Ontario Mortgage Agent Practice Exam

How can a contract be legally binding from a legal capacity perspective?

1. By ensuring the contract has a legal purpose and does not violate any law, statute, or public policy

2. By having parties approximately equivalent in bargaining power and meeting minimum standards in maturity and intellect

3. By exchanging consideration and entering the contract with the intention to create a legal relationship

4. By ensuring the offer and acceptance are communicated clearly and unambiguously

The correct answer is: By having parties approximately equivalent in bargaining power and meeting minimum standards in maturity and intellect

A contract can be legally binding from a legal capacity perspective by having parties approximately equivalent in bargaining power and meeting minimum standards in maturity and intellect. This is because in order for a contract to be enforceable, it must involve parties who are legally capable of entering into a contract. That means they must have the mental capacity to understand the terms of the contract and its consequences, and they must have the legal right to enter into contracts. Options A, C, and D are also important components of a legally binding contract, but they do not directly address the issue of legal capacity. For example, having a legal purpose and not violating any laws or public policy is important in ensuring the contract is enforceable, but it does not necessarily guarantee that the parties have the legal capacity to enter into the contract. Similarly, exchanging consideration and having the intention to create a legal relationship are important elements of a contract, but they do not directly address the issue of legal capacity. Option B is the correct answer because having parties with relatively equal bargaining power and meeting minimum standards of maturity and intellect is crucial in ensuring that the parties fully understand and willingly enter into the contract, which is a key factor in establishing legal capacity.