Which of the following must all parties to a contract be?

For a contract to be legally binding and enforceable, all parties involved must be mentally competent. This means that they must understand the nature and implications of the agreement they are entering into. Mental competency assures that individuals have the capacity to make informed decisions and comprehend the terms and conditions of the contract.

When a party is deemed mentally incompetent, they may not fully grasp the significance of the agreement, which can render the contract void or voidable. Mental competency is essential to ensure fairness and accountability in contractual relationships.

Regarding the other options, being underage may lead to a lack of legal capacity to enter into a contract, while being influenced by alcohol can impair judgment and decision-making, ultimately questioning the competency to contract. Illiteracy, while it may pose difficulties in understanding contract terms, does not inherently affect a person's mental competency if they can understand the contract's nature through other means, such as oral explanations. Thus, it is mental competency that is fundamental for all parties to a contract.