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The insurance company must have a legal capacity to issue the policy and the
applicant must have the legal capacity to purchase the policy.
a) Contractual Capacity of Individuals:
i. Every individual is presumed to have the legal capacity to enter into a valid
contract.
ii. Some people, who do not have full contractual capacity, enter into either
void or voidable.
iii.The majority of people who have limited contractual capacity are either
minors or lack mental capacity.
iv. A minor is a person who has not attained the age of majority.
b) Contractual Capacity of Organizations:
i. Organizations are generally presumed to have the contractual capacity of a
mentally competent adult.
ii. An organization that has been created in accordance with the laws of the
applicable jurisdiction is presumed to have contractual capacity to purchase
insurance.
iii. In some jurisdictions, the contract is void; in other jurisdictions, it
is voidable by the policy owner.
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