Most people can enter into a contract, but some people may be legally unable to do so for various reasons.
Contracts can be found void if one party is found to be lacking capacity to enter into a contract.
Find out who can and who can't enter into legally-binding contracts here!
Contract law may seem pretty simple at face value. Two parties who want to enter into a contract get together, draw up the terms of the contract with lawyers, and sign it. Sounds pretty quick and easy to do, right?
Unfortunately, it’s not quite that simple. There are certain legal requirements to enter into a contract that leave some segments of the population with a lack of capacity to contract.
We examine who can and who can’t legally enter into a contract below.
So, Can Anyone Make a Contract?
While most people can make and enter into a contract, not everyone can. Specifically, minors, people with mental incapacity, those under the influence of drugs and alcohol, and certain felons cannot legally enter into contracts.
We take a closer look at these scenarios here.
Who Has Lack of Capacity to Contract?
Several categories of people lack capacity to contract in the eyes of the law. They include the following:
Those who are legally classified as minors – that is, under 18 years of age – cannot enter into contracts in almost all U.S. states. Minors who do opt to enter into contracts can either fulfill their contractual obligations or void the contract itself.
Some exceptions exist, though. In most states, minors can’t void contracts for necessities like food, housing, and clothing. Also, most states have laws that minors can void a contract due to lack of capacity while still less than the age of majority. For example, if a minor turns 18 and hasn’t done anything to void the contract up until that point, then it can no longer be voided.
People who lack mental capacity can void or have their guardian void a contract, excepting those for necessities.
In many states, the standard for mental incapacity is a lack of understanding of the terms and meaning of the contract, something known as a cognitive test. Other states have what’s called an affective test, which states that a contract may be voided if one party isn’t able to act reasonably and the other party is aware of this condition. A third metric, the motivational test, is when a person’s ability to enter into a contract or not is used as a capacity test.
Drug and Alcohol Usage
People under the influence of drugs and alcohol are generally not considered by courts to lack capacity. However, if one party is so under the influence that they can’t understand the basic terms of the contract while the other party takes advantage of them, the contract could be considered voidable.
In some cases, certain felons may be barred from entering legal contracts under specific circumstances. This usually varies by state law and the type of felony involved.