Defenses to enforceability - Incapacity to contract

Learning Outcomes

This article explains incapacity as a defense to contract enforceability on the MBE, including:

• Defining contractual capacity and identifying which parties are protected categories (minors, persons with mental incapacity, and severely intoxicated persons), using MBE terminology.
• Differentiating void, voidable, and fully enforceable agreements in incapacity fact patterns, and predicting which party may assert or waive the defense.
• Applying rules governing disaffirmance, timing, and restoration of consideration to questions involving purchases of goods, leases, and service contracts.
• Evaluating when post-capacity conduct—such as continued use of benefits, payment, or silence—constitutes ratification that permanently eliminates the incapacity defense.
• Analyzing how the doctrine of necessaries and quasi-contract liability operates for minors and mentally incapacitated or intoxicated adults, including how “reasonable value” is assessed.
• Spotting high-yield exam traps involving misrepresentation of age, guardianship orders, and fact patterns that disguise contract issues as tort claims.
• Comparing the treatment of minors, mentally incapacitated persons, and intoxicated persons across similar scenarios to choose the best answer among close distractors.
• Developing a systematic approach for MBE questions that asks about capacity, legal effect of the agreement, available remedies, and who may enforce or avoid the contract.

MBE Syllabus

For the MBE, you are required to understand incapacity as a defense to contract enforceability, with a focus on the following syllabus points:

• Who lacks capacity to contract: minors (infants), persons with mental incapacity, and severely intoxicated persons.
• Legal effect of incapacity: when contracts are void and when they are voidable.
• Special rules for contracts for necessaries (necessities of life).
• Disaffirmance (avoidance) and ratification after capacity is regained.
• Quasi-contract liability for necessaries.

Test Your Knowledge

Attempt these questions before reading this article. If you find some difficult or cannot remember the answers, remember to look more closely at that area during your revision.

1. A 17-year-old buys a laptop on credit and signs a one-year installment contract. She continues making payments and using the laptop for eight months after turning 18, then stops paying and asserts incapacity. Is the seller likely to succeed in a suit for the remaining price?
   1. Yes, because the buyer ratified the contract after reaching majority.
   2. Yes, because a minor’s contracts are void.
   3. No, because the contract was void due to the buyer’s minority.
   4. No, because a minor can disaffirm at any time, even after turning 18.
2. Which of the following contracts is most likely enforceable against a minor on a quasi-contract theory?
   1. A contract to buy a luxury watch.
   2. A lease of an apartment that is the minor’s only residence.
   3. A contract to buy concert tickets for entertainment.
   4. A contract to buy a designer handbag.
3. A seller, while extremely drunk, signs a written agreement to sell his classic car for half its market value. He was so intoxicated that he did not understand he was signing a bill of sale, and the buyer knew this. The next day, the seller demands the car back. Which statement is most accurate?
   1. The contract is void, and title never passed to the buyer.
   2. The contract is voidable at the seller’s option because of intoxication.
   3. The seller is bound because intoxication is never a defense in contract.
   4. The seller can avoid the contract only if the buyer also lacked capacity.
4. A person has been adjudicated incompetent and a guardian appointed. Without the guardian’s knowledge, the person signs a contract with a private nurse to provide necessary round-the-clock care. The nurse performs for one month, then the guardian refuses to pay, arguing the contract is void. What is the nurse’s best argument?
   1. The contract is fully enforceable because it concerns medical care.
   2. The contract is voidable, so the nurse can enforce it against the ward.
   3. The ward is liable for the reasonable value of the services as necessaries.
   4. Guardianship has no effect on the ward’s capacity to contract.

Introduction

A valid contract requires not only offer, acceptance, and consideration, but also that each party has legal capacity. When a party lacks capacity, the agreement may be unenforceable or enforceable only in a limited way. On the MBE, incapacity appears as one of the classic defenses to contract formation and enforcement, alongside misunderstanding and mistake.

Key Term: Incapacity to Contract
The legal inability of a party to enter into a binding contract due to age, mental condition, or severe intoxication. Incapacity may make a contract void or (more commonly) voidable at the incapacitated party’s option.

Two structural ideas recur in exam questions:

• Is the agreement void (no legal effect at all) or voidable (valid unless and until the protected party chooses to avoid it)?
• Even if the contract is not fully enforceable, is the incapacitated party still liable for the reasonable value of necessaries (food, shelter, medical care) in quasi-contract?

Key Term: Void Contract
A purported contract with no legal effect from the outset. Neither party can enforce it (e.g., most contracts made by a person under guardianship).

Key Term: Voidable Contract
A contract that is valid and enforceable unless the protected party elects to avoid (disaffirm) it. Only the protected party has the power to avoid.

The MBE focuses on three categories of incapacity:

• Minors (infants).
• Persons with mental incapacity.
• Severely intoxicated persons.

We will examine each and then pull them together in the “Legal Effect” and “Limitations and Exceptions” sections.

Types of Incapacity

Minors (Infants)

Key Term: Minor (Infant)
A person under the age of 18 (the usual age of majority for MBE purposes) who generally lacks full contractual capacity.

At common law and on the MBE, a person under 18 generally lacks capacity to contract. The core rule:

• Most contracts made by a minor are voidable at the minor’s option.
• The adult contracting party is bound if the minor chooses to enforce the agreement.

This “one-way option” is critical: the incapacity belongs to the minor, not the adult.

Key Term: Disaffirmance
The exercise of a minor’s (or other incapacitated party’s) right to avoid or cancel a contract, rendering it unenforceable against that party.

A minor may disaffirm:

• Any time during minority, and
• Within a reasonable time after reaching majority.

On disaffirmance, the minor must generally return whatever consideration is still in their possession, but is not liable for wear and tear or depreciation under the majority rule.

Key Term: Ratification
The act of affirming a contract after incapacity ends, either expressly (e.g., a promise to perform) or impliedly (e.g., continued use of benefits), which makes the contract fully binding.

After turning 18, the former minor can ratify the contract, either:

• Expressly – “I confirm our deal and will keep paying.”
• Impliedly – by continuing to use the goods, accept services, or make payments for a substantial period after majority without disaffirming.

Once ratified, the contract is treated as if it were always binding; the right to disaffirm is lost. Ratification applies to all material terms; a party cannot ratify only the favorable parts.

Key Term: Emancipation
A status (by marriage, court order, or similar) in which a minor is treated as an adult for some legal purposes. For MBE purposes, emancipation rarely eliminates the minor’s capacity defense unless the facts say so.

Emancipation may alter certain state law rights, but for the MBE you should not assume emancipation eliminates the incapacity defense unless the fact pattern explicitly says so.

Exception: Necessaries

Key Term: Necessaries
Goods or services essential for a minor’s health and welfare—such as food, basic clothing, shelter, and medical care—for which the minor is liable in quasi-contract for their reasonable value.

Minors remain liable for the reasonable value (not the contract price) of necessaries. The theory is quasi-contract, not enforcement of the contract itself.

Key Term: Quasi-Contract
An equitable doctrine that allows recovery for the reasonable value of benefits conferred, even without an enforceable contract, to prevent unjust enrichment.

Key points:

• Necessaries usually include:
  • Food.
  • Ordinary clothing suitable to the minor’s station.
  • Shelter.
  • Medical and sometimes educational services.
• A good is not “necessary” if the minor is already adequately supplied from another source (e.g., living at home with parents who provide food and shelter).
• Liability is for reasonable value, so a store cannot insist on an inflated contract price.

Misrepresentation of Age

Many MBE questions add that the minor lied about being 18.

• Traditional rule: the minor can still disaffirm despite misrepresentation.
• However, the minor may:
  • Be liable in tort for fraud in some jurisdictions, and/or
  • Be required to make restitution for depreciation or damage in others.

On the MBE, unless the question clearly points you to a specific statutory rule, assume that misrepresentation of age does not destroy the core power to disaffirm.

Worked Example 1.1

A 16-year-old signs a contract to rent an apartment. She pays rent and lives there for six months. After turning 18, she continues to pay rent and live in the apartment for another year. The landlord sues for unpaid rent after she moves out.

Answer:
The lease was voidable while she was a minor. By continuing to live in the apartment and pay rent well after turning 18, she ratified the contract. After ratification, she is fully bound and is liable for rent that accrued after ratification.

Mental Incapacity

Key Term: Mental Incapacity
A condition in which, at the time of contracting, a person either cannot understand the nature and consequences of the transaction or cannot act reasonably in relation to the transaction, and the other party knows or has reason to know of this condition.

There are two standard tests:

• Cognitive test – The person is unable to understand the nature and consequences of the transaction.
• Volitional test – The person is unable to act in a reasonable manner in relation to the transaction, and the other party knows or has reason to know of this inability.

If either test is met at the time of contracting, the contract is generally voidable at the incapacitated person’s option.

Key Term: Guardian/Ward
A guardian is a court-appointed representative for a person (the ward) who has been adjudicated incompetent. Contracts entered into directly by the ward, without the guardian, are usually void.

Key distinction:

• Person adjudicated incompetent with a guardian:
  • Contracts made by the ward are typically void, not just voidable.
  • The guardian may enter contracts on the ward’s behalf.
• Person mentally ill but not adjudicated incompetent:
  • Contracts are generally voidable if the incapacity test is met.

Even when a contract is void or voidable, a mentally incapacitated person is usually liable for necessaries on a quasi-contract theory, just like a minor.

Worked Example 1.2

A person with a court-appointed guardian enters a contract to sell his car. The buyer seeks to enforce the contract.

Answer:
Because a guardian has been appointed, the seller (the ward) lacks capacity. The contract is void, not merely voidable. The buyer cannot enforce the sale contract against the ward.

Intoxication

Key Term: Intoxication
A temporary incapacity caused by alcohol or drugs. A contract is voidable if, at the time of contracting, a party was so intoxicated that they could not understand the nature and consequences of the transaction and the other party knew or had reason to know of the intoxication.

Key elements:

• The intoxicated person must be so impaired that they did not understand what they were doing, and
• The other party knew or had reason to know of that impairment.

If both are present, the contract is voidable at the intoxicated party’s option.

After sobering up, the intoxicated person may:

• Disaffirm within a reasonable time, returning what remains of the consideration, or
• Ratify by expressly affirming or by continuing to accept benefits or perform.

Worked Example 1.3

A person becomes extremely intoxicated at a party. He signs a written agreement selling his car for $500, far below its value. The buyer knows he is very drunk. The next day, after sobering up, he promptly notifies the buyer that he will not perform.

Answer:
If the seller was so intoxicated that he could not understand the nature and consequences of the transaction, and the buyer knew or had reason to know, the contract is voidable at the seller’s option. His prompt disaffirmance after sobering up is effective; he may avoid the contract, though he must return any consideration received that remains in his possession.

Worked Example 1.4

A 15-year-old buys a winter coat from a store. She wears the coat for several months, then tries to return it for a refund, claiming incapacity.

Answer:
The coat is a necessary (clothing essential to the minor’s welfare). The store cannot enforce the contract price as such, but it can recover the reasonable value of the coat in quasi-contract, even if the minor disaffirms. If she has the coat, she must return it; if she has worn it out, she may still be liable for its reasonable value as a necessary.

Legal Effect of Incapacity

The following principles govern the three types of incapacity:

• Who can avoid the contract?
  • Generally, only the incapacitated party (or their guardian) can avoid. The other party cannot invoke the incapacity as a defense.
• Void vs. voidable:
  • Void:
    • Most contracts entered into directly by a ward under guardianship.
  • Voidable:
    • Contracts by minors (except where a statute says otherwise).
    • Contracts by mentally incapacitated persons not under guardianship, if the incapacity test is met.
    • Contracts by severely intoxicated persons where the other party knew or had reason to know of the intoxication.
• Timing of disaffirmance:
  • Minors: during minority and for a reasonable time after reaching majority.
  • Mental incapacity/intoxication: within a reasonable time after regaining capacity (regaining mental stability or sobriety).
• Restoration of consideration:
  • The incapacitated party must typically return what remains of the consideration in their possession.
  • Under the majority approach, they are not liable for depreciation or damage, absent misrepresentation or tortious conduct.
• Ratification:
  • Once capacity is regained, continued performance, continued use of the property, or an express affirmation can amount to ratification, eliminating the defense.
  • Ratification must occur after capacity is regained; acts taken while still incapacitated do not count.

Worked Example 1.5

A 17-year-old buys a used car. She crashes it through her own fault, reducing its value to almost nothing. Before turning 18, she disaffirms and demands her money back, offering to return the wreck.

Answer:
The car is not a “necessary.” The contract is voidable at the minor’s option. Under the traditional rule, she may disaffirm by returning what remains of the consideration (the wrecked car) and recover the price she paid, even though the car was damaged. Some jurisdictions require a deduction for depreciation or willful damage, but unless the question specifies such a rule, assume the traditional MBE rule: the minor can disaffirm and is not liable for depreciation.

Limitations and Exceptions

Several limitations commonly appear in MBE fact patterns:

• Misrepresentation of age by a minor:
  • Does not usually bar disaffirmance, but may:
    • Support a separate tort action for fraud, or
    • Affect restitution (e.g., require the minor to compensate for depreciation).
• Necessaries:
  • Enforceable only to the extent of the reasonable value, not the agreed contract price.
  • Determining whether something is a “necessary” depends on the minor’s circumstances (e.g., an apartment may be necessary if it is the minor’s only housing; a second luxury apartment is not).
• Fairness to the other party:
  • In mental incapacity or intoxication cases where the other party did not know and had no reason to know of the incapacity, and the transaction is fair, courts are more reluctant to allow avoidance. Nonetheless, the MBE follows the doctrinal rule: the contract is voidable if the incapacity standard is met, but the equities may influence remedies.
• Torts vs. contracts:
  • A minor’s contractual incapacity does not immunize them from tort liability (e.g., for negligence or intentional torts).
  • The exam sometimes tests whether a claim has been dressed up as a tort but is essentially a contract claim; capacity rules apply to contract claims.

Worked Example 1.6

A 17-year-old lies about her age, saying she is 19, and signs a year-long gym membership contract. She uses the gym for three months, turns 18, continues to use the gym for six more months, then stops paying and claims incapacity.

Answer:
She had the right to disaffirm during minority and for a reasonable time after majority. However, by continuing to use the gym for six months after turning 18, she has impliedly ratified the agreement. Her earlier misrepresentation of age does not prevent ratification; she is now fully bound and liable for the remaining payments due after ratification.

Exam Warning

In MBE questions, always check whether the contract is for a necessary and whether capacity has been ratified away. Minors and other incapacitated parties are liable for the reasonable value of necessaries, and continued performance after regaining capacity is classic ratification.

Revision Tip

When a question involves a minor, someone with questionable mental capacity, or an intoxicated party, ask yourself in order:

1. Does this party fall into a protected incapacity category?
2. Is the contract void or voidable?
3. Is the subject matter a necessary?
4. Has there been ratification after capacity was regained?

Key Point Checklist

This article has covered the following key knowledge points:

• Incapacity to contract is a defense that can make an agreement void (e.g., ward under guardianship) or voidable (e.g., minor, mentally incapacitated, or intoxicated party).
• Minors can disaffirm most contracts during minority and within a reasonable time after majority, but adults remain bound unless the minor disaffirms.
• Minors, mentally incapacitated persons, and severely intoxicated persons are liable in quasi-contract for the reasonable value of necessaries.
• Contracts made by a ward with a court-appointed guardian are generally void, whereas those made by mentally ill or intoxicated persons without a guardian are usually voidable.
• Ratification after regaining capacity—by express affirmation or continued performance—makes a previously voidable contract fully enforceable.
• Misrepresentation of age may affect remedies but typically does not destroy the minor’s core power to disaffirm on the MBE.
• Only the incapacitated party (or their guardian) may assert incapacity; the other party cannot use it to escape their own obligations.

Key Terms and Concepts

• Incapacity to Contract
• Void Contract
• Voidable Contract
• Minor (Infant)
• Disaffirmance
• Ratification
• Necessaries
• Mental Incapacity
• Intoxication
• Guardian/Ward
• Emancipation
• Quasi-Contract