What is contractual capacity, and why is it important? What are some situations in which a court might consider whether contractual capacity is lacking or questionable?
What will be an ideal response?
For a contract to be deemed valid, the parties to the contract must have contractual capacity-the legal ability or competence to enter into a contractual relationship. Courts generally presume the existence of contractual capacity, but there are some situations in which capacity is lacking or questionable. In many situations, a party may have the capacity to enter into a valid contract but also have the right to avoid liability under it.Minors usually are not legally bound by contracts. Subject to certain exceptions, the contracts entered into by a minor are voidable (they can be canceled, or avoided) at the option of that minor. The minor has the option of disaffirming (renouncing) the contract and setting aside the contract and all legal obligations arising from it. An adult who enters into a contract with a minor, however, cannot avoid his or her contractual duties on the ground that the minor can do so. Unless the minor exercises the option to set aside the contract, the adult party is bound by it.Intoxication is a condition in which a person's normal capacity to act or think is inhibited by alcohol or some other drug. Under the common law rule, if the person was sufficiently intoxicated to lack mental capacity, the transaction is voidable at the option of the intoxicated person even if the intoxication was purely voluntary. In spite of the common law rule, most courts today rarely permit contracts to be avoided because of a party's intoxication.If a person has been adjudged mentally incompetent by a court of law and a guardian has been appointed, any contract made by the mentally incompetent person is void-no contract exists. Only the guardian can enter into binding legal duties on the incompetent person's behalf. Even if the court has not previously ruled that the person is mentally incompetent, the contract may be avoided if incompetence is proved.
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