Contracts and Sales Multistate Bar Practice Exam

For a party to disaffirm a contract due to intoxication, what must be true?

1. The intoxicated party must have signed the contract

2. Both parties must agree to disaffirm

3. The intoxicated party must have no memory of the contract

4. The other party must have known about the intoxication

The correct answer is: The other party must have known about the intoxication

In situations where a party seeks to disaffirm a contract due to intoxication, it's crucial that the other party was aware of the intoxication at the time the contract was made. This requirement is rooted in the idea that contracts are based on mutual assent and understanding. If the non-intoxicated party was unaware of the intoxicated state of the other party, it would be inequitable to allow disaffirmance just based on the intoxicated party's later regret or lack of clear capacity at the time of agreement. The key principle here is that intoxication can impair one's ability to understand the nature and consequences of a contract. However, for a valid disaffirmation to take place, the non-intoxicated party's knowledge of the intoxication is considered essential, as it signals that they should have recognized the impaired capacity of the intoxicated party. Thus, this context establishes that the intoxicated party can disaffirm the contract based on the non-intoxicated party's awareness of their state, ensuring fairness in contractual dealings.