Capacity and Formal Requirements
Capacity
Certain classes of person have restricted capacity to contract. Minors (generally under 18) are bound by contracts for necessaries (goods or services suited to their condition in life and actually needed) and by beneficial contracts of employment or education. Other contracts are voidable at the minor's option or unenforceable against them. Persons lacking mental capacity, or intoxicated persons, may avoid contracts if they did not understand the transaction and the other party knew or ought to have known. Companies have capacity limited by their constitution and statute.
Formal requirements
Most contracts need no formality, but some do: contracts for the sale or disposition of land generally require written evidence signed by the party to be charged; guarantees must be evidenced in writing; certain consumer credit agreements require prescribed form. Failure of formality usually makes a contract unenforceable, not void.
Traps to watch
- Necessaries is judged at the time of supply and by the minor's actual needs, not by what the minor wanted.
- Voidable vs void: a minor's contract for non-necessaries is generally voidable, meaning it stands unless avoided within a reasonable time; do not say it is automatically void.
- Part performance and proprietary estoppel can sometimes rescue an oral land contract, but only in narrow circumstances.
- Signature is strong evidence of assent but can be set aside for misrepresentation or non est factum in rare cases.
Rule of thumb
Ask two questions: does this person have capacity? and does this type of contract require formality? If either fails, the contract may be unenforceable or voidable rather than simply breached. Worked example: a 16-year-old buys a bicycle for commuting to work. It is likely a necessary suited to their needs, so the contract binds them; a luxury item bought on credit probably would not.