Contract Glossary
Capacity
Definition
Capacity means you're legally able to enter into a contract. Minors (under 18 in most states), people who are severely intoxicated, and individuals with certain mental incapacities don't have capacity. A contract signed without capacity can be voided.
In Practice
If you're contracting with a sole proprietor, you're relying on that individual's capacity. If you're contracting with a company, the question shifts: does the person signing actually have authority to bind the company? A mid-level manager signing a $500,000 contract they weren't authorized to approve creates a capacity problem for the company, and a headache for you if the deal falls apart.
Common in these contract types
Related contract clauses
Frequently asked questions
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