In which scenario would an unenforceable contract be applicable?

An unenforceable contract arises in situations where one of the parties is unable to enter into a binding agreement due to a lack of legal capacity. This can occur in cases involving minors, individuals who have been declared mentally incompetent, or those who are intoxicated at the time of agreement. Even if the agreement is made in good faith, it cannot be enforced by the competent party due to this lack of capacity.

In contrast, a fully executed contract is one where all parties have fulfilled their obligations, meaning it is not unenforceable. Additionally, the ability for both parties to sue each other does not define a contract as unenforceable; rather, it indicates that there is an enforceable agreement in place. Lastly, even when a contract is written and signed, it does not automatically guarantee its enforceability if one party lacks the legal capacity to consent to the terms. Therefore, the correct answer highlights a situation where a fundamental aspect of contract law—capacity—renders the contract unenforceable.