Contract law (2022): Defenses against formation: Lack of capacity

Capacity or more fully mental capacity covers day-to-day decisions, including: what to wear and what to buy, as well as, life-changing decisions, such as: whether to move into a care home or whether to have major surgery.

The UK's Mental Capacity Act 2005 or MCA sets out a two-stage test of capacity:

1. Is the person unable to make a particular decision?

2. Is the inability to make a decision caused by an impairment of, or disturbance in the functioning of, a person's mind or brain?

The MCA states an individual is unable to make their own decision, if they are unable to do at least one of four things:

1. Understand information given to them.

2. Retain that information long enough to be able to make the decision.

3. Weigh up the information available to make the decision.

4. Communicate their decision.

Discussion.

As an aspect of the social contract between a state and its citizens, the state adopts a role of protector to the weaker and more vulnerable members of society. In public policy terms, this is the policy of parens patriae. Similarly, the state has a direct social and economic interest in promoting trade, so it will define the forms of business enterprise that may operate within its territory, and lay down rules that will allow both the businesses and those that wish to contract with them a fair opportunity to gain value. This system worked well until social and commercial mobility increased. Now persons routinely trade and travel across state boundaries (both physically and electronically), so the need is to provide stability across state lines given that laws differ from one state to the next. Thus, once defined by the personal law, persons take their capacity with them like a passport whether or however they may travel. In this way, a person will not gain or lose capacity depending on the accident of the local laws, for example, if A does not have capacity to marry her cousin under her personal law (a rule of consanguinity), she cannot evade that law by travelling to a state that does permit such a marriage. In Saskatchewan Canada, an exception to this law allows married persons to become the common law spouse of others prior to divorcing the first spouse. This law is not honored amongst other Canadian provinces.