Legal Capacity to Enter a Contract: Definition & Examples


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Long-time friends Sandy and Millie are enjoying a night out together at a local pub. After Millie treated Sandy to a bottle of tequila, the friends decided to open a restaurant together; they immediately drafted a contract on a cocktail napkin and began planning their finances. The next morning, Sandy realized that she was in no position to go through with the business venture; Millie raised a civil lawsuit against Sandy. Why will the court likely rule in Sandy's favor?

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1. James was furious with his parents because they do not allow him to stay up late. At age 17, he rented an apartment on the other side of town. When his landlord inquired about his age, James claimed that he was indeed an adult. James signed the lease and moved into his new apartment. After a few days, James missed his mom's cooking so he asked if he could get out of the lease by admitting to his landlord that he had lied about his age and was actually a minor. What can the landlord do?

2. Which of the following is an example of a situation where the use of a cognitive test would help?

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About This Quiz & Worksheet

Some people do not have the capacity to enter a contract due to various reasons. This assessment reviews those reasons including age of maturity, mental illness, or intoxication.

Quiz & Worksheet Goals

In these assessments, you'll be tested on the elements that affect one's capacity to enter into a contract, including the following:

  • Court considerations regarding a person who entered into a contract after drinking alcohol decides she wants out of the contract
  • Whether a lease signed by a minor is enforceable if he falsified his age and claimed to be 18
  • Purpose of a Cognitive Test and a Motivational Test
  • Whether a contract signed by a minor is enforceable after she turns 18

Skills Practiced

  • Distinguishing differences - compare and contrast topics from the lesson, such as Cognitive Test and Motivational Test
  • Critical thinking - apply relevant concepts to examine information about entering into a contract before the age of maturity in a different light
  • Interpreting information - verify that you can review information regarding how mental illness affects one's ability to enter into a contract and interpret it correctly

Additional Learning

To learn more, review the accompanying lesson titled Legal Capacity to Enter a Contract: Definition & Examples. This lesson covers the following objectives:

  • Define capacity and cite three examples of lack of capacity
  • Explain what the Age of Maturity is and know when a contract signed by someone who has not reached the Age of Maturity can be enforced
  • Know what kinds of mental illness can prevent a contract from being enforced and describe two tests that are used to test for mental illness
  • Understand how being under the influence of alcohol or drugs can affect the validity of a contract