Also known as: capaces negotii · legal capacity · capacity to contract
Written by attorneys — see sources below.
The legal ability of a natural person to incur at least voidable contractual duties or to enter into other legal relationships such as landlord-tenant arrangements. Capacity may be partial and can depend on the nature of the transaction or surrounding circumstances including guardianship, minority, mental condition, or intoxication.
Charlotte, recently placed under a limited financial conservatorship, attended a reception and signed a margin trading agreement with View Finance after several cocktails. Her conservator April later sought to avoid the agreement. Because Charlotte lacked capacity to incur even voidable duties in financial transactions, the agreement is unenforceable against her.
Cade Carpenter attempted to lease warehouse space from Canyon Construction while under guardianship for mental illness. The proposed landlord refused to proceed once the guardianship came to light. No landlord-tenant relationship could arise because both parties must possess legal capacity to create that relationship.
Christopher Collins mailed an offer to sell equipment to Colin Chambers. Before Chambers could accept, Collins suffered a stroke that deprived him of legal capacity. The offeree's power of acceptance ended upon the offeror's loss of capacity, so no contract formed.
Caleb Chang, a seventeen-year-old, signed a contract to purchase industrial tools from Cascade Manufacturing. After the seller delivered the equipment, Chang sought to disaffirm. Because he was an infant at the time of assent, he lacked full legal capacity to incur contractual duties.
Chloe Chen, under a limited conservatorship that restricted only high-risk investments, agreed to buy volatile shares from Cypress Technologies. The conservator later challenged the purchase. Capacity to contract can be partial, so the transaction fell outside the authority granted by the court order.
Parents of Black children sought to enroll their children in a private school that refused admission on racial grounds. The school claimed the parents lacked capacity to form enrollment contracts. The children possessed full legal capacity to enter the proposed educational contracts, so the refusal violated federal law.
The Fairfax-Brewster School commenced operations in 1955 and opened a summer day camp in 1956. Bobbe's School opened in 1958 and grew from an initial enrollment of five students to 200 in 1972. Neither school has ever accepted a Negro child for any of its programs. In response to a mailed brochure addressed "resident" and an advertisement in the "Yellow Pages" of the telephone directory, Mr. and Mrs. Gonzales telephoned and then visited the Fairfax-Brewster School in May 1969. After the visit, they submitted an application for Colin's admission to the day camp. The school responded with a form letter stating that it was "unable to accommodate [Colin's] application." Fairfax-Brewster's Chairman of the Board explained that the reason for rejection was that the school was not integrated. Mr. Gonzales then telephoned Bobbe's School, from which the family had also received a brochure addressed to "resident." He was told that only members of the Caucasian race were accepted. In August 1972, Mrs. McCrary telephoned Bobbe's School in response to an advertisement in the telephone book. She inquired about nursery school facilities for her son, Michael, and asked if the school was integrated. The answer was no. The suits were consolidated for trial. The District Court found that the Fairfax-Brewster School had rejected Colin Gonzales' application on account of his race and that Bobbe's School had denied both children admission on racial grounds. The court held that 42 U.S.C. § 1981 makes illegal the schools' racially discriminatory admissions policies. It therefore enjoined the schools and the member schools of the Southern Independent School Association from discriminating against applicants on the basis of race. The court awarded compensatory relief to Mr. and Mrs. McCrary, Michael McCrary, and Colin Gonzales. Finally, the court assessed attorneys' fees of $1,000 against each school. The Court of Appeals for the Fourth Circuit, sitting en banc, affirmed the District Court's grant of equitable and compensatory relief and its ruling on the statute of limitations, but reversed the award of attorneys' fees. Factually, the court held that there was sufficient evidence to support the trial court's finding that the two schools had discriminated racially against the children. The court agreed that 42 U.S.C. § 1981 is a limitation upon private discrimination. We granted certiorari to consider whether § 1981 prevents private schools from discriminating racially among applicants and to address the attorneys' fees and statute of limitations issues.
View caseA court-ordered conservatorship limits the protected person's authority to incur contractual duties within its scope. The limitation prevents formation of even voidable obligations in the restricted area. The other party cannot enforce the agreement once the conservatorship is shown.
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Yes. The power of acceptance ends when either the offeror or offeree loses legal capacity to enter the proposed contract. No contract can form once that capacity disappears.
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No. The relationship requires that both parties possess legal capacity or requisite authority to enter it. Absence of capacity on either side prevents the relationship from arising.
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A natural person lacks capacity if under guardianship, an infant, mentally ill or defective to the point of inability to understand or act reasonably in the transaction, or intoxicated to the same degree. The other party must have reason to know of the condition in some cases.
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…them ineligible to do so elsewhere in the city. Thus, if § 1982 had been thought to do no more than grant Negro citizens the legal capacity to buy and rent property free of prohibitions that wholly disabled them because of their race, judicial enforcement of the restrictive covenants at issue would not have violated § 1982. But…