What is meant by capacity to contract under the UCC?

Capacity to contract under the UCC refers to the legal ability of parties to enter into binding agreements. This concept ensures that individuals or entities engaging in a contract possess the necessary legal competence, which includes being of sound mind, not being under duress, and having the requisite age as stipulated by law.

Understanding this definition is crucial because it establishes the foundation for enforceability in contract law. If a party lacks capacity—whether due to being a minor, mentally incapacitated, or under undue influence—the contract may be deemed void or voidable. Therefore, option B accurately captures the essence of capacity to contract, emphasizing the legal qualifications necessary for parties to legitimately enter into contractual obligations.

Other choices offer related concepts but do not fully encapsulate what capacity to contract means under the UCC. For instance, the number of parties or their financial stability are not essentials related to contractual capacity itself, and while age may be a factor in determining capacity, it is just one aspect of a broader legal framework concerning a party's ability to form a contract.