Capacity to contract is the legal competence of a person to enter into binding contractual obligations. Under Indian law, not every person who enters into an agreement becomes bound by it. The law recognises three categories of persons with diminished contractual capacity: minors, persons of unsound mind, and intoxicated persons. The statutory foundation lies in the Indian Contract Act, which establishes that a minor's contracts are void ab initio—meaning they are invalid from their inception and confer no rights or obligations on any party. This is fundamentally different from contracts with persons of unsound mind or those under intoxication, which are voidable at the option of the person lacking capacity. Understanding this distinction is critical for CLAT preparation because it defines the legal universe of enforceable agreements and determines when courts will refuse to enforce or validate a purported contract. The rule's foundation rests on the principle of protecting vulnerable persons who cannot appreciate the nature, quality, and consequences of their actions. A minor, legally defined as a person below eighteen years, lacks the maturity and experience to make reasoned decisions about property and legal obligations. The law therefore treats contracts with minors as void—not merely unenforceable, but non-existent in legal terms. This means no contract ever came into being. In contrast, persons suffering from unsound mind or intoxication may possess temporary lucidity or may not be entirely incapacitated. The law therefore treats their contracts as voidable—valid when formed, but capable of being repudiated by the incapacitated person. The interaction between these categories and the specific mental state of the individual creates a nuanced framework. A person of unsound mind includes those suffering from idiocy, mania, or dementia, but the insanity must be proven to exist at the time of contracting. Similarly, intoxication must be sufficiently severe to render the person incapable of knowing the nature of the act. Mere drunkenness or depression does not suffice; the test is whether the person lacked capacity to understand the agreement. The legal consequences of these incapacities flow logically from their characterisation. Since a minor's contract is void ab initio, it creates no enforceable rights for anyone. The minor cannot sue to enforce it, and the other party cannot sue the minor for breach. If the minor receives benefits under such a contract—for instance, goods delivered—the law does not require restitution unless the minor retains those benefits and they are capable of being returned in specie (their original form). The doctrine of unjust enrichment does not apply here; instead, the law recognises that a minor's protection is paramount. A minor can ratify a contract after attaining majority, but even this ratification is not compulsory and does not relate back to the original agreement. For voidable contracts, the position differs significantly. The person of unsound mind or the intoxicated person has the right to repudiate the contract, but they must do so within a reasonable time of attaining sound mind or sobriety. This repudiation must be clearly expressed through word or conduct. The other party to a voidable contract is treated as an innocent party and may be entitled to restitution for benefits conferred, provided the other party had knowledge of the incapacity or is deemed to have such knowledge. The remedies available include specific performance for the innocent party in certain circumstances, rescission of the contract, and damages for misrepresentation if the incapacitated person falsely represented their capacity. Capacity to contract occupies a central position in the architecture of Indian contract law. It interacts with other foundational principles such as offer and acceptance, consideration, and lawful object. A contract requires not only consensus ad idem (agreement of minds) but also the capacity of both parties to enter into it. Capacity is a condition precedent to valid contract formation. It must be distinguished from competence, which is broader and includes social and moral competence. In Indian jurisprudence, capacity is narrowly defined as legal capacity—the ability in law to bind oneself contractually. Related concepts include the doctrine of necessaries, which permits supply of necessaries to a minor on credit with recovery from the minor's property (not from the minor personally); the concept of beneficial contracts of service, which bind minors if they are wholly for the minor's benefit; and the rule of ratification, which allows a minor to adopt a contract after majority. Understanding capacity also illuminates the law of guardianship and trusts, where guardians contract on behalf of minors with court sanction. The concept extends to corporations (legal persons with limited capacity), lunatics (persons declared unsound by court), and drunken persons (where the onus of proving incapacity falls on the drunken person). CLAT examiners frequently distort this principle through several recurring tactics. First, they may introduce a fact pattern where a minor has misrepresented their age and ask whether the contract becomes enforceable—the trap is that even fraudulent misrepresentation by a minor does not validate the contract; a minor's remedy lies in rectification, not enforcement against the minor. Second, examiners may reverse the burden of proof by stating that the other party claims the minor was competent and asking whether this rebuts the presumption of incapacity—the correct answer is that minority is an absolute bar, not a presumption. Third, they may conflate voidable contracts with void contracts, presenting a scenario of a person of unsound mind and asking the same consequences as apply to minors; this tests whether the candidate understands the crucial distinction. Fourth, they may introduce a temporal element, such as a contract formed when a person was intoxicated but ratified after sobriety, and ask whether ratification validates it from inception—the answer is no; ratification operates prospectively. Finally, examiners may import rules from tort or restitution law (such as fraudulent inducement or unjust enrichment) and ask whether these override the incapacity rules—the correct approach is that incapacity operates as an independent bar and is not displaced by other doctrines. A subtle trap involves contracts for necessaries (food, shelter, education) which bind minors to the extent of the value of goods supplied, not the contract price—examiners may ask whether this makes the original contract valid (it does not; the liability is quasi-contractual).