American Contract Law for a Global Age, 2017a

Unit 13
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CONTRACT DEFENSES
Part One
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Capacity to Contract
FOCUS OF THIS UNIT
You may recall from the introduction to the course that one of the requirements
of a valid contract is “competent parties.” A competent party, in legal parlance, is one
who has capacity to contract. The contracts of competent parties are valid, those of
incompetent parties are voidable—that is, they can be undone at the request of the
incompetent party (or, in some cases, that party’s representative). The capacity
requirement is the subject of this unit.
Voluntary and Involuntary Obligation. In general, tort law and criminal law
involuntarily impose legal duties on the persons subject to those laws. As an
individual member of society you do not, for instance, have the right to commit a
battery or rob a bank. Contract law, in contrast, usually involves taking on legal
duties that would not exist but for the voluntary entry into a contractual relationship.
A person has more legal obligations after entering into a contract than she has before
doing so. Is the ability to take on new duties, incur potential liability, and to limit
one’s future legally really a valuable power? Perhaps counterintuitively (as least
when we frame the question that way), the answer is an emphatic yes. The ability of
parties to legally bind themselves has far-reaching economic and social consequences.
If you cannot legally bind yourself to repay a loan, for example, no one is going to give
you one, which means your future options (getting a car or a home or starting a
business) are limited. Similarly, the inability to enter into enforceable agreements
also has economic and social consequences—largely negative ones, as history
demonstrates.
The Consequential Power to Contract. In many societies in history, the power
to contract has often been limited to a narrow class of people who use it to help
consolidate their political power. In early Rome, for example, only the head of a
family, known as the paterfamilias, had the power to make binding contracts. This
arrangement allowed the heads of the families to maintain their power and authority,
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UNIT 13: CAPACITY TO CONTRACT 239