What is a key factor for parties to have the authority under a contract?

Having the authority under a contract fundamentally means that the parties involved are legally capable of entering into the agreement. Being of sound mind refers to the mental capacity to understand the terms and implications of a contract. This is essential because a person who is not of sound mind may lack the ability to make reasoned decisions, comprehend the responsibilities they are agreeing to, or even appreciate the nature of the contract itself.

For a contract to be enforceable, both parties must meet certain legal standards, including the ability to enter into a contract voluntarily and with full understanding of what they are agreeing to. If either party is deemed incapable due to mental impairment or other factors, the contract may be considered void or voidable.

The other options, such as being legally related, having a business history, or residing in the same state, do not inherently affect a person's capacity to enter into a contract. Relationships and residency may have implications in specific circumstances, but they do not define the fundamental requirement of having the mental acuity necessary to consent to a contract. Therefore, being of sound mind is the crucial factor in determining the authority to enter into a contractual agreement.