Persons

Definitions matter on exams that devote a large portion of questions to the legal aspects of finance. A rule only applies when the facts fit the rule’s definitions, so you need to know exactly what key terms mean.

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? A fire truck? A motorized skateboard? The definition determines whether the rule applies.

One of the first definitions to know is person.

In everyday English, “person” usually means a human being. In legal and regulatory questions, person is much broader. It can mean:

• A natural person (a human being), and
• Many kinds of organizations and government bodies

So while you’re a person, the U.S. government is also a person, and so is a large corporation.

A practical way to think about this is that a person is a natural person or legal entity that can enter into legal contracts.

There are also important examples of non-persons to know. 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 can technically enter into contracts, but those contracts are generally unenforceable, and the minor can void the contract.
• Incapacitation means someone can’t manage their own affairs or well-being, which prevents them from entering binding contracts. Common causes include dementia, mental illness, and a sustained lack of consciousness (e.g. in a coma).
• Deceased individuals can’t enter into contracts.