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CONCEPT REVIEW:

Capacity is the third element of a legally binding contract. A person who has legal capacity has the mental ability to understand his or her rights and obligations under a contract and therefore, presumably to comply with the terms. On the other hand, incapacity is the possession of a mental or physical defect that prevents a natural person from being able to enter into a legally binding contract. Depending on the nature and extent of the defect, a person may have either no capacity, the complete inability to enter into contracts. or limited capacity, the ability to form only voidable contracts.

The icon next to each label below will reveal a situation where a contract is created. After reading the scenario, place the label in the appropriate drop zone: Valid, Void, or Voidable.