Capacity to Contract

Capacity in law refers to a person’s competency or fitness to enter into legal agreements or be held accountable for their promises or actions. When a contract is formed a person is held legally accountable and is subject to the terms of that contract, unless the person did not have the capacity when the contract was formed or the contract doesn’t meet the other requirements such as consideration and mutual agreement. If the contract was formed with a party that is considered a minor, intoxicated, or mentally unsound in some way the contract is void because the party was incapacitated.

The law doesn’t consider minors to have the capacity to form a contract on equal terms with an adult because of their lack of experience and maturity. However a contract with a minor is usually valid unless the minor takes actions to disavow or disaffirm the contract before they reach the age of majority. The age of majority in most places is eighteen although in some places the age of majority may be higher at nineteen or twenty one. Disaffirming a contract can be as easy as stating the intention not to honor the contract orally or in writing. A minor cannot however usually disaffirm, and is therefore bound by, contracts created for necessities like food or shelter despite age. (Liuzzo, pg. 172)

If a seventeen year old entered into a contract to receive money to perform a certain action, for example play for a certain sports team, the minor could void the contract before reaching the age of majority as long as the contract had not received prior judicial approval. However if a minor signed a rental agreement the contract could not be voided later even if the minor wanted out of the agreement because housing is considered a necessity.

When a party is intoxicated or under the influence when entering into a contract this can sometimes void the contract. However if the intoxicated party tries to dodge contractual obligation by claiming they were under the influence the contract is...