What is contractual capacity?

Contractual capacity refers to the legal ability of a person to enter into a valid and enforceable contract. It is the competence of a party to understand the nature and consequences of their contractual obligations. For a contract to be legally binding, all parties must possess the necessary contractual capacity.

The essential elements of contractual capacity include:

• Age: A person must be of legal age (18 years or above in Nepal).
• Sound Mind: The party must be mentally competent to understand the terms of the contract.
• Sanity: The party should not be under the influence of drugs or alcohol at the time of entering into the contract.

If any party lacks contractual capacity, the contract may be voidable or void, depending on the circumstances.