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There are certain requirements that must be met when creating an estate plan. The law requires that the individual signing the Will, Trust or other similar legal documents must have adequate mental “capacity.” In general, capacity means that the person understands the consequences of executing the documents, understands who their family is, and has a basic understanding of their assets.
However, determining whether a person is competent to sign legal documents is not always easy.
Each state has its own definition of competency, but below are a few general guidelines:
The individual signing the estate planning documents must have the ability to understand what it means to sign the Will. The signer must understand the extent and nature of the estate being disposed of by the Will. The signer must also comprehend the relationship he/she has with those individuals who would have some claim to the estate.
Timing. When it comes to capacity, it is possible for the individual’s abilities to change from day to day. The testator must have capacity at the time the Will is signed. If there is any question regarding the signor’s capacity, it is imperative that you document the individual’s capacity on the day the documents are signed.
Document type. The required capacity of the signer may be greater for some legal documents than it is for others.
It important to confer with an experienced attorney to help ensure that the capacity requirements will be met.
Who Lacks the Capacity to Contract?
According to Section 11 of the Contract Act, an individual needs to meet certain guidelines to be deemed competent enough to enter into a valid contract. These guidelines are as follows:
The individual cannot be a minor.
The individual needs to be mentally sound.
The individual is not disqualified to enter valid contracts by law.
In terms of legally binding agreements, certain individuals will always lack the legal capacity or ability to enter contracts. Legally, it is assumed that these individuals do not know what they are truly doing.
Legal minors and the mentally ill are generally not permitted to enter contracts. These individuals are placed into a “special” category.
Minors and the Capacity to Contract
The concept of the capacity to contract protects individuals who lack capacity from having to commit to agreements that abuse their lack of knowledge or savvy.
If a legal minor or a mentally ill person enters a contract, the agreement is voidable.
This means that the person who lacks legal competence to enter a contract is able to void the agreement at any time. However, the person also has the option to permit the agreement to go ahead as planned.
In most states, minors are considered individuals who are under the age of 18.
These individuals lack the capacity to contract. Therefore, if a minor signs a contract, he can opt to either void the contract or honor the agreement. However, there are a few exceptions. In most states, for example, minors are not able to void contracts for food, lodging, clothing, and other necessities.
Minors can only void contracts due to a lack of capacity to contract only while under the age of 18.
In many states(what does capacity mean when signing a document)
In many states, if a minor turns 18 and hasn’t voided a contract, it is no longer possible for the contract to be nullified. For example, if a minor signs a three-year endorsement agreement with a brand, he will be able to void the contract as long as he is under age 18.
The Mentally Ill and the Capacity to Contract
If an individual lacks sufficient mental capacity, he or she can void most contracts. The mentally ill can also have guardians void contracts. One exception to this rule is that contracts for necessities cannot be voided.
In most states, mental capacity is determined by whether the party is able to understand the meaning and the effects of the words making up the transaction or contract. This test is referred to as the “cognitive” test.
In some states, the “affective” test is used. If a party does not have the ability to act in a manner that is reasonable, the contract can be voided by said party. However, according to the test, the other party must have reason to know about the mentally ill party’s condition.
Some states use the “motivational” test as a third measure. In these states, courts measure capacity in terms of the ability of a person to judge whether it would be beneficial to enter into the agreement. If the tests are applied to individuals who have mental conditions like bipolar disorder, the tests may produce different results.
For example, if an individual who has been diagnosed as manic-depressive signs a contract, he may be considered mentally capable of signing the contract. Though the individual may have signed the contract while in a manic state, he may still be deemed capable of contracting because the illness may not have rendered him mentally incompetent. In the eyes of the Court, the manic state was cognitive in the sense that the condition may have impaired the judgment of the individual but not his ability to understand.
Under the Influence of Drugs or Alcohol
In general, individuals who are under the influence of drugs or alcohol do not have the capacity to contract. According to the courts, individuals who are intoxicated voluntarily should not be permitted to avoid contractual obligations. Instead, these individuals should assume responsibility for any of the actions they commit in their altered, self-induced state of mind.
What is Capacity?
In this Toolkit capacity is a legal word. A person who has capacity is able to make decisions about things that affect their daily life, such as:
where to live
what to buy
what support or services they need
when to go to the doctor
matters that have legal consequences, including: making a will, getting married, entering into a contract, having medical treatment.
People who have capacity are able to live their lives independently. They can decide what is best for themself and can either take or leave the advice of others.
Broadly speaking, when a person has capacity to make a particular decision, they are able to do all of the following:
understand the facts involved
understand the main choices
weigh up the consequences of the choices
understand how the consequences affect them
communicate their decision.
If a person doesn’t have the capacity to make a certain decision, someone called a ‘substitute decision-maker’ might need to make the decision for them.
Capacity is decision specific
If you care for, or provide services to, a person whose decision-making is in question you may need to decide frequently (each time a decision is made) whether the person has capacity to make each and every decision.
It is very rare for a person not to have capacity for any decisions.
However, this can happen when a person is unconscious or has a severe cognitive disability, for instance.
More often, people lack capacity only in making one sort of decision. For example, a person might be able to decide where they want to live (personal decision), but not be able to decide whether to sell their house (financial decision). They can do their grocery shopping (make a simple decision about money), but not be able to buy and sell shares (make a more complex decision about money).
What can affect a person’s capacity?
Capacity varies from person to person and from situation to situation. Capacity is not something solid that you can hold and measure. Neither is it something that is the same all the time. It is affected by a person’s abilities and by what’s happening around them
Everyone’s abilities vary and everybody reacts in their own way to their environment.
For example, some people enjoy being in a crowded, noisy place but others find it stressful and difficult. Also, each person’s capacity can fluctuate, depending on things such as their mental and physical health, personal strengths, the quality of services they are receiving, and the type and amount of any other support. This creates a challenge for you when undertaking a capacity assessment. 3.
So, the level of capacity a person has at a particular time can depend on the following factors:
the type of decision being made: Is it a financial decision, a health decision, some other kind of decision?
the timing of the decision: Is the person tired? Is the person more able to make decisions in the morning, for instance?
is the decision simple or complicated?
how much information has the person been given, and what is their level of understanding about the information?
communication between the assessor and the person: Is there effective communication in place at the assessment so each person understands the other? For example, neutral interpreters 4or advocates may be required, or a particular Alternative and Augmentative Communication (AAC) strategy may be needed 5 .
the physical environment in which the decision is being made: Is the environment noisy or is the situation stressful?
the person‘s experience: How much knowledge of, or familiarity with, the topic does the person have?
health: Does the person have an illness or condition that worsens from time to time and affects their capacity, such as a mental illness or the effects of drugs, alcohol or anaesthesia?
personal stress: Is the person dealing with any social issues which may cause them stress at the time of decision-making?
Can Minors enter into contractual agreements?
In the UK, a legal presumption exists that entitles anyone to enter into a contract unless an exception applies. One of those exceptions is in the case of a minor.
Since 1969 the age of contractual capacity for individuals has been set at 18 and reaching the age of 18 is known as attaining ‘majority’. Minors are therefore those who have not attained the age of 18.
Minors are permitted to enter into contracts for limited purposes however, and the test as to whether or not they can, focuses on the nature of the transaction, and whether the minor is of an age such that they are capable of understanding it.
The general law states that contracts entered into by children that are for necessaries are binding on children, as are those for apprenticeship, employment, education and service where they are rightly said to be for the benefit of the child.
Contracts for necessaries are for such things as the supply of food, medicines, accommodation and clothing, but generally speaking conveniences and products and services for comfort or pleasure are excluded, as are commercial or ‘trading’ contracts. These latter contracts are therefore voidable at the option of the minor.
Consequently, whether the minor may avoid a contract they have entered into depends on the nature of that contract.
Contracts where the minor may avoid the effect of the contract are for the acquisition of a legal or equitable interest in property of a permanent nature – so shares, land, marriage and partnerships would all be included here.
Other contracts, however, require positive ratification in order to be enforceable, which includes contracts for debts and the sale of goods that are not for necessaries. The ratification must take the form of an acknowledgement that the debt is binding after attaining the age of 18.
On the other hand, restraints of trade may be unenforceable against a minor, even if they would be enforceable against an adult.
What are necessaries in contract law
The law provides that contracts for certain goods and services are not voidable. Necessaries include items and services that are necessary to the minor’s health and safety, such as food, lodging, shelter and clothing. In some instances, automobiles are considered necessaries.
Definition of legal capacity
: the capability and power under law of a person to occupy a particular status or relationship with another or to engage in a particular undertaking or transaction by giving the organization legal capacity — International Court of Justice/Advisory Opinion the legal capacity to sue.
What is legal capacity in marriage?
Capacity generally refers to the mental ability of one or both of the parties to the marriage to agree to become spouses. Both parties must be of “sound” mind and capable of agreeing to the marriage.
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