Bar Exam (Next Generation) Quiz: Incapacity To Contract

5 questions · exam conditions

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Incapacity To ContractQuestion 1 of 5

Darius, after mixing prescription medication and alcohol, became so intoxicated that he could not understand the nature of a transaction. At a bar, he signed a contract to sell his vintage guitar to Lena for $2,000, the guitar's fair market value. Lena knew Darius was intoxicated and unable to understand, but she did not encourage his drinking or take advantage of him beyond making the proposal. The next morning, sober, Darius texted Lena, 'I want out of the guitar deal.' He has not delivered the guitar. The jurisdiction follows the Restatement (Second) of Contracts.

Which of the following is correct?

Darius cannot avoid the contract because the price was fair and Lena did not overreach.

Darius cannot avoid the contract because his intoxication was voluntarily self-induced.

Darius can avoid the contract because Lena had reason to know of his incapacity; fairness is not a defense.

Darius can avoid the contract only if he can prove that Lena caused or encouraged his intoxication.

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Bar Exam (Next Generation) Quiz

Bar Exam (Next Generation) Quiz: Incapacity To Contract

Practice Incapacity To Contract in Bar Exam (Next Generation) with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Incapacity To Contract, giving you a quick way to practice the rules, question types, and explanations that matter most for Bar Exam (Next Generation).

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Question 1

Which of the following is correct?

Darius cannot avoid the contract because the price was fair and Lena did not overreach.
Darius cannot avoid the contract because his intoxication was voluntarily self-induced.
Darius can avoid the contract because Lena had reason to know of his incapacity; fairness is not a defense. (correct answer)
Darius can avoid the contract only if he can prove that Lena caused or encouraged his intoxication.

Explanation: Under Restatement Second §16, a contract is voidable if the party was intoxicated and the other party had reason to know that the intoxication prevented understanding or reasonable action. Lena knew Darius could not understand, so the contract is voidable. Neither the fairness of the price nor the absence of overreaching is a defense. (A) and (B) are incorrect; (D) adds a causation requirement not in the rule.

Question 2

Mateo, age 17, had been living on his own without parental support. He needed emergency dental surgery. A dentist performed the surgery after Mateo signed a contract promising to pay $4,000. The dentist's usual and reasonable charge for the surgery was $3,200. Before his eighteenth birthday, Mateo disaffirmed the contract and refused to pay. The jurisdiction follows the common law of contracts.

What is the dentist's best recovery?

$4,000, because a minor's contract for necessaries is enforceable at the contract price even after disaffirmance.
$3,200, because Mateo's disaffirmance relieves him of the contract price, but he remains liable for the reasonable value of necessaries. (correct answer)
$0, because Mateo validly disaffirmed the contract while still a minor and before any ratification.
$3,200, but only if the dentist can show Mateo understood the nature and consequences of the contract.

Explanation: A minor's contract for necessaries is not enforceable at the contract price, but the minor is liable in quasi-contract for the reasonable value of necessaries furnished. Dental surgery for a minor without parental support was a necessary. Mateo's disaffirmance discharged the contract price but left a duty to pay $3,200, the reasonable value. (A) overstates by enforcing the contract price; (C) ignores the necessaries exception; (D) incorrectly adds a capacity requirement.

Question 3

Helen, an 83-year-old widow not under guardianship, suffers from dementia that leaves her unable to understand the nature and consequences of a real estate sale. Her neighbor, Alan, who had no reason to know of Helen's condition, offered to buy her house for its fair market value. Helen accepted and the sale closed, with deed delivered and price paid. Six months later, Helen's newly appointed guardian asked a court to set aside the sale. The jurisdiction follows the Restatement (Second) of Contracts.

Which of the following best describes the guardian's position?

The guardian may set aside the sale because Helen lacked contractual capacity at the time of the sale, regardless of Alan's knowledge.
The guardian may set aside the sale only if the guardian returns the purchase price and proves Alan knew of Helen's incapacity.
The guardian may not set aside the sale because the contract was on fair terms, Alan had no knowledge of Helen's condition, and the sale was fully performed. (correct answer)
The guardian may not set aside the sale because Helen had not been adjudicated incompetent before the sale and the price was fair.

Explanation: Under Restatement Second §15, a person lacking mental capacity incurs only voidable duties, but avoidance may be cut off where the contract was on fair terms, the other party had no reason to know of the incapacity, and the contract has been fully performed. The sale was at fair market value, Alan was innocent, and closing occurred. Thus the guardian cannot set it aside. (A) ignores the §15(2) limitation; (B) is not the correct basis; (D) is false because lack of adjudication does not itself bar a capacity defense.

Question 4

Jenna, age 17, paid $1,200 cash to a dealer for a used laptop for personal use. She used the laptop for six months; two weeks before her eighteenth birthday, it was stolen from her car. One week after turning eighteen, Jenna sent the dealer a written notice disaffirming the contract and demanded return of the $1,200. The dealer refused. The jurisdiction follows the common law of minors' contracts.

Which of the following best describes Jenna's rights?

Jenna may recover the full $1,200 because the contract was voidable and she was not required to return consideration that she no longer possessed. (correct answer)
Jenna may recover only the $1,200 minus the reasonable value of her use of the laptop for six months.
Jenna may recover the $1,200 only if she also pays the dealer the laptop's fair market value at the time it was stolen.
Jenna cannot recover the $1,200 because her failure to return the laptop before disaffirming defeats her avoidance.

Explanation: A minor may disaffirm a non-necessity contract before or within a reasonable time after reaching majority. Upon disaffirmance, the minor must return any consideration still in her possession, but if the consideration has been lost or stolen, the minor is not liable for its value and may recover the payments she made. Because Jenna no longer had the laptop, her inability to return it did not defeat avoidance. The dealer is not entitled to offset use or lost value. (B) and (C) wrongly impose restitution; (D) misstates the return requirement.

Question 5

A court adjudicated Otto incompetent to manage his property and appointed a guardian for his estate. Despite the guardianship, Otto later signed a written contract to sell a rare coin to a dealer for $1,500, the coin's fair market value. The dealer did not know of the guardianship and paid the price. Otto's guardian, learning of the sale, sought to have it set aside.

Which of the following best describes the dealer's rights under the contract?

The contract is enforceable because the dealer paid fair value and had no knowledge of the guardianship.
The contract is voidable by Otto's guardian, but only if the guardian shows Otto did not understand the sale.
The contract is void, so the guardian may set it aside without regard to the dealer's knowledge or the fairness of the price. (correct answer)
The contract is enforceable because Otto may contract during a lucid interval even while under guardianship.

Explanation: A person whose property is under guardianship because of an adjudication of incompetence has no capacity to contract; contracts made after the adjudication are void, not merely voidable. The dealer's good faith and fair price are irrelevant. (A) incorrectly treats the contract as enforceable; (B) incorrectly treats it as voidable and adds a proof requirement; (D) incorrectly recognizes a lucid interval capacity for an adjudicated incompetent.