Incapacity contract law is used when there is a question of the mental capacity of a party to a contract. When incapacity exists, the party is not eligible to enter into the contract.

Incapacity Due to Status

Incapacity can occur due to the status of the parties involved. For example:

  • Aliens, defined as people who have gained citizenship in a country other than their own, can enter into contracts. However, if war breaks out between their new country and their country of origin, the contract is then void.
  • During imprisonment, convicts or prisoners are not allowed to enter into a contract.
  • An insolvent person who is unable to pay debts cannot enter into a contract.
  • Physicians from the Royal Medical College cannot enter into contracts with their patients.
  • Barristers cannot enter into contracts with their clients.

Incapacity can also occur in relation to the mental status of the person. For example:

  • Mental deficiency can refer to persons under the age of 18 in Indian law and 21 in British law. At these ages, they are seen as lacking mental maturity and considered minors.
  • Idiots in medical terms suffer deficiencies from birth and are listed as having a permanent incapacity.
  • Persons determined to be insane have two states: state of sanity and state of insanity. Contracts may be entered into during a state of sanity. Otherwise, their status is listed as temporary incapacity.

Incapacity and Illegality

Contract obligations can be avoided by three types of people. They are:

  1. Minors. Until the age of maturity, minors cannot enter into contracts. If they do, the contracts will be voidable. If the minor reaches the age of consent, they can then agree to the terms of the contract.
  2. Vulnerable parties. A vulnerable party is one who has difficulty understanding the content of the contract and the consequences of not meeting the terms of the contract. If the person is lacking mental capacity, a minor, or has an illness, they may not be able to complete the tasks expected of the contract.
  3. Intoxicated people. People who are intoxicated have the potential to negate the contract formation if the other party is aware that the intoxicated person cannot fully comprehend the contract.

Contracts may also be voided if the content of the contract contains illegal products or expects illegal actions to be taken by the parties involved. Contracts related to any criminal activity, whether drugs or murder, are illegal and therefore unenforceable.

Defenses to Breach of Contract

If a breach of contract occurs due to incapacity, the party who breached the contract can be removed from any liability if they can properly defend the breach. Some defenses that are valid include:

  • Repudiation, where one party of the contract will not complete the contractual obligations. This must be proven to be abandonment, renouncement, and refusal of the contract.
  • Revocation, where one party rescinds an offer prior to the offer being accepted. The revocation is valid as long as it was communicated to the other party.
  • Lack of capacity, which shows that the party entering the contract was not allowed to do so. This could be in the case of a minor or a person lacking mental capacity.

Conversely, if a minor commits fraud by misrepresenting their age to the other party, the contract cannot be voided. The minor must then uphold their end of the contract. A minor cannot void a contract related to items considered to be necessities such as:

  • Food.
  • Lodging.
  • Clothing.
  • Medicine.
  • Medical care.
  • Education.
  • Legal services.

Legally Incapacitated vs. Legally Incompetent

Legally incapacitated in most states is described as a person who cannot meet the basic requirements needed to maintain physical health and safety. To be considered legally incapacitated, a guardianship proceeding may be necessary, but more often evidence must be used to show the inability to meet the basic requirements of physical health, safety, or property management. This will vary by state.

Legally incompetent is a legal term applied to a person who is part of legal action and is either physically or mentally incapable of understanding the charges against them. They also cannot take part in their defense. Legally incompetent can also refer to a professional who is unable to perform their duties, such as a doctor.

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