What is Capacity to Contract?

When drafting a legally binding business contract with more than one individual, you want to make sure that everyone entering the agreement has the capacity to contract. In other words, each person you are going into business with must be legally eligible to enter the contract. If someone who lacks the capacity to contract enters your agreement, the agreement becomes void and unenforceable. In this blog, our Chicago business attorney explains the factors that can impact one’s capacity to contract.

Are they a minor?

In most states, individuals under the age of 18 are considered minors, and therefore unable to make or enter a contract. A contract signed by a minor is only void for the time until the individual becomes of legal age – once he or she turns 18 and hasn’t done anything to void the contract, it can no longer be unenforceable.

Do they meet the standard for mental capacity?

An individual who does not meet the standard for mental capacity can void most contracts. In order to enter a contract agreement, the individual must be able to fully understand the meaning and impact of the words included in the contract.

Are they authorized?

Not everyone can sign a contract for a corporation’s behalf. Try to get some assurance that an individual signing such a contract is a corporate officer with actual authority to legally bind the company.

Alcohol and Drug Usage

Courts generally exclude those under the influence of drugs and alcohol from the category of people who have the capacity to enter a business contract or agreement. While those who are intoxicated are not exempt from upholding any contractual obligations, they are also responsible for being accountable of anything they do while under the influence.

Questions about drafting or signing a contract? At The Prinz Law Firm, our Chicago business lawyers have extensive experience assisting clients with understanding the aspects of entering a legally binding contract. As our client, we make your concerns our business – we are dedicated to the success of your career and business.

Call The Prinz Law Firm today at (312) 212-4450 today to schedule a free consultation.