Contracts Part II, Capacity: Draw the Law

Well, continuing on our tour of contract law, remember that last time I talked about what constitutes a contract and what is good consideration for a contract.  Today I am going to talk about capacity and the difference between void and voidable contracts.

Who can Enter a Contract?

An enforceable contract is only created when both parties have maturity and mental capacity. Why? Well, we decided a long time ago that a promise for a promise require some degree of understanding, and if one party did not comprehend they would be at a disadvantage.

The law will only enforce contracts that are made between parties that have capacity, as the rationale is we would like to avoid people taking advantage of those who cannot comprehend the agreement.

Who lacks Maturity and Mental Capacity?

In terms of maturity, it will be minors. Businesses always have to be wary about selling things to kids. The law in contracts (as with many other parts of the law) assumes minors need protection due to lack of maturity. The goal is avoid the car salesman selling the shiny new red truck to the 15-year old who has no idea how much car loan payments are.

In terms of mental capacity, intoxicated, drugged out, and mentally handicapped people will lack mental capacity. Why? They are not in their right mind. A court of law may feel that if one party was intoxicated and the other side knew about it, and was trying to take advantage of the fact, that the contract is voidable.

Minors lack maturity and intoxicated people lack the capacity to appreciate the effects of the deal being made.

Therefore, when entering a contract (and remember what I told you last week a contract is not a formal looking set of paper!) be wary of kids and drunks.

What Happens When Entering a Contract with Someone Who Lacks Maturity or Mental Capacity?

For children, if they enter a contract they may still have to comply with the terms if they do nothing to rescind the agreement once they reach the age of majority. Therefore, for teens in modeling, and they sign the modeling agreement at 17, then wait till 19 to complain about it – they may not be able to get out of it. Additionally, for necessities a minor’s parents may be forced to pay fair market value.

A minor who waits too long may be forced to comply with the contract once they pass the age of majority.

Other than the mentally handicapped (unless they should become lucid at some point) the drunk who does not appear to be drunk or is trying use their drunkenness to get out of a contract may have also still have to comply. Basically, the court would make them prove they were drunk and had a lack of capacity.

Check back next week, where I will talk about the difference between void and voidable contracts and entering contracts with legal persons (i.e. business entities).

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*Disclaimer:  This post discusses general legal issues, but does not constitute legal advice in any respect.  No reader should act or refrain from acting based on information contained herein without seeking the advice of counsel in the relevant jurisdiction.  Ryan K. Hew, Attorney At Law, LLLC expressly disclaims all liability in respect to any actions taken or not taken based on the contents of this post.