Key Concepts of Capacity to Contract

Understanding capacity to contract is key in determining who can legally enter agreements. Factors like age, mental ability, and intoxication affect contract validity, ensuring that parties involved can comprehend their rights and obligations in any agreement they make.

1. Age of majority and minors' contracts

   • The age of majority is typically 18 years, at which individuals can enter into binding contracts.
   • Contracts made by minors (under the age of majority) are generally voidable at the minor's discretion.
   • Minors may be held liable for contracts involving necessaries, such as food and shelter.

2. Mental capacity and incompetence

   • Individuals must have the mental capacity to understand the nature and consequences of a contract to be bound by it.
   • Contracts entered into by individuals deemed mentally incompetent are void or voidable, depending on the jurisdiction.
   • A court may declare someone incompetent due to mental illness, developmental disabilities, or other impairments.

3. Intoxication and its effect on contracts

   • Contracts made by individuals who are intoxicated may be voidable if they were unable to understand the nature of the agreement.
   • The intoxication must be severe enough to impair judgment significantly.
   • A party seeking to void a contract due to intoxication must prove their state at the time of the agreement.

4. Guardianship and conservatorship

   • Guardianship involves a court-appointed individual managing the affairs of someone deemed incompetent.
   • Conservatorship is similar but often pertains to financial matters specifically.
   • Contracts entered into by individuals under guardianship or conservatorship may be void or require court approval.

5. Voidable contracts vs. void contracts

   • Voidable contracts are valid until one party chooses to void them, often due to lack of capacity.
   • Void contracts are inherently unenforceable from the outset and cannot be ratified.
   • Understanding the distinction is crucial for determining rights and obligations.

6. Ratification of contracts by minors

   • Minors can ratify contracts upon reaching the age of majority, making them enforceable.
   • Ratification can be explicit (through a statement) or implicit (through actions).
   • Once ratified, the minor loses the right to void the contract.

7. Necessaries doctrine

   • Minors are liable for contracts involving necessaries, which are essential items like food, clothing, and shelter.
   • The doctrine protects minors while ensuring they can obtain essential goods and services.
   • The price must be reasonable and reflect the market value of the necessaries provided.

8. Emancipation of minors

   • Emancipation grants minors legal independence from their parents or guardians, allowing them to enter contracts.
   • Emancipated minors have the same rights as adults regarding contractual capacity.
   • The process and requirements for emancipation vary by jurisdiction.

9. Power of attorney

   • A power of attorney allows one person to act on behalf of another in legal or financial matters.
   • The principal must have the capacity to grant power of attorney; otherwise, it may be void.
   • The agent's authority can be limited or broad, depending on the terms set by the principal.

10. Contracts made under duress or undue influence

    • Contracts entered into under duress (threats or coercion) are voidable.
    • Undue influence occurs when one party takes advantage of a position of power over another, leading to an unfair agreement.
    • Proving duress or undue influence requires demonstrating the lack of free will in the decision-making process.