Definitions are very important when taking an exam focusing 45% of its test questions on the legal aspects of finance. If a regulation or rule applies to a specific entity, item, or circumstance, one must know the exact definition of certain terms in order to determine if the law applies. For example, the speed limits on the highway apply to automobiles. That seems easy enough, but what exactly is an automobile? Does an ambulance, fire truck, or motorized skateboard meet the definition?
One of the first definitions we’ll start with is the term ‘person.’
When we utilize the English language in normal circumstances, persons are our colleagues, friends, and family members. However, don’t assume a person refers to a natural person (a.k.a. human being) in a test question. While you are a person, so is the US Government, so is a large corporation, and so on. Any natural person or entity that can enter into legal contracts is considered a person.
There are some important examples of non-persons to be aware of. The following parties are never considered persons:
The most common reason for non-person status is the inability to enter into legally binding contracts. While minors can technically enter into contracts, they are considered generally unenforceable, plus the minor can void the contract at any time. Incapacitation, which occurs when someone is unable to manage their own affairs or well-being, also results in an inability to enter binding contracts. The most common reasons for incapacitation are dementia, mental illness, and a sustained lack of consciousness (e.g. in a coma). Last, dead people obviously cannot enter into contracts.
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