The doctrines of consideration and promissory estoppel are essential to an understanding of how contracts
are formed and enforced in the United States.
7.2
Capacity and Legality
For a contract to be legally binding, the parties entering into the contract must have the capacity to do so. As
a legal matter, there are certain classes of people who are presumed to have no capacity to contract. These
include legal minors, the mentally ill, and those who are intoxicated. If people meeting these criteria enter into
a contract, the agreement is considered voidable. If a contract is voidable, then the person who lacked
capacity has the choice to either end the contract or continue with it as agreed upon. This design is meant to
protect the party lacking capacity.
Following are some examples of the application of these rules.
Minors Have No Capacity to Contract
In most states, minors under the age of 18 lack the capacity to make a contract and may therefore either
honor an agreement or void the contract. However, there are a few exceptions to this rule. In most states, a
contract for necessities (i.e. food and clothing) may not be voided. Also, in most states, the contract can no
longer be voided when the minor turns 18.
Mental Incapacity
If a person lacks the mental capacity to enter a contract, then either he or she, or his or her legal guardian,
may void it, except in cases where the contract involved necessities. In most states, mental capacity is
measured against the “cognitive standard” of whether the party understood its meaning and effect.
the role for him or give him the job, as originally anticipated. Also, he will not likely be awarded any damages
for the job that he turned down with We are the Best, LLC, as expectation damages are not usually available.
E X A M P L E  7 . 2
Mary, 16, an athlete, signs a long-term endorsement deal with a well-known brand and is compensated for
several years. At age 20, she decides she wants to take a better endorsement deal, so she tries to void the
agreement on the grounds that it was made when she was a minor and that she lacked capacity at that time.
Mary will not likely succeed in having her agreement voided, as she has passed the period of incapacity.
E X A M P L E  7 . 3
Mr. Williams contracted to sell a patent. Later, however, he claimed that he lacked capacity to enter the
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Chapter 7 Contract Law
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