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CAPACITY

Legal capacity refers to a person's ability to acquire rights and assume obligations, and to the role or position in which a person acts when doing so. Contractual capacity requires majority age and mental competence. Testamentary capacity requires understanding the nature of the act, the extent of one's property, and the natural objects of one's bounty. A person may simultaneously hold multiple legal capacities — as an individual, as a trustee, as an agent — and acts taken in one capacity do not bind the person in another.

AUTHORITYCONSENTPERSONCAPACITY (personal)CAPACITY (representative)
WHAT IS THE THING INSIDE THE CAPACITY?
ALSO ONAU
LEVEL 1 — STREET LEVEL
STREET LEVEL

Capacity is the legal ability to do something — to make a contract, sign a will, or hold property. Not everyone has full capacity at all times. Age, mental state, and legal status all affect it. The same person may act in different capacities — and the consequences depend on which capacity is actually involved.

SUBWAY VERSION

Can this person legally do this thing right now? And in what role?

WHO PUT IT THERE?
WHAT IS THE THING?
WHO HOLDS OR CONTROLS WHAT?
WHO CAN DO WHAT?
WHO BENEFITS?
WHAT MADE ANY OF THAT LEGALLY EFFECTIVE?
LEVEL 2 — MAP THE RELATIONSHIP

CONNECTED DOES NOT MEAN IDENTICAL.

DON'T MERGE THESE
CAPACITYAUTHORITY

Capacity is about whether you can act at all — or in a given role. Authority is about whether you can act on someone else's behalf. A trustee has capacity to act as trustee; whether a specific act is authorized depends on the trust instrument and applicable law.

CAPACITYCONSENT

Consent is what you give. Capacity is whether your consent counts. A person who lacks capacity cannot give legally effective consent — even if they appear to agree.

CAPACITYPERSON

Being a legal person means the law recognizes you at all. Having capacity means you can perform a specific legal act. A minor is a legal person who lacks full contractual capacity.

CAPACITY (personal)CAPACITY (representative)

A person acting in their own right has personal capacity. A person acting as trustee, agent, executor, or officer acts in a representative capacity. The same individual may have both simultaneously — but acts in one capacity do not bind them in the other, and the legal consequences differ.

SCI-FINANCE INTERCHANGE
LEVEL 3 — INSPECT THE THING

Sci-Finance analytical terminology. Not statutory or conventional legal terminology.

REAL PIPS
P — PARTIES
Who are the legally relevant people or entities?

The person whose capacity is at issue; and, where relevant, the person or entity on whose behalf they are acting. When a person acts in a representative capacity — as trustee, agent, executor, or officer — the analysis must identify both the actor and the principal or entity they represent.

I — INTENTIONS
What relationship did they intend to establish?

Capacity is not a matter of subjective intent — it is an objective legal status. A person who lacks contractual capacity cannot cure that deficiency by intending to be bound. Conversely, a person who has capacity but acts in a representative role must manifest that role clearly; an agent who signs without disclosing the principal may be personally bound.

P — PURPOSE
What is the arrangement supposed to accomplish?

The purpose of capacity rules is to protect persons who cannot adequately protect themselves (minors, persons with cognitive impairment) and to ensure that legal acts are performed by persons with the legal authority to perform them. Capacity rules also allocate risk: a party who deals with someone lacking capacity may find the transaction voidable.

S — SUBJECT MATTER
What property, right, interest, or obligation is actually involved?

The subject matter of a capacity analysis is the specific legal act at issue — contract, will, deed, trust, corporate resolution — and the specific capacity in which the person is acting. Capacity is act-specific and role-specific. A person may have testamentary capacity but lack contractual capacity. A trustee has capacity to manage trust property but not to use it for personal benefit.

THINGS INSIDE THIS THING
age of majoritymental competenceguardianshipemancipation
LAW OF PROXIMITY

Things placed near one another may have a meaningful relationship without becoming the same Thing.

A beneficiary near property is not necessarily its titleholder.

A trustee near a beneficiary is not necessarily acting in the beneficiary's capacity.

A document near an asset does not itself prove conveyance of that asset.

A person appearing beside an institution does not thereby acquire that institution's authority.

FIRST ESTABLISH THE RELATIONSHIP. THEN DETERMINE ITS CONSEQUENCES.
CAPACITY & AUTHORITY
PERSON
CAPACITY
SOURCE OF AUTHORITY
AUTHORIZED ACT
RECORD
CONSEQUENCE

The same natural person may occupy more than one capacity. Authority must be traced to the capacity relevant to the particular act.

Adult individual (personal capacity)
CAPACITY

Full legal capacity to contract, hold property, execute instruments

SOURCE OF AUTHORITY

Common law; state law governing age of majority (typically 18)

AUTHORIZED ACT

Enter contracts, execute wills and trusts, convey property, bring suit — all in their own name and for their own account

Minor
CAPACITY

Limited — contracts are voidable at the minor's election; some acts (e.g., necessaries) may be binding

SOURCE OF AUTHORITY

Common law infancy doctrine; state statutes

AUTHORIZED ACT

May enter contracts but can disaffirm them upon reaching majority; cannot execute a valid will in most jurisdictions; may hold property through a guardian or custodian

Trustee (representative capacity)
CAPACITY

Fiduciary capacity — acts on behalf of the trust and its beneficiaries, not in a personal capacity

SOURCE OF AUTHORITY

Trust instrument; acceptance of trusteeship; applicable trust law

AUTHORIZED ACT

Manage, invest, and distribute trust property; enter contracts on behalf of the trust; the trustee's personal assets are not at risk for trust obligations unless the trustee acted improperly

Agent (representative capacity)
CAPACITY

Acts on behalf of a principal within the scope of actual or apparent authority

SOURCE OF AUTHORITY

Agency agreement; principal's manifestation of authority

AUTHORIZED ACT

Bind the principal to contracts and other legal acts within the scope of authority; the agent is not personally bound unless they exceed authority or fail to disclose the principal

WHAT CHANGED?

Do not stop because a document exists. Ask what legally or economically changed.

?Did title change?
?Did possession change?
?Did authority change?
?Did a beneficial interest arise or change?
?Did an obligation arise?
?Was anything actually conveyed?

Before capacity is established: the legal act is void or voidable, depending on the type of incapacity and the jurisdiction. After capacity is confirmed: the act is legally effective and binding (subject to other requirements). When a person acts in a representative capacity — as trustee, agent, or officer — the legal consequences attach to the principal or entity, not to the individual personally. If the representative exceeds their authority or fails to disclose the principal, personal liability may follow. The capacity in which a person acts at the moment of the transaction determines who is bound and who bears the consequences.

EXAMPLE
NEW YORK HYPOTHETICAL

Marcus is 17 years old. He signs a lease for an apartment. The lease is voidable — Marcus can disaffirm it when he turns 18. The landlord cannot enforce it against him as a minor. Now consider: Marcus's mother, Elena, is trustee of a family trust. She signs the same lease on behalf of the trust, as trustee. The trust is bound — not Elena personally. If Elena signs without disclosing she is acting as trustee, she may be personally bound. The same person, the same act, different capacity — different legal result.

This hypothetical illustrates the questions a reader should investigate. It does not provide individualized legal advice or jurisdiction-specific legal conclusions.

LAW LEVEL

Legal capacity refers to a person's ability to acquire rights and assume obligations, and to the role or position in which a person acts when doing so. Contractual capacity requires majority age and mental competence. Testamentary capacity requires understanding the nature of the act, the extent of one's property, and the natural objects of one's bounty. A person may simultaneously hold multiple legal capacities — as an individual, as a trustee, as an agent — and acts taken in one capacity do not bind the person in another.

JURISDICTION & SCOPEGeneral U.S. common law. Age of majority, testamentary capacity standards, and guardianship rules vary by state. Representative capacity rules are governed by the applicable trust, agency, or corporate law of the relevant jurisdiction.
PRIMARY SOURCES

Citations are provided for reference only. The Institute does not fabricate citations, cases, statutes, quotations, or URLs. If verified primary-source material has not been supplied, the entry shows SOURCE REVIEW PENDING.

restatement
Restatement (Second) of Contracts § 12 (1981)
Capacity to contract: defines who has full, limited, or no capacity; covers minors and persons with mental illness
uniform-act
Uniform Probate Code § 2-501 (2010)
Testamentary capacity: requires that the testator be of sound mind and at least 18 years of age
restatement
Restatement (Third) of Agency §§ 1.01, 4.01–4.02 (2006)
Representative capacity: agent's authority to bind principal; disclosed and undisclosed principals
uniform-act
Uniform Trust Code § 601 (2000)
Capacity to create a trust: requires that the settlor have capacity to transfer property
LAST REVIEWED
2026-09
PRIMARY SOURCE
Restatement (Second) of Contracts § 12 (1981); UPC § 2-501
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