What does diminished capacity refer to?

Diminished capacity refers to the inability to enter a contract due to various reasons, which can include mental incapacity, being under the influence of drugs or alcohol, or being a minor. When a person has diminished capacity, they may not fully understand the terms or implications of the contract they are entering into, making them susceptible to entering agreements that they may not fully comprehend or appreciate. This concept is important in contract law as it offers certain protections to individuals who may not have the ability to make informed decisions, allowing contracts to be deemed voidable if the party can demonstrate their lack of capacity. The understanding of this principle is essential for recognizing when a contract may not be enforceable due to the parties' mental or legal capacity at the time of formation.