Capacity

1. Law.

Anyone can enter a contract, whether or not they have ‘capacity’ to do so. But if an individual who lacks contractual capacity enters a contract, the contract may not be enforceable.

Problems of capacity may arise in relation to minors, mental incapacity or intoxication.

2. Banking.

In relation to the individuals whom a bank will authorise to open and operate a bank account, the appropriate level of seniority and the role of the individuals within the business of the customer.

3.

More generally, the ability to absorb or hold. For example, tax capacity or borrowing capacity.

(Tax capacity being the ability to use tax reliefs efficiently to shelter otherwise taxable profits or gains. Borrowing capacity being the maximum amount of borrowing which can be sustained based on a firm's expected future cashflows and its assets.)

See also

• Contract
• Minor