Ace the Texas Law Module 2026 – Smash the 20-Hour Power Test!

The term "capacity" in contract law refers to the legal ability of an individual or entity to enter into a binding agreement. This involves an assessment of whether the parties involved possess the cognitive ability and legal qualifications to understand the nature and effects of the contract they are engaging in. For example, minors, individuals deemed mentally incapacitated, or those under the influence of substances may not have the capacity to contract legally. Therefore, determining capacity is crucial because a contract entered into by someone lacking the requisite legal capacity may be void or voidable.

Other terms related to a contract, such as the value assigned to it, its duration, or the condition of any property involved, are important but do not pertain to the concept of capacity. They address different aspects of contract law, such as consideration, enforceability, and the subject matter of the contract, rather than the parties' ability to form legal agreements.