Ready to elevate your legal expertise? Take our free capacity to contract quiz and discover just how well you grasp the fundamentals of contract formation. This contract law quiz offers a dynamic legal capacity test that puts your understanding capacity to contract to the ultimate challenge. Each section features practical scenarios, clear questions, and interactive contracts multiple choice questions designed to pinpoint gaps in your contract knowledge, and our concise format delivers instant feedback to help focus your study efforts. Whether you're preparing for exams or brushing up on key principles, tackling these contract law test questions will sharpen your skills and boost your confidence. Don't wait - dive in now, test your contract knowledge, and start mastering the art of enforceable agreements today!
Which of the following is a fundamental element required for contractual capacity?
Presence of a written document
Offer and acceptance only
Mutual mistake only
Legal age and mental competence
Contractual capacity requires that the parties have legal age and sufficient mental competence to understand the transaction. Without these, the contract may be void or voidable. This principle helps ensure fairness and enforceability in agreements. Learn more about capacity.
A minor enters into a contract for non-necessary goods. The contract is generally:
Fully enforceable
Automatically void
Voidable at the minor's option
Enforceable only by the minor
Contracts for non-necessaries entered into by minors are typically voidable at the minor's discretion. This protects minors from imprudent agreements while allowing them to repudiate unfavorable contracts. The minor must disaffirm within a reasonable time after reaching majority. Details on minors' contracts.
Which of the following contracts can a minor generally not disaffirm?
Subscription to magazines
Contracts for necessaries
Entertainment subscriptions
Optional purchase agreements
Contracts for necessaries - such as food, shelter, and medical services - are enforceable against minors for reasonable value. The minor remains liable even if they disaffirm other parts of the contract. This ensures suppliers are compensated for providing essentials. Learn about necessaries.
In the context of contractual capacity, 'necessaries' refer to:
Only housing contracts
Luxury items over a certain price
All entertainment-related contracts
Goods and services essential to a minor's standard of living
'Necessaries' include goods and services necessary for a minor's maintenance and health, like food, clothing, shelter, and medical care. Courts enforce these contracts to protect providers. The minor pays reasonable value, not necessarily contract price. More on necessaries.
Which statement best describes a contract made by an intoxicated person?
Always enforceable
Valid if oral only
Voidable if the person was unable to understand the nature of the transaction
Automatically void
Contracts made by intoxicated persons are voidable only if the intoxication prevents understanding of the transaction's nature and the other party knew of the incapacity. Otherwise, the contract remains enforceable. Restitution may be required upon disaffirmance. Intoxication and contracts.
Which of the following is the presumption regarding an adult entering a contract?
They lack capacity until proven otherwise
They must provide proof of mental competence
They are presumed to be minors
They are competent and have capacity
Adults are presumed to have contractual capacity unless evidence shows mental incapacity, intoxication, or other disqualifying factors. This presumption streamlines contract enforcement. The burden shifts to the challenger to prove incapacity. Adult capacity presumption.
If a minor misrepresents their age to obtain a contract for non-necessaries, most jurisdictions will:
Hold guardian liable
Deny disaffirmance
Convert contract into a gift
Allow disaffirmance but require restitution
Many jurisdictions allow minors to disaffirm contracts despite misrepresentation but require them to restore any benefits received to recover restitution. This balances protection for minors and fairness to the other party. Misrepresentation of age.
Which scenario most likely renders a contract voidable due to mental incapacity?
A person temporarily tired
A senior citizen without formal education
A person with chronic headache
A person lacking understanding at the time of contracting
A contract is voidable if the party lacked the mental ability to understand the nature and consequences of the transaction at the time of contracting. General fatigue or age alone does not suffice. The other party often must know of the incapacity. Mental incapacity.
Which type of contract is typically considered void from the outset if entered by a minor?
Agreements for prostitution
School tuition contracts
Bed rental agreements
Basic food purchases
Contracts for immoral or illegal activities, such as prostitution, are void ab initio even if entered into by adults, and certainly by minors. Such agreements violate public policy. They cannot be ratified or enforced. Contracts against public policy.
At what age is a person generally presumed to have full contractual capacity?
25 years old
21 years old
16 years old
18 years old
Most jurisdictions set the age of majority - and thereby full contractual capacity - at 18 years. Before this age, contracts are voidable by minors except for necessaries. This standard age aligns with broader legal adulthood rules. Age of majority.
How long does a minor typically have to disaffirm a contract after reaching majority?
A reasonable time period after turning 18
They cannot disaffirm after majority
Until they reach 21
One week exactly
After reaching majority, a former minor must disaffirm within a reasonable time. What is reasonable depends on the contract and jurisdiction. Failure to act implies ratification. Contract ratification.
Which of these is NOT typically considered a necessary?
Basic housing
Medical treatment
A video game console
Essential clothing
Luxury items such as video game consoles are not considered necessaries, so minors can void those contracts. Necessaries cover items essential for health and maintenance. Courts enforce reasonable value of necessaries. Necessaries explained.
Adjudicated incompetency by a court results in a contract being:
Void
Enforceable if oral
Voidable
Always ratified
When a court has adjudicated a person incompetent, any contract they make is void, not merely voidable. This ensures protection for those under guardianship. No voiding action is needed. Guardianship and contracts.
Which of the following persons lacks capacity to enter a contract?
An educated elderly individual
A person declared legally incompetent
A sober adult
A minor consuming soda
A person declared legally incompetent by a court has no capacity to contract; agreements are void. Others, like educated elders or sober adults, are presumed competent. Minor drinking soda still has capacity subject to disaffirmance rules. Incapacity overview.
Which contractual agreement entered by a minor generally remains enforceable?
Sale of gaming accessories
Purchase of concert tickets
Subscription to a video streaming service
Medical services provided to the minor
Medical services are considered necessaries, enforceable against minors for the reasonable value. Entertainment and luxury subscriptions are non-necessaries and voidable at the minor's option. Learn about necessaries.
A person who signs a contract while mildly drowsy is generally considered to have:
Voidable contract automatically
Capacity, unless evidence shows lack of understanding
No capacity at all
Automatic ratification
Mild drowsiness does not usually impair capacity unless it rises to the level of mental incapacity that prevents understanding the nature of the contract. The presumption of capacity remains unless disproven. Capacity assessment.
What effect does ratification have on a contract a minor entered as a minor once they reach majority?
It converts it into a gift
It voids the contract automatically
It validates the contract as if the minor were of age
It only validates part of the contract
Ratification by a former minor makes the contract fully binding as if they had been of legal age at inception. It prevents later disaffirmance. Ratification can be express or implied by conduct after majority. Ratification explained.
Under common law, an adult may ratify a contract entered by an agent who lacked capacity by:
Replacing the agent
Performing or accepting benefits of the contract
Providing written notice of disaffirmance
Failing to object within 24 hours
An adult principal ratifies a contract made by an incapacitated agent by affirming it through performance or accepting benefits. This retroactively authorizes the agreement. Silence alone usually does not constitute ratification. Ratification in agency.
A minor disaffirms a year-long lease upon turning 18. The landlord may:
Cancel disaffirmance due to property damage
Demand full rent for the remaining term
Retain full security deposit without accounting
Recover reasonable value for use of premises
When a minor disaffirms a lease, the landlord can recover compensation for the minor's use and occupancy on a reasonable basis. They cannot enforce the full remaining rent unless damages exceed use value. Lease and necessaries.
To void a contract for intoxication, the intoxicated party must show:
That the contract was written
Inability to understand the contract and other party's awareness
Presence of a third-party witness
Proof of drunkenness alone
Voiding for intoxication requires showing the party lacked understanding of the contract's nature and the other party knew or had reason to know of the incapacity. Mere drunkenness is insufficient. The contract is voidable, not automatically void. Intoxication rules.
A guardian appointed for an allegedly insane person enters a contract on their behalf. That contract is:
Valid if within guardianship scope
Voidable only by ward
Enforceable against guardian personally
Void
Contracts made by a guardian on behalf of an incapacitated ward are valid if performed within the authority granted by the court. This protects the ward's interests and ensures necessary agreements. Guardianship scope.
A corporation's capacity to contract is determined by:
Federal contract law exclusively
Board of directors' personal approval
Its charter and applicable statutes
Shareholder majority votes only
A corporation can contract within its express and implied powers defined by its charter and state statutes. Agreements beyond these powers are ultra vires and potentially voidable. Shareholder votes or board resolutions do not override statutory limits. Corporate capacity.
Which statement about mental incapacity and contracts is accurate?
Always void regardless of understanding
Enforceable if oral
Voidable if incapacity prevents understanding at contracting
Void only if in writing
A contract is voidable, not void, when mental incapacity prevents understanding of its nature and consequences. If the party regains capacity, they can ratify. Written form does not affect this rule. Mental incapacity details.
To prove undue influence, one must show:
Mutual mistake of fact
Any written threat
Excessive persuasion by someone in a dominant position
Economic hardship only
Undue influence involves pressure or persuasion by someone with a special relationship or dominance, overpowering free will. It differs from duress and mistake. Courts void such contracts to protect vulnerable parties. Undue influence.
The doctrine of equitable estoppel in capacity cases prevents a party from:
Seeking restitution under any circumstances
Raising lack of capacity for necessaries
Using intoxication as a defense
Denying capacity after misrepresentation caused reliance
Equitable estoppel bars a party from denying capacity when they misrepresented or concealed facts and the other party reasonably relied on that misrepresentation. It ensures fairness and prevents unjust outcomes. Equitable estoppel.
A contract entered while a party is intoxicated may still be enforced if:
It was witnessed by a third party
It was simple in nature
They understood the transaction and the other party was unaware of intoxication
It involved necessaries
If the intoxicated party understood the contract and the other party had no reason to know of the impairment, the contract remains enforceable. This upholds expectations when intoxication does not impair decision-making. Intoxication enforcement.
Under the UCC, capacity to contract for sale of goods is governed by:
General contract capacity rules
Strict age of 21
UCC special capacity rules
Federal approval
The UCC defers to general capacity rules for sales contracts; no special age or capacity provisions apply beyond common law. Parties without capacity cannot enforce sales contracts. UCC and capacity.
Which type of mistake can render a contract voidable for capacity reasons?
Mistake about quality of considerations only
Mistake of law always
Clerical errors in drafting
Mutual mistake regarding a basic assumption
Contracts may be voidable if both parties share a mutual mistake about a fundamental fact that goes to the contract's essence. Clerical or quality mistakes typically do not affect capacity. Mistake of fact.
In cases of unilateral mistake, a contract is voidable only if:
The contract is for sale of goods
The mistaken party is a minor
The mistake concerns contract formality
The non-mistaken party knew of the mistake or caused it
Unilateral mistake voidability requires that the other party knew or induced the mistake, or that enforcing the contract would be unconscionable. A simple error without third-party knowledge does not suffice. Unilateral mistake.
A contract induced by fraud may be voidable despite capacity because:
Fraud affects only written contracts
Fraud undermines genuine assent
Capacity rules override fraud
It becomes a criminal matter only
Fraud vitiates assent even if the party had capacity, making the contract voidable. The defrauded party may rescind and recover damages. Capacity and fraud doctrines operate independently. Contract fraud.
Which remedy is available to someone lacking capacity due to mental illness?
Rescission and restitution
Specific performance
Punitive damages
Liquidated damages
A mentally incapacitated person can seek rescission of a voidable contract and restitution of benefits conferred. Courts avoid granting specific performance when capacity is questionable. Rescission remedies.
Which doctrine restores parties to their pre-contract position when capacity is lacking?
Liquidated damages
Expectation damages
Restitution
Specific performance
Restitution returns benefits conferred to undo unjust enrichment when a contract is void or voidable due to incapacity. It protects the party lacking capacity and prevents windfalls. Restitution doctrine.
If an intoxicated person's contract is voided, the other party may recover:
Restitution for any value provided
No recovery at all
Punitive damages
Full contract price automatically
When a contract is voided due to intoxication, the intoxicated party must typically return any benefits received, allowing the other side to recover restitution. Full contract price may exceed this amount and is not automatically awarded. Restitution theory.
A court may appoint a guardian ad litem to:
Approve corporate charters
Conduct depositions
Ratify contracts for minors
Represent an alleged incapacitated person in litigation
A guardian ad litem is appointed to represent the interests of a party allegedly lacking capacity during litigation, ensuring fair process. They do not ratify contracts or perform corporate duties. Guardian ad litem.
An ultra vires corporate contract is one that:
Meets all statutory requirements
Involves an affiliate
Exceeds the corporation's chartered powers
Is oral only
An ultra vires contract goes beyond the express or implied powers outlined in a corporation's charter and governing statutes. Such contracts are voidable at the corporation's option to protect shareholders and creditors. Ultra vires definition.
Which statute often limits a minor's ability to disaffirm certain educational contracts?
Uniform Commercial Code
Sherman Antitrust Act
State statutes on student loans and tuition
Federal Securities Act
Many states enact specific statutes preventing minors from disaffirming contracts for student loans and educational tuition to ensure funding stability. These carveouts protect institutions and the public interest. State education statutes.
Which test focuses on a person's ability to understand the nature and consequences of a transaction?
Objective third-party test
National competency standard
Cognitive test for capacity
Volitional test only
The cognitive test assesses whether a person can comprehend the transaction's nature and effects. It is widely used to determine capacity. The volitional test addresses control over actions, not just understanding. Capacity tests.
Which landmark case introduced the concept of a 'lucid interval' for contracts?
Hollingsworth v. Bear
Lucy v. Zehmer
Hadley v. Baxendale
Carlill v. Carbolic Smoke Ball Co.
Hollingsworth v. Bear recognized that individuals with intermittent mental incapacity may contract during lucid intervals when they fully understand. This allows valid agreements during such periods. Case summaries.
Which doctrine allows third parties to enforce contracts made by incapacitated agents once ratified by the principal?
Third-party beneficiary rule
Statute of Frauds
Agency ratification doctrine
Doctrine of privity
When a principal ratifies an agent's actions made during agent's incapacity, third parties can enforce the ratified contract against the principal. This doctrine protects innocent third parties. Agency law.
Partnership agreements require capacity. A partner adjudicated incompetent:
Can remain as partner indefinitely
Triggers dissolution by default
Is automatically dissociated from partnership
Must be ratified by other partners
When a partner is adjudicated incompetent, most partnership laws automatically dissociate them to protect the firm's operations. The partnership may continue without them. Partnership law.
An agent with limited authority enters a contract exceeding that scope. The principal later ratifies. The contract:
Becomes valid from inception
Is void ab initio
Remains voidable
Requires third-party consent
Ratification retroactively validates contracts made beyond an agent's authority, making them enforceable as if originally authorized. Ratification must be full and with knowledge of all material facts. Ratification doctrine.
Equitable estoppel can bar incapacity defenses when:
Both parties had equal bargaining power
The contract is for real estate
The contract is oral
A party misled the other regarding capacity
Estoppel prevents a party who misrepresented or concealed their incapacity from later denying it if the other party reasonably relied on that representation. This encourages honest dealing. Equitable estoppel.
Restitution in voidable contracts requires:
Specific performance
Return of benefits conferred by both sides
Payment of liquidated damages
Punitive sanctions
Restitution restores both parties to their positions before the contract by returning benefits conferred. This remedy applies when contracts are void or voidable due to incapacity. Restitution overview.
To obtain restitution from an incapacitated party, the claimant must show:
Both parties lacked capacity
The party was a corporation
They conferred a measurable benefit
The contract was in writing
Claimants must prove they conferred a measurable benefit on the incapacitated party and that retention without restitution would be unjust. Written form is irrelevant. Restitution requirements.
Which factor is most critical when evaluating capacity during a lucid interval?
Long-term testamentary intent
Momentary understanding of transaction details
Contract value
Presence of a guardian
In lucid interval cases, courts focus on whether the person understood the nature and effects of the transaction during that brief period. Long-term intent or contract value is less relevant. Lucid interval law.
How do jurisdictions differ in applying cognitive vs. volitional tests for mental capacity?
Some require only understanding, others also require self-control
All use a unified federal standard
Most ignore volitional capacity
Volitional test applies only to minors
Some jurisdictions apply only the cognitive test focusing on understanding, while others add the volitional test requiring the ability to control behavior. This creates variability in capacity rulings. Capacity tests.
Which challenge arises with electronic signatures by minors in capacity disputes?
Server location compliance
Software export controls
Digital watermark authenticity
Verifying signer's age and intent online
Electronic signatures complicate age verification and evidence of understanding, making capacity disputes harder to resolve. Courts must assess how the minor authenticated and agreed online. E-signatures.
How does UNCITRAL Model Law address capacity to contract in international sales?
It sets a uniform age of majority
It prohibits minor participation
It mandates electronic ID verification
It defers to domestic capacity rules of each party
The UNCITRAL Model Law on International Commercial Contracts defers to each party's domestic rules on capacity, avoiding uniform age or signature requirements. This respects national sovereignty. UNCITRAL Model Law.
In high-value commercial deals, how do courts balance capacity and duress concerns?
By scrutinizing both mental state and coercion in context
By applying federal standards only
By always preferring capacity over duress
By excluding duress if written
Courts examine both the party's mental ability to understand the transaction and any coercive pressures. They assess bargaining power, sophistication, and negotiation circumstances. This holistic review protects fairness in major deals. Duress and capacity.
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Study Outcomes
Understand the concept of capacity to contract -
Learn what legal capacity entails and why it's a fundamental requirement for forming enforceable contracts.
Analyze real-world capacity scenarios -
Work through practical examples to identify whether parties meet the criteria for valid contractual capacity.
Identify parties lacking capacity -
Recognize which groups (e.g., minors, mentally impaired individuals, intoxicated persons) may lack the legal ability to contract.
Apply capacity rules to contract validity -
Use established legal principles to determine if agreements are void or voidable due to capacity issues.
Evaluate enforceability of agreements -
Assess the impact of capacity defects on contract enforceability and potential remedies.
Demonstrate proficiency in contract capacity principles -
Consolidate your contract law expertise by accurately answering questions on capacity to contract.
Cheat Sheet
Age of Majority and Minors' Contracts -
Under Restatement (Second) of Contracts §14, parties under 18 generally lack legal capacity to contract, making agreements voidable at the minor's option. Exceptions include contracts for necessities (e.g., food, shelter) and beneficial employment agreements, which remain enforceable. Remember the mnemonic "MINE" (Minors, Necessaries, Indemnity Exceptions) to ace this section on your capacity to contract quiz.
Mental Capacity and Lucid Intervals -
To pass a legal capacity test, a party must understand the nature and consequences of the transaction; intermittent "lucid intervals" can restore capacity temporarily (Restatement §15). Cases like Lucy v. Zehmer demonstrate how contractual intent is evaluated even amid eccentric behavior. Jot down "Know-Nature" (KN) to recall the two-pronged understanding requirement: knowing you're contracting and knowing what you contract.
Intoxication and Volitional Impairment -
Courts require proof that intoxication prevented understanding the deal's nature or rendered the party unable to act reasonably (Restatement §16). Purely voluntary intoxication isn't a free pass - you must show the other side knew or should have known of your impairment. Use "I-I" (Intoxication Impact) to remember the cognitive and volitional tests for your contract law quiz prep.
Corporate and Agency Capacity -
Corporations contract through authorized agents; transactions outside corporate power (ultra vires) can be voided unless later ratified or given express approval (Delaware General Corporation Law §122). Always check articles of incorporation and board resolutions before assuming capacity. Keep "CAPA" (Corporate Authority & Proper Authorization) in mind when testing your contract knowledge in a corporate context.
Ratification, Disaffirmance, and Time Limits -
After gaining capacity (e.g., reaching majority), a party may ratify previously voidable contracts by affirming them, while disaffirmance must occur within a reasonable time and often requires restitution (Restatement §7). Courts look for clear intent - words or conduct - to ratify or disaffirm. Remember "RAD" (Ratify, Act, Disaffirm) to track post-capacity options on your legal capacity test.
