Incapacity

The improper-bargaining defenses arose from external pressure — what one party did to the other. Incapacity arises from an internal condition that prevents a party from giving meaningful consent at all. The chapter’s organizing tension is between protecting vulnerable parties and preserving transactional stability, and the law resolves it differently for each category: a bright-line status rule for infants, a graded inquiry for the mentally ill, and a high bar for the intoxicated.

Capacity as a precondition

R2d § 12. No one can be bound by a contract who lacks legal capacity to incur at least voidable duties. The section names four sources of incapacity — guardianship, infancy, mental illness or defect, and intoxication. A guardianship contract (§ 13) is void; the other categories yield voidable contracts the protected party may disaffirm.

Infancy

R2d § 14. A minor incurs only voidable contractual duties; the minor may disaffirm before majority or within a reasonable time after. The necessaries exception limits the privilege: a minor remains liable for the reasonable value of necessaries actually furnished. But “necessary” is a flexible, fact-bound term — and a thing is not a necessary if the minor has a parent or guardian able and willing to supply it. The policy cuts both ways: the rule protects minors from improvident bargains but raises the cost of dealing with them in good faith.

Mental illness or defect

R2d § 15. A contract is voidable on two alternative grounds: a cognitive test (the party cannot understand the nature and consequences of the transaction) or a volitional test (the party cannot act reasonably in relation to it and the other party has reason to know of the condition). Total cognitive incapacity voids regardless of the other party’s knowledge; impaired-judgment claims require that knowledge. Section 15(2) further limits avoidance where the contract was made on fair terms and the other party had no reason to know — protecting the good-faith dealer. Capacity is judged at the moment of contracting, not by later decline.

Intoxication

R2d § 16. A contract is voidable for intoxication only where the party cannot understand the transaction and the other party has reason to know of the intoxication. Courts rarely grant relief because the impairment is self-induced; the doctrine guards against strategic, after-the-fact claims of incapacity.

Cases

Webster Street Partnership v. Sheridan holds that an apartment lease signed by minors was voidable because housing was not a “necessary” where the tenants could return home to parents able and willing to support them; on disaffirmance the contract became void and the minors recovered what they had paid. It teaches that “necessary” turns on the particular minor’s circumstances, not on the abstract nature of the good — the same facts can flip the outcome. The mental-illness branch is illustrated by Estate of McGovern, where the Pennsylvania court, judging capacity at the moment of contracting and declining to adopt the Restatement’s broader test, found a retiree competent to elect a disadvantageous pension option despite alcoholism and grief — a contrast that shows how much the chosen legal standard, holding facts constant, can drive the result.

What you should be able to do

Apply the infancy doctrine to a minor’s purchase and work through disaffirmance, restitution, and whether the good was a necessary given the minor’s actual situation. Apply § 15’s cognitive and volitional prongs and explain when the other party’s knowledge matters. Apply § 16 to an intoxication claim and explain why relief is rare. Next class is the Module IV capstone: a quiz and a negotiation simulation that test all four defenses doctrines as deployed leverage, not casebook labels.