In terms of legal agreements, what does 'capacity' refer to?

• A. The ability to validate a contract
• B. The legal age and mental competency of parties involved
• C. The requirement of written documentation
• D. The terms outlined for enforcement

Answer: (B)

Capacity in the context of legal agreements refers to the legal ability of individuals to enter into a contract. This encompasses two primary factors: the legal age of the parties involved, which typically means that they must be at least 18 years old in most jurisdictions, and their mental competency, which indicates that they must have the cognitive ability to understand the nature and implications of the agreement they are entering.

An individual lacking capacity—for instance, due to being a minor or having a mental impairment—may not be able to enter into a binding contract. Such agreements can be declared void or voidable at the discretion of the party lacking capacity. Therefore, ensuring that both parties possess the proper capacity is fundamental to the enforceability of a contract.

Other aspects like validation, documentation, and enforcement terms do not specifically address the foundational requirement of party competency and legal age, making them less relevant to the definition of capacity in contracts.