A Requirement for the Existence of an Enforceable Contract Is

question 158

Multiple Choice

A requirement for the existence of an enforceable contract is that the parties have the legal capacity to contract. Which of the following is incorrect with respect to the law of incapacity?

• A) If someone contracts with an insane person but there was no indication of mental illness, the contract can be binding.
• B) A contract by an insane person for necessities, such as food, is binding.
• C) The law governing contracts with persons intoxicated by alcohol or drugs is the same as the law governing contracts with the insane.
• D) If a mentally impaired person cannot avoid a contract on the basis of insanity, the court could still set the contract aside for being an "unconscionable" transaction.
• E) If you knew that you were negotiating a new lease, but that you weren't being as effective as you wanted to be because you had been drinking, you can have the resulting contract set aside.

---

Definitions:

Equity Method

An accounting technique used by companies to record their investments in other companies, where the investment is recorded at original cost and adjusted for the investor's share of the investee's net income or loss.

Voting Shares

Shares of a company's stock that grant the shareholder the right to vote on corporate matters and decisions at shareholder meetings.

Issue of Shares

The process by which a company allocates new shares to shareholders, which can raise capital or dilute ownership depending on the circumstances.

Gain or Loss

The financial result from the sale of an asset or investment, calculated as the difference between the selling price and the original purchase price.