What does 'capacity to contract' mean in real estate?

'Capacity to contract' in real estate refers to the legal ability of parties to enter into a binding contract. This concept encompasses several critical elements, including the age of the parties involved and their mental competency. To have the capacity to contract, individuals must be of legal age, typically 18 years or older, and possess the mental ability to understand the nature and significance of the contract they are entering into.

This principle ensures that agreements are made with competent parties who can comprehend the implications of the terms and conditions they are agreeing to. Without this legal capacity, a contract may be considered void or unenforceable, meaning that the parties may not be held to the terms of the agreement. For instance, if one party is deemed mentally incompetent at the time of signing, the contract may be invalidated, leading to potential legal disputes. This underscores the significance of 'capacity to contract' in ensuring that all parties are legally equipped to fulfill their obligations under the agreement.