Capacity of Parties to a Contract in Contract Law

Capacity of parties to a contract

Capacity of parties to a contract is one of the most important essential elements of a valid contract. The parties to the contract should be able to perform and understand the terms and conditions of the valid contract.

In our daily life, every transaction we make is a result of a contract. Like purchasing vegetables from the seller or buying pens, and books from the stationary shop all are contracts.

For a valid contract, the parties to the contract must hold legal eligibility to enter into a contract and the legal capacity of parties to perform the contract’s obligations.

What is Capacity to Contract?

The capacity of parties to a contract meaning, in Common Law, the word capacity means ability. So, the capacity of a contract means the ability of the parties to enter into a contract that forms legally binding relations with each other.

If any party failed or is incapable to perform the conditions agreed by the parties to the contract, then the contract becomes invalid. So, the capacity of parties in business law is an essential element of a valid contract.

Example: A minor who is unable to understand the terms and conditions agreed in the contract, such person is incapable to enter into a contract. This is the capacity of parties example.

Read More — The Capacity of Parties to Enter into Contract