Capacity of parties to a contract is one of the most important essential elements of a valid contract. The parties to the contract should be able to perform and understand the terms and conditions of the valid contract.

What is Capacity to Contract? The capacity to contract meaning, in Common Law, the word capacity means ability. So, the capacity of a contract means the ability of the parties to enter into a contract that forms legally binding relations with each other.

section 11 of the Contract Act declares the following persons to be competent to a contract; 1. Who has completed the Age of Majority 2. Who is of Sound Mind 3. Who has not been disqualified from entering into a contract by any law

1. The Age of the majority The age of majority in India is governed by the Indian Majority Act, 1875. As per section 3 of the Indian Majority Act, "Every person who is living in India shall be deemed to have attained the age of majority on his completing the age of eighteen (18) years."

2. Sound mind According to section 12 of the Indian Contract Act, 1872, a person is a sound mind who can understand the terms and conditions and who is capable of making a rational decision with the effects of the conditions mentioned in the contract.

3. Persons Disqualified by Law Apart from minors and unsound mind persons, the person who is disqualified or barred from entering into a contract by the law of land, Such a person cannot form or enter into a contract. Therefore contract made by or with a person who is disqualified by law from entering into a contract is void.