Legal Definitions - lack of capacity

Lack of capacity refers to a legal determination that an individual is unable to make certain decisions or enter into specific agreements because of a recognized impairment or characteristic. This means the law does not consider them capable of fully understanding the nature and consequences of their actions in a legal context, thereby preventing them from creating or entering into legally binding relationships.

Common reasons for a person to lack capacity include:

• Being a minor (under the age of legal majority, typically 18).
• Significant mental impairment, such as severe dementia, intellectual disability, or certain mental illnesses, that prevents rational decision-making.
• Extreme intoxication by drugs or alcohol that renders a person unable to understand their actions.

Here are some examples illustrating the concept of lack of capacity:

• Example 1: A minor purchasing a high-value item

  Imagine a 15-year-old student who uses their savings to buy an expensive, non-essential gaming computer from a private seller, signing a purchase agreement. In many jurisdictions, individuals under the age of 18 (minors) are generally presumed to lack the legal capacity to enter into binding contracts, especially for items that are not considered necessities. Even if the teenager understood the transaction, the law provides protections for minors, allowing them to void such contracts. The seller might find the agreement unenforceable if the minor later decides to return the computer.

• Example 2: An elderly person with advanced dementia making a new will

  Consider an 88-year-old individual who has been diagnosed with severe Alzheimer's disease and is largely disoriented and unable to recognize close family members. If this person attempts to draft and sign a new will that significantly alters their previous estate plan, their capacity to do so would likely be challenged. For a will to be legally valid, the person making it must possess "testamentary capacity," meaning they must understand they are signing a document that distributes their property upon death, know the general nature of their assets, and recognize the natural objects of their affection (e.g., family). Due to the advanced dementia, this individual would likely be found to lack the necessary capacity to create a valid will.

• Example 3: An individual under severe intoxication signing a business contract

  Suppose a business executive attends a social event where they consume an excessive amount of alcohol, becoming severely intoxicated. While in this state, they are presented with a complex business partnership agreement and sign it, agreeing to terms that are highly unfavorable and that they would never have accepted while sober. If it can be proven that the executive was so profoundly intoxicated that they could not understand the nature and consequences of the document they were signing, they may be deemed to have lacked the capacity to enter into that contract. The agreement could potentially be challenged and invalidated in court.