, Division 2, California, 2007
148 Cal.App.4th 809, 56 Cal.Rptr.3d 140
http://scholar.google.com/scholar_case?case=1540939777753786246&q=56+Cal.Rptr.3d + 140&hl=en&as_sclt=2,22
Todd, J.
Appellants Meshiel Cooper Traylor (Meshiel) and her minor son Craig Lamar Traylor (Craig)
appeal the judgment confirming an arbitration award in favor of Craig’s former personal
manager, respondent Sharyn Berg (Berg), for unpaid commissions under a contract between
Berg, Meshiel and Craig and unrepaid loans from Berg. * * *
On January 18, 1999, Berg entered into a two-page “Artist’s Manager’s Agreement”
(agreement) with Meshiel and Craig, who was then 10 years old. Meshiel signed the agreement
and wrote Craig’s name on the signature page where he was designated “Artist.” Craig did not
sign the agreement. Pursuant to the agreement, Berg was to act as Craig’s exclusive personal
manager in exchange for a commission of 15 percent of all gross monies or other consideration
* * *
On or about June 13, 2001, Craig obtained a recurring acting role on the Fox Television
Network show “Malcolm in the Middle” (show). On September 11, 2001, four months prior to
the expiration of the agreement, Meshiel sent a certified letter to Berg stating that while she and
Craig appreciated her advice and guidance, they no longer needed her management services and
could no longer afford to pay Berg her 15 percent commission because they owed a “huge
amount” of taxes. On September 28, 2001, Berg responded, informing appellants that they were
in breach of the agreement.
* * *
The arbitration hearing commenced on February 7, 2005. * * * Though Meshiel and Craig’s
counsel failed to appear at the hearing, Meshiel personally appeared with Craig’s talent agent,
Steven Rice. Craig did not appear. * * *
On February 11, 2005, the arbitrator issued his award, which was served on the parties on
February 14, 2005. * * * The arbitrator awarded Berg commissions and interest of $154,714.15,
repayment of personal loans and interest of $5,094, and attorney fees and costs of $13,762. He
also awarded Berg $405,000 “for future earnings projected on a minimum of 6 years for national
* * *
Simply stated, one who provides a minor with goods and services does so at her own risk.
[Citation.] The agreement here expressly contemplated this risk, requiring that Meshiel remain
obligated for commissions due under the agreement regardless of whether Craig disaffirmed the
agreement. Thus, we have no difficulty in reaching the conclusion that Craig is permitted to and
did disaffirm the agreement and any obligations stemming therefrom, while Meshiel remains
liable under the agreement and resulting judgment. Where our difficulty lies is in understanding
* * *
“As a general proposition, parental consent is required for the provision of services to minors
for the simple reason that minors may disaffirm their own contracts to acquire such services.”
[Citation.] According to Family Code section 6700, “a minor may make a contract in the same
manner as an adult, subject to the power of disaffirmance”. * * * In turn, Family Code section
6710 states: “Except as otherwise provided by statute, a contract of a minor may be disaffirmed
by the minor before majority or within a reasonable time afterwards or, in case of the minor’s
death within that period, by the minor’s heirs or personal representative.” Sound policy
considerations support this provision:
disaffirmance of a minor’s contract might have been avoided by declining to enter into the
contract. [Citation.]
Berg offers two reasons why the plain language of Family Code section 6710 is inapplicable,
neither of which we find persuasive. First, she argues that a minor may not disaffirm an
agreement signed by a parent. * * * [This is not in accord with the law as stated in numerous
cases.]
Second, Berg argues that Craig cannot disaffirm the agreement because it was for his and his
family’s necessities. Family Code section 6712 provides that a valid contract cannot be
disaffirmed by a minor if all of the following requirements are met: the contract is to pay the
reasonable value of things necessary for the support of the minor or the minor’s family, the
No specific language is required to communicate an intent to disaffirm. “A contract (or
conveyance) of a minor may be avoided by any act or declaration disclosing an unequivocal
intent to repudiate its binding force and effect.” [Citation.] Express notice to the other party is
unnecessary. [Citation.] We find that the “Notice of Disaffirmance of Arbitration Award by
Minor” filed on August 8, 2005 was sufficient to constitute a disaffirmance of the agreement by
Craig. * * *
We find that Craig was entitled to and did disaffirm the agreement which, among other
things, required him to arbitrate his disputes with Berg. On this basis alone, therefore, the
judgment confirming the arbitration award must be reversed.
* * *
CASE 14-2
IN RE THE SCORE BOARD, INC.
United States District Court, D. New Jersey, 1999
238 B.R. 585
http://scholar.google.com/scholar_case?case=9690754193230293303&q=238+B.R.+585+&hl=en&as_sdt=2,34
Irenas, J.
During the Spring of 1996, Appellant Kobe Bryant (“Bryant”), then a seventeen-year old star
high school basketball player, declared his intention to forego college and enter the 1996 lottery
draft of the National Basketball Association. On May 8, 1996, The Score Board Inc. (“Debtor”),
then a New Jersey based company in the business of licensing, manufacturing and distributing
sports and entertainment-related memorabilia, contacted Bryant’s Agent, Arn Tellem (“Tellem”
or “Agent”) in anticipation of making a deal with Bryant.
* * *
In early July 1996, after the above [initial] negotiations, Debtor prepared and forwarded a
signed written licensing agreement (“agreement”) to Bryant. The agreement granted Debtor the
right to produce licensed products, such as trading cards, with Bryant’s image. Bryant was
In addition to being compensated for the autographs, Bryant was entitled to receive base
compensation of $10,000. Moreover, Debtor agreed to pay Bryant $5,000, of the $10,000, within
ten days following receipt of the fully executed agreement. Finally, Bryant was entitled to a
$5,000 bonus if he returned the agreement within six weeks.
Bryant rejected the above agreement, and on July 11, 1996, while still a minor, Bryant made
a counter-offer (“counter-offer”), signed it and returned it to Debtor. The counter-offer made
several changes to Debtor’s agreement, including the number of autographs. Bryant also changed
the amount of prepaid autographs from 7,500 to 500.
By late 1997, Bryant grew reluctant to sign any more autographs under the agreement and his
Agent came to the conclusion that a fully executed contract did not exist. By this time, Tellem
became concerned with Debtor’s financial condition because it failed to make certain payments
to several other players. Debtor claims that the true motivation for Bryant’s reluctance stems
from his perception that he was becoming a “star” player, and that his autograph was “worth”
more than $2.00.
* * * On April 20, 1998, Tellem stated that no contract existed because the counter-offer was
never signed by Debtor and there was never a meeting of the minds. Tellem added that the
counter-offer expired and that Kobe Bryant withdrew from the counter-offer.
Subsequently, Debtor began to sell its assets, including numerous executory contracts with
major athletes, including Bryant. Bryant argued that Debtor could not do this, because he
believed that a contract never existed. In the alternative, if a contract was created, Bryant
contended that it was voidable because it was entered into while he was a minor. * * *
On December 21, 1998, the Honorable Gloria M. Burns ruled in her memorandum opinion
* * *
On February 2, 1999, the Bankruptcy Court entered its final orders: (1) granting Debtor’s
motion to assume its executory contract with Bryant and assign it to Oxxford; and (2) overruling
Bryant’s objection to the sale.
Bryant challenges the Bankruptcy Court’s finding that he ratified the agreement upon
attaining majority. Contracts made during minority are voidable at the minor’s election within a
reasonable time after the minor attains the age of majority. [Citations]
The right to disaffirm a contract is subject to the infant’s conduct which, upon reaching the
On August 23, 1996, Bryant reached the age of majority, approximately six weeks after the
execution of the agreement. On August 26, 1996, Bryant deposited the $10,000 check sent to him
from Debtor. Bryant also performed his contractual duties by signing autographs.
The Bankruptcy Court did not presume ratification from inaction as Bryant asserts. It is clear
that Bryant ratified the contract from the facts, because Bryant consciously performed his
contractual duties.
Bryant asserts that he acted at the insistence of his Agent, who believed that he was obligated
to perform by contract. Yet, neither Bryant nor his Agent disputed the existence of a contract
until the March 23, 1998, letter by Tellem. That Bryant may have relied on his Agent is irrelevant
to this Court’s inquiry and is proper evidence only in a suit against the Agent. To the contrary, by
*** Chapter Outcome ***
De’ne a “necessary” and explain how it affect the contracts of a minor.
Liability for Necessaries
Contractual incapacity does not excuse a minor from an obligation to pay a
reasonable value for necessaries —things that supply his personal needs, such
as food, shelter, medicine, and clothing.