Lacking Contractual Capacity

To create a contract, it is required that both parties can become involved in the contract. When it amounts to legally binding agreements, specific individuals are at all times regarded as being short of legal ability, or “capacity”, to contract. As a legal issue, they are essentially assumed not to understand what they are doing. These individuals – lawful minors and the mentally ill, for instance – are situated into an exclusive group. If they become involved in a contract, the agreement is deemed “voidable” by them, as the individual who was short of capacity to become involved in the agreement in the first place. Voidable signifies that the individual who was short of capacity to become involved in the contract can either terminate the contract or allow it to move forward as settled on. This safeguards the party who is short of capacity from being coerced to go through with a deal that profits from his or her shortage of know-how.

Minors Possess No Contractual Capacity

Minors, those below eighteen years old in many states, are short of the capacity to make a contract. As a result, a minor who authorizes a contract can either stick to the deal or void the contract. However, there are some exceptions. For instance, in many states, a minor cannot void a contract for essentials such as food, clothing, and accommodation. In addition, a minor can void a contract for shortage of capacity only while still below the age of majority. In many states, if a minor becomes eighteen years old and has not done anything to void the contract, then the contract can no longer be voided.

Mental Incapacity

An individual who is short of mental capacity can void, or have a guardian void, many contracts, except contracts for necessities. In many states, the standard for mental capacity is whether the party knew the significance and result of the words encompassing the contract or transaction. This is termed the “cognitive” test. A few states use what is dubbed the “affective” test: a contract can be void if one party cannot act in a sensible way and the other party has cause to be aware of the condition. A few states use a third measure, termed the “motivation” test. Courts in these states gauge capacity by the individual’s ability to determine whether or not to become involved in the agreement. These tests might generate an unreliable outcome when employed to mental conditions like bipolar disorder.

Alcohol and Drugs

Individuals who are inebriated by drugs or alcohol are normally not believed to be short of capacity to contract. Courts normally decide that those who are voluntarily intoxicated should not be permitted to evade their contractual duties, but instead must assume responsibility for the outcome of their self-induced changed mental state. However, if a party is so far gone as to be incapable of comprehending even the type and outcome of the agreement, and the other sober party benefits from the individual’s condition might be voidable by the intoxicated party.