Are You Legally Capable of Entering Into a Contract?

If you are part of a separating couple, you will generally be encouraged to sort out any disputes about splitting your property by way of a negotiated agreement, which is always better (and much less costly) than going to court for a judge-ordered resolution.

But while domestic contracts and minutes of settlement are certainly the better way to go, there are also potential pitfalls involved – mainly involving a narrow range of scenarios that beg the question of you, as a party to the agreement, were legally able to enter into it at all.

In Ontario law, this involves what is known as an issue of “capacity”:  For any contract to be valid, it must be entered into by two or more people who have legal capacity to do so.  Conversely, certain people are automatically deemed in law not to have legal capacity, namely:

• minors (i.e. under age 18),
• people who are mentally incapable (i.e. are unable to understand the full meaning and effect of any contract to which they purport to agree), and
• individuals who are under the influence of alcohol or drugs when the contract is entered into.

Note that there can be exceptions to some of these general rules; for example, despite their legal incapacity in a general sense, minors are still legally able to enter into contracts to purchase the necessities of life such as food, clothing and accommodation.

Agreements purportedly made with a person under a legal incapacity are essentially subject to being “voided”, which means it is no longer binding.

Do you have a question about whether or not you’ve entered into a valid contract? Contact us for a consultation.