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Certain people lack the legal ability to enter into a binding contract.In order for a contract to be legally binding, all of the individuals who signed the agreement must have "contractual capacity." Contractual capacity is a legal term that refers to the minimum mental capacity required to enter into an agreement. In other words, individuals who lack the capacity to contract are presumed to not know what they're doing, and they can "void," or set aside, the contract. The law recognizes three categories of individuals who lack the capacity to contract: minors, individuals with psychological disabilities, and intoxicated persons. If anyone from these categories enters into a contract, the agreement might be considered "voidable" by them. This protects the party who lacks capacity from being forced to go through with a deal that takes advantage of his or her lack of savvy. Let's look at some situations in which a person might lack the legal capacity to enter into a legally binding contract. Can a Minor Sign a Contract?Minors (those under the age of 18, in most states) lack the capacity to make a contract. So a minor who signs a contract can either honor the deal or void the contract. There are a few exceptions, however. For example, in most states, a minor cannot void a contract for necessities like food, clothing, and lodging. Also, a minor can void a contract for lack of capacity only while still under the age of majority. In most states, if a minor turns 18 and hasn't done anything to void the contract, then the contract can no longer be voided. Disaffirmance by a MinorA minor can "disaffirm," or set aside, a contract by stating their intention to not honor the contract. The minor can state this intention verbally (in words or in writing) or through actions that indicate the minor does not intend to honor the contract. For example, if a child entered into an agreement to mow his neighbor's lawn, and then the child sells his lawnmower, that action indicates his intention to disaffirm the contract. However, the disaffirmation must happen before the minor comes of age, and the minor can't pick and choose which parts of the contract to set aside. Further, if the minor paid provided consideration, such as money to the other party, the other party must give the consideration back to the minor following disaffirmation. Mental Incapacity and ContractsA person who lacks mental capacity can void, or have a guardian void, most contracts (except contracts for necessities). As with contracts with minors, the contract is voidable, and not automatically void. In other words, the person who lacked the capacity to enter the contract can either end the contract or permit it to go ahead as agreed on. In most states, the standard for mental capacity is whether the party understood the meaning and effect of the words comprising the contract or transaction. This is called the "cognitive" test. Some states use what's called the "affective" test: a contract can be voided if one party is unable to act in a reasonable manner and the other party has reason to know of the condition. And some states use a third measure, called the "motivational" test. Courts in these states measure capacity by the person's ability to judge whether or not to enter into the agreement. These tests may produce varying results when applied to mental conditions such as bipolar disorder. Can an Intoxicated Person Sign a Contract?People who are intoxicated by drugs or alcohol are usually not considered to lack the capacity to contract. Courts generally rule that those who are voluntarily intoxicated shouldn't be allowed to avoid their contractual obligations, but should instead have to take responsibility for the results of their self-induced altered state of mind. However, if a party is so far gone as to be unable to understand even the nature and consequences of the agreement, and the other (sober) party takes advantage of the person's condition, then the contract may be voidable by the inebriated party. Who Is a Minor or an Infant?Traditionally, a minor or an infant was a person who was under the age of 21. This has been changed by statutes in almost every state, and a minor is now anyone under the age of 18. The terms “infant” and “minor” are used interchangeably in most legal contexts. What Is the Rule When Contracting With an Infant?Generally speaking, anyone who contracts with a minor does so at their peril. That is because the law gives minors the ability to void, or exit, contracts as they see fit. In addition, guardians can void a contract on behalf of a minor. The other party to a contract with a minor, the one who is not a minor, does not have the same right to void the contract. The law in this area varies in the different states, so a person would want to consult an experienced contract lawyer in their state to learn about the provisions of contract law relating to minors in their state. More importantly, courts do not enforce contracts in which one party is a minor. This means that if the minor breaches the contract and does not provide the performance promised in it, the other party cannot recover damages by suing the minor for breach of contract. The other party would have to absorb the loss. The technical legal term for the right of one party to renounce a contract is “disaffirmance. “ This law is most often justified as necessary to protect minors from assuming obligations which they are not capable of understanding. It also protects minors from economic exploitation, as they may not have the experience and understanding to recognize contractual relationships that may not really be in their best interests. Of course, allowing minors the right to unilaterally void a contract might lead to harsh results, so some exceptions have been created. When a minor reaches the age of majority, i.e. 18, and they are still a party to a contract, in most states, the contract then becomes a valid, enforceable contract. Or, in some states, the minor has a limited amount of time in which to either accept the contract or void it. If the minor does not void the contract within the required time period, the contract is considered to have been ratified. Contracts made with minors who have been emancipated by a court are valid, because a court has granted adult status to the emancipated minor. What Is a Voidable Contract?A voidable contract is a contract that either party may exit at will. A valid contract is one that is binding on both parties. If one party fails to do what they promised in a valid contract, the other party may sue them for breach of contract. If the party who does not receive the performance promised in a valid contract from the other party sues that other party for breach of contract, they can expect to succeed. A court should enforce the contract and award the non-breaching party damages to compensate for their economic losses. One of the most important kinds of contracts with a minor that can be enforced deals with necessities. When a minor enters into a contract that is for health, e.g. medicines, comfort, or education, the minor cannot void the contract on the grounds that they did not have the capacity to enter into it. Moreover, when a minor does void a contract that they are legally allowed to void, the law requires that certain steps be taken. If the minor still has the property or goods that they received from the other party to the contract, they must return it to the other party when they seek to void the contract. If the minor does not return the property in such a situation, they cannot void the contract. However, if the minor cannot return the goods they have received per the contractual agreement, because it has been spent, damaged or destroyed, they can still void the contract. They can void the contract, and the law only requires that they return that part of the goods or property they received that they still have. If the minor has nothing left of what they received, or what they have is damaged property, they can still void the contract. However, if a parent or any other adult co-signs a contract entered into by a minor, then the parent or other adult can be held liable for performance of the contract. So, for example, if a parent or guardian co-signs a car loan made to a minor, the parent is responsible for paying the loan if the minor defaults. If a parent or guardian has not co-signed the contract, they cannot be held liable for a minor’s contract. What Are The Exceptions to a Minor’s Ability to Void a Contract?If every contract with a minor were invalid, of course, no sane person would ever enter into a contract with a minor. To allow some minors to enter into contracts and/or prevent minors from abusing their minority, there are several exceptions including the following:
Can an Attorney Help Me with Contracting with a Minor?If contracting with a minor, it is likely that the contract would not be legally enforceable. The time to consult with an experienced contracts attorney is before entering into the contract. So, if you are in the process of negotiating or drafting a contract with a minor, you really should consult a contracts attorney. If you already have a contract with a minor who is seeking to void it or defend against its enforcement, contacting an experienced contracts attorney is strongly recommended.
 Susan is a member of the State Bar of California. She received her J.D. degree in 1983 from the University of California, Hastings College of Law and practiced plaintiff’s personal injury law for 8 years in California. She also taught civil procedure in the Paralegal program at Santa Clara University. She then taught English as a foreign language for eight years in the Czech Republic. Most recently, she taught English as a second language for Montgomery County Public Schools in suburban Washington, D.C. Now she devotes her time to writing on legal and environmental topics. You can follow her on her LinkedIn page.
Ki Akhbari LegalMatch Legal Writer Original Author
Jose Rivera Managing Editor Editor Last Updated: Jun 6, 2022 Law Library Disclaimer What is the legal notion of the Disaffirmance of a contract by a minor and how does this work?A minor or any other person who has not yet reached the legal age of majority is generally not legally required to carry out the terms of a contract. In most cases, a minor only needs to give the intention that they intend to disaffirm a contract. The other party, however, remains bound by the contract.
What is the purpose of the minor's right to Disaffirm contracts?General Rule - Minor may disaffirm a contract for necessaries, but is liable for the reasonable value of necessaries that were furnished to the minor. Traditionally, insurance has not been viewed as a necessary, so minors can ordinarily disaffirm their insurance contracts and recover all the premiums paid.
What is the effect of contracts entered into by minors?Contracts made by minors are void since, by law, they lack the legal capacity or ability to enter into legally binding agreements or contracts by themselves. The law presumes that these individuals are not fully aware of what they are doing and as such, are placed into special categories.
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