Working With Legal Counsel

Working With Legal Counsel

Mental Capacity and Contracts: What You Should Know

by Janet Myers

Mental capacity is crucial when entering a business contract. Everyone in a contract has to have full mental capacity to do so, or the contract will be null and void. When you are in a contract with another business, you need to be sure everyone involved is mentally capable of entering a contract, or you could find yourself in legal trouble. Here are some things you should know regarding mental capacity and contracts:

Two Mental Capacity Tests

To ensure everyone is mentally capable of entering a contract, states will use one of two tests. The "appreciate effects" test is one option. This test simply identifies whether a person is able to fully understand the severity of what they are involved in and can appreciate the effects of the outcome and benefits.

The "control test" is a test some states use to determine if a person is able to control themselves even if they are not understanding the lengths of the situation.

These are necessary requirements to ensure one party is not taking advantage of the other. Because of the impact a contract can have on a person or business, these tests are necessary to ensure everyone is aware of the significant commitments they entail.

Those who are not found mentally competent but who have entered into a contract will be freed of the contract and the contract will be cancelled.

Minors and Mental Capacity

Though minors are perfectly capable of being mentally capable in many cases, they are not considered so for the sake of entering a contract. If a minor has signed a contract, the contract will be cancelled.

There are few exceptions with regard to a business's point of view. When a minor enters a store and makes a purchase, this is considered a contract and is perfectly fine.

If a minor has entered a business contract with another party, he or she has an out to leave the contract with no drawbacks whatsoever. However, if the minor waits to leave the contract until they are of legal age, they may not then backtrack and leave the contract. Once they are a legal adult, they are liable for the contract and may not leave the contract without going through the legal process.

Psychological Disabilities and Mental Capacity

Those who are psychologically disabled are often considered mentally incapacitated and are not able to enter a contract. Those who are deemed mentally incapacitated are not able to completely comprehend the importance of what they are entering into. The law protects those individuals, as others could take advantage of the incapacity to understand. 

For more on contracts and business litigation, contact business attorneys like Richard L Wise, Counselor at Law.


About Me

Working With Legal Counsel

When was the last time you were forced to defend your business? If you are like most company owners, you might not be prepared for the kind of legal battles your adversaries can throw at you, which is why you should be ready with a great business attorney. I started working with legal counsel a few years ago, and it has made a tremendous difference with my confidence. Now, I feel like I am ready for anything, even when the future of my business isn't sure. This blog is all about working with legal counsel to navigate the harsh waters lawsuits can throw at you.