Only legally competent people are allowed to enter into a contract. Therefore, capacity is the ability to make sound decisions when entering into a contract with another party. For example, a party to a contract is expected to be of sound mind, of legal age, and have the ability to legally consent to the terms of an agreement. Based on this understanding, certain individuals are exempted from entering into a contract, including minors, mentally unstable or insane, people under the influence of drugs, insolvents, and enemy aliens. Should any of these persons enter into a contract, it is deemed invalid, and it can be voided.
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