The ability to understand the nature and effects of one’s actions. When a party to a contract is deemed to lack the capacity to enter into a binding contract, that contract is void or voidable. Related entries Four Types of Internet Contract Formations Vinculum Juris Integration Clause Illusory Promise Penal Damages Indemnity Clause Lack of Consideration vs. Failure of Consideration Accord and Satisfaction Fraud in the Factum Chance Bargain