Capacity

What Is Capacity?

Capacity is one of the core requirements for a valid contract. A party who lacks capacity may void the agreement, leaving the other side without a remedy even if all other contract elements are present. Capacity protects vulnerable individuals from being bound by agreements they could not fully understand.

Who Lacks Capacity

• **Minors** (under 18 in most U.S. states) generally may disaffirm contracts, except for necessities like food, shelter, and medical care - **Persons with mental incapacity** who cannot understand the nature and consequences of the agreement - **Intoxicated persons** if the other party knew or should have known of the impairment - **Adjudicated incompetents** whose contracts are typically void rather than voidable

Practical Implications

When a party lacks capacity, the contract is usually voidable at that party's option, not automatically void. The party with capacity remains bound until the protected party elects to ratify or disaffirm the agreement. Ratification may occur expressly or by retaining benefits after capacity is restored. Businesses dealing with potentially incapacitated parties should require evidence of authority, such as a power of attorney or guardianship order, and document the circumstances of contract formation.