Business Law Chapter 7
Contract, Capacity, Legality and Intention
Having capacity is being able to understand the legality and implications of your actions and not having any
condition for you to be unable to do so, such as being insane or mentally incapable. The test for capacity is
objective. Minors or children under the age of majority (18) when accompanied by an adult are not bound
by the contract at hand, the adult would be because they are seen by law to not have capacity or not be
able to legally understand the implication.
For example, if a car dealership sells a car to a minor and that minor accepts the deal, the dealership would
be bound by that contract because a minor is seen to not have capacity to make that decision.
Necessaries and beneficial contracts of service
Necessities are things we need in a society to function such as food, clothes, water, somewhere to live and
transportation. What is considered necessity changes between minors and her status. For example if that
minor is buying clothing and already has a sufficient supply, then those clothes are not considered a
The courts have fou