Comprehensive Volume, 18th Edition
Chapter 14: Capacity
and Genuine Assent
An agreement that otherwise appears to
be a contract may not be binding because
one of the parties lacks contractual
In such a case, the contract is ordinarily
voidable at the election of that party who
lacks contractual capacity. In some cases,
Chapter the contract is void.
Contractual incapacity is the inability, for
mental or physical reasons, to understand
that a contract is being made and to
understand its general terms and nature.
Incapacity may be due to:
being a minor
Factors Which May Invalidate Contract
Lack of Status Incapacity Minors
Capacity Factual Incapacity Intoxication
Unilateral Induced by
or Known to Other Party
Possible Mutual Mistake
Incapacity of Minors
Minors can avoid most contracts.
The minor, on avoiding the contract, must
return what had been received from the other
party if the minor still has it.
When a minor avoids a contract for a
necessary, (item essential to basic living
needs) the minor must pay the reasonable
value of any benefit received.
Incapacity Due to Insanity
The contract of an insane person is
voidable to much the same extent as the
contract of a minor.
An important distinction is that if a
guardian has been appointed for the
insane person, a contract made by the
insane person is void and not merely
Incapacity Due to Intoxication
An intoxicated person lacks contractual
capacity to make a contract if the
intoxication is such that the person does
not understand that a contract is being
The consent of a party to an agreement is
not genuine or voluntary in certain cases
of mistake, deception, or pressure.
When this occurs, what appears to be a
contract can be avoided by the victim of
such circumstances or conduct.
Mistakes that are unknown to the other party
usually do not affect the binding character of the
A unilateral mistake of which the other
contracting party has knowledge or has reason
to know makes the contract avoidable by the
victim of the mistake.
When both parties are mistaken about a basic,
Chapter material fact of the contract, the adversely
14 affected party may avoid the contract.
Innocent misrepresentation generally has no
effect on the agreement, though there is a trend
to allow it as a ground for avoiding the contract.
When one party knows of a fact that has a
bearing on the transaction, the failure to
volunteer that fact is called nondisclosure.
When concealment goes beyond silence and
consists of actively hiding the truth, the conduct
is fraud rather than nondisclosure.
Chapter There is a growing trend to hold fine-print clauses
14 not binding on the theory that they are designed to
hide the truth from the other contracting party.
The free will of a person, essential to the
voluntary character of a contract, is lacking if
the agreement is obtained by pressure.
Contracts made under pressure are voidable;
Undue influence, where the beneficiary of the
contract is in a position of extreme power over the
maker of the contract
Threats of extreme economic loss (economic duress)
Chapter Threat of physical force that would cause serious
personal injury or damage to property (physical
Possible Remedies for Lack of
There is NOT a
of the parties
14 Rescission Reformation