Legally competent parties

Key Takeaways

• Legally competent parties is the contract element requiring that everyone who signs has the legal capacity to be bound, meaning sound mind and full age.
• Washington sets full age at 18. RCW 26.28.010 deems all persons of full age at eighteen years, and RCW 26.28.015(4) applies that age to entering any legal contractual obligation.
• A minor's contract is not automatically void in Washington. RCW 26.28.030 binds the minor unless the contract is disaffirmed within a reasonable time after reaching majority and the money and property received are restored.
• An entity can be a competent party. RCW 23B.03.020 gives a Washington corporation the power to purchase, receive, lease, acquire, own, hold, improve, use, and otherwise deal with real property.

What It Means

Legally competent parties is the contract element requiring that everyone signing has the legal power to be bound. Two things are being tested at once. The signer has to be old enough, and the signer has to be of sound mind at the moment of signing. Miss either one and the agreement is exposed, because the person who lacked Capacity can walk away from it later.

A party does not have to be a human being. A business, a trust, or a corporation can hold and convey real property and can be a competent party to a purchase and sale agreement. What changes with an entity is the second question a broker has to ask: not only whether the entity is competent, but whether the individual holding the pen has authority to sign for it.

This element sits alongside the others a Valid Contract needs, including mutual agreement, Consideration, and a lawful purpose. It is also the element most often missing in the fact patterns students see, because a contract signed by a minor or by someone who was not lucid at signing looks perfectly ordinary on paper. Our piece on building a contract review system covers where problems like these surface in a file.

How It Works in Washington

Washington fixes the age line by statute. RCW 26.28.010 provides that, except as otherwise specifically provided by law, all persons are deemed to be of full age for all purposes at the age of eighteen years. RCW 26.28.015(4) applies that same age to the specific act of entering into any legal contractual obligation and being legally bound to the full extent as any other adult person.

A contract signed by a minor is not a nullity here. RCW 26.28.030 provides that a minor is bound, not only by contracts for necessaries but also by other contracts, unless the minor disaffirms them within a reasonable time after attaining majority and restores to the other party all money and property received. The power to unwind belongs to the party who lacked capacity. The other side stays bound, which is the same rule the course applies to a person who was mentally ill at signing: the contract is voidable by that person within a reasonable time after the incapacity ends.

Entities draw their capacity from their own statutes. RCW 23B.03.020 gives a Washington corporation the power to sue and be sued in its corporate name and to purchase, receive, lease, acquire, own, hold, improve, use, and otherwise deal with real or personal property. Capacity and authority still travel together. RCW 64.04.020 requires every deed to be in writing and signed by the party bound by it, so the file should show why the person signing, whether an officer, a managing member, or an agent acting under a Power Of Attorney, can bind the party named on the document.

Example

Aiden is 17. He signs a purchase and sale agreement on a $415,000 Everett condominium and deposits $8,000 in earnest money. The seller is Harbor Ridge Properties, Inc., and its president signs for the corporation. The corporation is a competent party under RCW 23B.03.020. Aiden is not, because RCW 26.28.010 sets full age at eighteen.

Aiden turns 18 three weeks before the closing date, and under RCW 26.28.030 he now has a decision to make. If he disaffirms within a reasonable time after reaching majority and restores what he received, he is out of the deal. If he says nothing, closes, and takes the keys, he is bound like any other adult. Harbor Ridge never had that choice. It was bound the moment its president signed, and it could not escape the contract on the ground that Aiden was 17 when he signed. That one-sided quality is the whole point of the element, and our guide to crafting winning offers and counteroffers shows why a listing broker checks signing capacity before recommending acceptance.

Common Mistakes and Exam Traps

• A contract signed by a minor is voidable, not void. RCW 26.28.030 binds the minor unless the contract is disaffirmed within a reasonable time after reaching majority and what was received is restored.
• Only the party who lacked capacity can void the agreement. The competent party on the other side remains bound by the terms.
• Competence and authority are separate questions. A corporation is a competent party under RCW 23B.03.020, and the individual signing for it still needs authority to bind it.
• Washington sets full age at eighteen under RCW 26.28.010, not nineteen or twenty-one. Age and soundness of mind are two different tests, and an adult can lack capacity at any age.