Also known as: contractual capacity · capacity to enter contracts · legal capacity · contractual competence
Written by attorneys · grounded in primary & secondary sources — see below
The legal ability of a person to incur at least voidable contractual duties. Capacity to contract may be partial and its existence in respect of a particular transaction may depend upon the nature of the transaction or upon other circumstances. A natural person who manifests assent has full capacity unless under guardianship, an infant, mentally ill or defective, or intoxicated.
Craig Caldwell, recently placed under a limited financial conservatorship, attended an investment reception and signed a complex margin agreement after several cocktails. The representative knew of Craig's prior hospitalization and erratic patterns yet proceeded without inquiry. Because capacity may be partial and depend on the transaction, the agreement is voidable at Craig's election through his conservator.
Caleb Chang sought to lease warehouse space from Cardinal Insurance for his distribution business. Cardinal's representative learned that Caleb had been adjudicated incapacitated and placed under guardianship the week before. No landlord-tenant relationship formed because the parties lacked the legal capacity required to enter that relationship.
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Clifford Cox mailed an offer to sell equipment to Central Dynamics. Before the company could accept, Clifford suffered a stroke that deprived him of legal capacity. The offeree's power of acceptance terminated when the offeror lost capacity to enter the proposed contract.
Charles Cunningham, a seventeen-year-old, signed a financing agreement for a vehicle purchase. Because he was an infant, he lacked full legal capacity to incur contractual duties even though he manifested assent to the transaction.
Cody Callahan, under limited guardianship for financial matters, attempted to bind himself to a high-risk derivatives contract. Capacity to contract may be partial, and its existence depends on the nature of the transaction, so the agreement remained voidable despite Cody's apparent assent.
Cynthia Cortez purchased cigarettes and later sued the manufacturer for breach of warranty. The manufacturer raised a defense based on lack of legal capacity under other law that nullifies the obligation, illustrating how capacity rules supplement commercial statutes.
A person lacks capacity if unable to understand in a reasonable manner the nature and consequences of the transaction or unable to act reasonably in relation to it when the other party has reason to know of the condition.
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No. Capacity may be partial and its existence depends on the nature of the transaction, so a court must examine whether the specific agreement falls within the conservatorship's limits.
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The offeree's power of acceptance terminates when the offeror is deprived of legal capacity to enter the proposed contract.
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Intoxication prevents formation only when it renders the person unable to understand the transaction or to act reasonably and the other party has reason to know of the condition.
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…nor women could hold office, serve on juries, or bring suit in their own names, and married women traditionally were denied the legal capacity to hold or convey property or to serve as legal guardians of their own children. See generally L. Kanowitz, Women and the Law: The Unfinished Revolution 5-6 (1969); G. Myrdal, An American…