Ability to understand the nature and effects of one’s acts. When a party to an agreement is deemed to lack the “capacity” to enter into a binding contract, the agreement is void or voidable. Related entries Agreement to Sell Novation Davis v. Jacoby Rescission of Contracts Quantum Meruit American Trading & Production Corp. v. Shell International Marine Ltd. Tompkins v. Dudley Taylor v. Caldwell Alaska Democratic Party v. Rice Feinberg v. Pfeiffer Co.