Capacity is a legal term that refers to the ability of persons to enter into contracts.
Some categories of people have had their freedom to enter into contracts restricted. These categories obviously vary depending on legal jurisdiction. For example, under British Columbia law the categories are:
- Infants. (The definition of an infant differs in various jurisdictions, depending on what the age of majority is in that jurisdiction.) An infant is not bound by the contracts he or she enters into except for the purchase of necessaries and for beneficial contracts of service. Infants must pay fair price only for necessary goods and services. In contracts between an adult and an infant, adults are bound but infants may escape contracts at their option (i.e. the contract is voidable). Infants may ratify a contract on reaching age of majority. In the case of executed contracts, when the infant has obtained some benefit under the contract, he/she cannot avoid obligations unless what was obtained was of no value. It should be noted that the British Columbia Infants Act (RSBC 1996 c.223) declares all contracts with infants to be unenforceable, including those for necessities. Upon repudiation of a contract, either party can apply to the court. The court may order restitution, damages, or discharge the contract. All contracts involving the transfer of real estate are considered valid until ruled otherwise.
- Insane. Persons claiming insanity must show that they did not understand what they were doing and that the other person knew or ought to have known of the insanity.
- Intoxicated. Contracts entered into while intoxicated are treated like insanity. They must be repudiated as soon as sober.
- Enemy Aliens may have contracts void or suspended in event of outbreak of war.
- Bankrupts: before discharge they must notify creditors, but after discharge they are returned to full capacity.
- Corporations. The capacity of corporations depends on the method of incorporation. The capacity of crown corporations are limited by legislation.
- Unions have limited capacity unless the contract relates to union activities.
At one point, married women were considered to be incapacitated, but this is no longer the case.
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