Ace the Texas Real Estate State Exam 2025 – Unlock Your Realty Dreams!

"Capacity to contract" refers to the legal qualifications a person must meet to enter into a binding agreement. In real estate, this specifically means that individuals must be of legal age and possess the mental competence to understand the terms and implications of the contract they are entering into. This ensures that all parties involved are capable of making informed decisions regarding their agreements.

For instance, minors typically do not have the legal capacity to contract, which can render agreements invalid if signed by them. Similarly, someone who is deemed mentally incapacitated may also lack the capacity to enter into a contract. Thus, option B is correct because it highlights both the necessary legal age and mental competency as prerequisites for forming a valid contract, which is fundamental to ensuring that parties to a real estate transaction can adequately understand and agree to the obligations they are assuming.