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 Four Types of Internet Contract Formations Vinculum Juris Integration Clause Illusory Promise Penal Damages Indemnity Clause Lack of Consideration vs. Failure of Consideration Inure Insurable Interest Agreement to Sell