Which of the following describes competent parties in a contract?

Competent parties in a contract refer to individuals who have the legal capacity to enter into a binding agreement. This means they must fully understand the terms of the contract and be able to make informed decisions. Mentally stable and sober individuals satisfy these criteria because they are considered capable of comprehending the obligations and implications of a contract. Their mental clarity and sobriety allow them to operate within the legal confines required to agree to contractual terms.

In contrast, individuals under 18 years of age generally lack the legal capacity to enter into contracts, as they are considered minors and their agreements are often voidable. While educational attainment, such as having a high school diploma, does not determine one’s capacity to understand contracts, it is not a requirement for contractual competency. Additionally, the presence of competent legal counsel is not a prerequisite for all parties to be deemed competent; while it can assist individuals in understanding contracts, it does not substitute for the actual mental competency of the contracting parties themselves.