Explain Capacity and Legality in Relation to Contracts

Contracts are an essential aspect of doing business, and it is critical to understand the concept of capacity and legality when creating or signing a contract. In this article, we will explain what capacity and legality mean in relation to contracts.

Capacity in relation to Contracts

Capacity refers to a person`s legal ability to enter into a contract. In other words, it is the ability to understand the terms of the contract and agree to them without being coerced or under any duress. To have the capacity to enter into a contract, a person must be of sound mind, of legal age, and not under any disability that would prevent them from entering into a contract.

For instance, it would be illegal for a minor, including those under 18 years old, to enter into a contract because they lack the capacity to understand the implications of the contract fully. Similarly, individuals who are mentally incapacitated or are under the influence of drugs or alcohol do not have the capacity to enter into a legally binding contract.

It is the responsibility of the person entering into the contract to ensure that they have the capacity to do so. If they do not have the capacity, the contract may be deemed invalid.

Legality in relation to Contracts

Legality refers to the legality of the subject matter of a contract. It is a fundamental requirement for any contract to be legally binding. For instance, a contract that is against public policy, such as an agreement to commit a crime or engage in fraudulent activities, is not legal and thus unenforceable.

Likewise, if the subject matter of the contract violates any applicable laws or regulations, then the contract is not legal. Examples of such contracts include contracts that involve the purchase or sale of illegal drugs, gambling, or prostitution.

It is important to note that even if the terms of the contract are legal, a contract can still be deemed unenforceable if it violates a statute or public policy. For example, a contract that violates employment discrimination laws would be unenforceable.


Capacity and legality are essential aspects to consider when creating or signing a contract. It is essential to ensure that all parties involved in the contract have the capacity to enter into a legally binding agreement. Additionally, it is necessary to ensure that the subject matter of the contract is legal and does not violate any applicable laws or regulations. By understanding the concept of capacity and legality, you can create and sign contracts with confidence and avoid any potential legal troubles.