Why is "capacity" important in contract formation?

Capacity is a crucial element in contract formation because it establishes that the parties involved have the legal ability to enter into a contract. This includes verifying that individuals are of legal age, which typically means they are at least 18 years old in Texas, and that they possess the mental capacity to understand the obligations and rights stemming from the contract. If a party lacks capacity—whether due to age, mental illness, or intoxication—the contract may be voidable or void. This protective measure ensures that only those who can comprehend and consent to the terms of an agreement are bound by them, thereby promoting fairness and justice in contractual dealings.

The other options address different aspects of contracts but do not specifically pertain to the role of capacity. For example, while being informed and emphasizing written agreements are important for clarity and enforceability, they do not relate to the legal ability of the parties to enter into a contract. Similarly, the notion of allowing for higher compensation pertains to the negotiation and terms of a contract rather than the foundational requirement of capacity.