UK Accounting Glossary
The act of denying or contradicting a previous statement. Can also mean the refusal to abide by a formerly enacted contract or agreement.
Disaffirmance is the denial or nullification of the existence of something or repudiation of an earlier transaction. It can also refer to a declaration that a voidable contract is void. In other words, it is an act by which a person who enters into a voidable contract declares that he/she will not abide by it.
Disaffirmance refers to the right to renounce a contract and thereby void any legal obligations resulting from the contract. To void the contract, the person must indicate he or she will not be bound by the contract. This can be explicitly expressed by the person in a declaration or implied when the person performs an act that indicates he will not abide by the terms of the contract.
Disaffirmance occurs when a voidable contractual obligation is renounced. Minors or, in some cases, persons who can prove they lacked the capacity to enter a legally binding contract – intoxication, mental incompetence, etc. – can disaffirm a contract and therefore avoid all legal obligations set forth in the contract.
Generally, a minor, or a person who has not yet reached the legal age of majority, is not legally required to carry out the terms of any contract he or she might enter. The minor retains the right of disaffirmance of the contract.
Only the minor retains this right; the other party remains bound by the contract. However, in most states, a minor cannot disaffirm a contract for necessities, such as food, shelter, clothing, medical care or employment. A minor may also not disaffirm a contract for the purchase or sale of real estate.
Otherwise, a minor retains the right of disaffirmance of any contract into which he or she enters, whether or not it has already been performed. Once that minor reaches the age of majority, any contract that he or she has entered into prior to the age of majority must be either disaffirmed within a reasonable but predetermined period of time or ratified.
In order to disaffirm a contract made before he or she reached the legal age of majority, the minor must state, either in writing or orally, his or her intention not to honour the contract. If the minor acts in such a way as to indicate to a reasonable person that he or she has no intention to honour the contract, that can count as disaffirmance, too. However, once the minor has reached legal age, if he or she does not disaffirm the contract within the time limit, the contract becomes ratified, and the entire contract becomes binding to both parties.
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This glossary post was last updated: 9th December 2019.