By Kim Foster | Escrow/Title Officer, Paralegal | Salt Lake Office

In order to enter into a legally binding contract the signer must be competent or have the capacity to enter into the contract. Capacity is the mental or cognitive ability to understand the nature and effects of ones acts. The most common reasons for incapacity are minor children (typically under age 18), permanent mental conditions (ex. Alzheimer’s), or temporary mental conditions (ex. under the influence of drugs/alcohol). Competency is defined as one who is “duly qualified: having sufficient capacity, ability or authority.” Often health professionals are required to perform a functional test to determine an individual’s competency.
If a party does not have the capacity or competency to understand the nature and consequences of an agreement (i.e. listing or purchase agreements), that agreement may become null and void. Please note this does not extend to an individual’s understanding of every detail in a contract. It is enough if they understand that they are entering into a contract, as well as the general nature of the contract.
If an individual seems confused about what is happening when a contract is being signed, use caution. Often we need to make a determination at the spur of the moment. Use your best judgement.

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