Question

Read the following extract and then answer the question below.

As a business law lecturer, you find your students arguing about contractual capacity. One student argues that any person is allowed to enter into a valid contract and the other one says it is mandatory that only people with full contractual capacity are allowed to enter into a valid contract. When you ask them what is meant by contractual capacity, they fail to give you an answer. Describe contractual capacity pointing out categories of those who suffer due to lack of contractual capacity

Answer 1

Contractual capacity is the legal ability to enter into a contract. Individuals lacking capacity include minors, the mentally impaired, and intoxicated persons. Understanding contractual capacity is key for contract enforceability and economic activity.

Step-by-step explanation:

Contractual Capacity Explained

Contractual capacity refers to the legal ability of a party to enter into a contract. This means the person must have the mental ability to understand the rights and obligations under the contract and must knowingly be able to exercise their own will regarding these rights and obligations. Certain categories of people are generally recognized to lack full contractual capacity and therefore cannot be bound by the terms of a contract. These categories include minors (typically under the age of 18), those who suffer from mental impairments, and individuals who are intoxicated at the time of entering the contract.

For example, if a skilled surgeon enters into an employment agreement to operate on a patient, the expectation is that the patient will pay for these services. If there is a failure to pay, the surgeon has recourse through the legal system due to the strong contractual and property rights in place. However, if the patient was a minor or deemed mentally incapable when the contract was made, the contract may be considered void or voidable, thus affecting the surgeon's ability to enforce the contract.