Must be of legal age, mentally competent to understand the contract, and not under the influence of drugs or alcohol.

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Capacity to contract is the key idea here. A binding agreement must be entered into by parties who have the legal ability to understand and agree to its terms. Being of legal age, mentally competent to understand the contract, and not under the influence ensures a party can genuinely consent. If someone lacks this capacity, the contract can be voidable because there isn’t true assent, and a guardian or court may intervene. The other elements—legal purpose, agreement (offer and acceptance), and consideration (something of value exchanged)—are also required for a valid contract, but this statement specifically targets the party’s competence to enter into the agreement.