When discussing the legal ability of a party to enter into a contract, the term used is usually “capacity”. Capacity is the legal ability of a person or organization to enter into a contract with another party. It also refers to the legal right a person has to enter into a contract and to be bound by its terms.

In order to have capacity, a party must be able to understand the implications of the contract they are entering into, and must have the mental capacity to make a rational choice. Generally, a person must be of legal age and of sound mind in order to possess the capacity to enter into a contract. In some cases, such as minors, the rules may vary, and additional restrictions may apply.

Depending on the type of contract, additional qualifications may also be necessary. For example, a contract for the sale of goods typically requires the buyer to possess a valid driver’s license or other such proof of identification, since this establishes that the buyer is a legally recognized person. Likewise, the seller may need to provide proof of ownership for the goods they are selling.

It is important to remember that a contract is not enforceable until the parties involved have the capacity to enter into it. If a person lacks the capacity to enter into a contract, the contract is likely to be invalid. Knowing the legal requirements for forming a valid contract is essential to make sure all parties involved are within their rights.