Contracts: Capacity

Capacity is the forth element in establishing a legally binding contract. The mental ability, or capacity, to enter into a contract might seem like a straightforward requirement at first, but can actually be one of the more difficult elements to establish in certain situations. Certain classifications of people, such as minors, mentally incapacitated, and sometimes even intoxicated persons, may inherently lack the capacity to contract. Minors, unless they are emancipated, are given the legal authority in most states to disaffirm, or void, any contract they enter into. Mental incapacity can be a little harder to determine. However, if any person, suffering from a mental disorder or not, enters into a contract understanding both the nature and obligations of the contract, they will be bound by the contract. In a similar way, if an intoxicated person merely exercises poor judgment due to their intoxication, but understands the contract, they will still be bound.