Capacity of parties is one of the five elements required of all legally enforceable contracts alongside:
- Agreement.
- Genuine intentions.
- Consideration.
- Legality of object.
Without all five elements being present in a contract, it may not be legally enforceable and could be considered null and void if challenged in court.
Capacity of parties refers to each party who is entering a contract. Each is required by law to have the mental and intellectual capacity to understand the terms of the contract and to make the decision to enter it.