Persons

Definitions matter on exams that test legal aspects of finance. When a regulation or rule applies only to a specific entity, item, or circumstance, you need the exact definition of key terms to decide whether the law applies.

A simple example is a highway speed limit that applies to “automobiles.” That sounds straightforward - until you ask what counts as an automobile. Does an ambulance qualify? A fire truck? A motorized skateboard? Legal questions often turn on that kind of definition.

One of the first definitions to know is the term ‘person.’

In everyday English, “persons” usually means people you know - friends, family, coworkers. In legal and regulatory questions, though, don’t assume “person” means a natural person (a.k.a. a human being). While you are a person, so is the U.S. Government, and so is a large corporation.

A useful way to think about it is this: a person can be a human being or a legal entity that can enter into legal contracts.

There are some important examples of non-persons to be aware of. The following parties are never considered persons:

• Minors
• Incapacitated
• Deceased

A common reason for non-person status is the inability to enter into legally binding contracts.

• Minors: While minors can technically enter into contracts, those contracts are generally unenforceable, and the minor can void the contract at any time.
• Incapacitated: Incapacitation occurs when someone is unable to manage their own affairs or well-being. This also prevents them from entering binding contracts. Common reasons include dementia, mental illness, and a sustained lack of consciousness (e.g. in a coma).
• Deceased: Deceased individuals can’t enter into contracts.