Mental incapacity simply means that a person does not have the competence to enter into a contract. 131.) Bratton testified that Smalley had always seemed perfectly normal and competent to him from the time that they met to at least sometime after Mrs. Baker brought the amended modification back from Los Angeles, except that on one occasion in July of 1965, during a conversation with Bratton, Smalley broke into tears. The steps in declaring an individual as mentally incompetent are as follows: App. FN 3. Dr. Allison diagnosed Smalley as a manic depressive, which psychosis characteristically causes the patient to be hyperactive, [262 Cal. The court accepted much of the testimony from friends and family of Mrs. Rick, discounted much of the testimony offered by Sailer's witnesses, and found that Mrs. Rick lacked the requisite mental capacity to execute the power of attorney and the land conveyance. None of the letters between the parties or drafts of agreements that were introduced into evidence made mention of a partnership relation between Smalley and Bratton. In testifying, Bratton referred to their deal as a business venture. The Law Review Note observes that the syndrome characteristic of the manic phase of a manic- depressive psychosis has been described as follows: "scarcely deviant from normal 'exuberant' behavior. Expert Answer 1. (See 39 N.Y.U.L.Rev. [11] Our conclusion that the evidence supports a finding that there was no partnership or joint venture is given additional support by the rule that in the absence of a written agreement, the burden of proving the existence of a partnership is on the party so alleging (Mercado v. Hoefler, supra, 190 Cal.App.2d at p. 16; Frisch v. Frisch, 97 Cal. Finding No. 2d 631, 634 [55 Cal. In Durham, it was held that conduct is not criminal if it is the product of a mental disease or disorder; similarly, in Faber, it was held that a contract is voidable if entered into as a result of a mental disease. Study the case below and determine if this is a valid contract or not and why. Finding No. 374].) Mental incapacity When a party does not comprehend the nature and consequences of the contract when it is formed, he or she is regarded as having mental incapacity. For example, the individual with Alzheimer's may make multiple payments for the same service, or the people providing the services may write checks to themselves from the patient's checkbook without being detected. Whenever it is proposed to make an incompetency determination, the beneficiary will be notified of the proposed action and of the right to a hearing as provided in 3.103.Such notice is not necessary if the beneficiary has been declared incompetent by a court of competent jurisdiction or if a guardian has been appointed for the beneficiary based upon a court finding of . " Id. The Court held that Plaintiff introduced sufficient evidence such that a reasonable jury could find Plaintiff incompetent. Sailer eventually claimed the maximum commission from the estate, although he never explicitly told Mrs. Rick he was to be paid for his services. Following her husband's death, the couple's investment account manager offers to administer the estate. 2d 814; Philbrook v. Howard, supra (1958) 157 Cal. Contracts entered into by mentally incompetent persons are not valid under any circumstances. 7 (See Deicher [262 Cal. These cases appear, however, to rest on the factual situations therein which involved ventures of a limited scope. She testified that Smalley understood what he was doing at the time he got out of the hospital and at that point reinterested himself in the deal with Baker (which he had initiated in July). FN 1. App. Under the authority of Gombos v. Ashe, 158 Cal. These symptoms are noticeable because they differ markedly from the patient's previous behavior." App. App. 04 Misconception #4: There is one standard power of . 5 (See 39 N.Y.U.L.Rev., supra, at p. 356, fns. 349]; Walton v. Bank of California, 218 Cal. You can consider entering into a durable power of attorney. If a person was not aware that they were entering into a contract and he or she is mentally incapacitated, the law provides that it is a voidable case. A few cases have opined that in certain joint ventures one adventurer may not have the power to bind the other. Not only is the record devoid of any evidence of fraud, but there is no evidence of unfairness, overreaching or undue influence. There are, however, no California cases dealing with manic-depressive psychosis with respect to contractual incompetency. 2d 834] in California. The doctor's diagnosis, though, was based on the testimony that Sailor expected his opponent's witnesses to give. There were witnesses and experts for both sides of the argument. The trial court eventually found that Plaintiff lacked the mental capacity to enter into the loan agreement and that the Bank failed to act in good faith towards Plaintiff. 533]; see generally Weihofen, Mental Incompetency to Contract or Convey (1966) 39 So.Cal.L.Rev. 11.3 The assumption underlying any contract is that each party has freely entered into a binding agreement, having assessed whether or not the terms are in their best interests. Understanding this cause of action is important for anyone who is entering into a significant contract or business transaction. General information. The doctor had no way of knowing whether Smalley was manic or depressed on October 20, 1965, but did know he was manic when he left the hospital on September 16, 1965, and depressed when the doctor first saw him on November 30, 1965. 6. For a physician facing a stroke emergency involving a patient not competent to provide informed consent, substitute consent may be obtained, that is, consent provided on behalf of the patient by a family member (next of kin) who is expected to act in the best interests of the patient. The VA defines a mentally incompetent person as "one who because of injury or disease lacks the mental capacity to contract or manage his or her own affairs, including disbursement of funds without limitation" In most cases, the VA will assign a fiduciary to manage an incompetent veteran's monetary affairs, but when a veteran does not . We, therefore, conclude that the finding that Smalley did not have the requisite mental capacity to enter into the agreements which are the subject of this action is not supported by the evidence. 2d 828] right to sell the invention to all the world, and an exclusive right to sell said invention to United States government agencies; two, a proposed modification of the 1961 Baker-Pendleton contract, not yet signed by Pendleton, permitting Baker to license independent contractors to purchase the invention from Pendleton and to market the same; and three, written escrow instructions directing Haile to deliver the $10,000 deposit to Baker upon full execution of the modification of the Baker-Pendleton contract, and further directing Haile to return the deposit to Smalley if Baker did not deliver an executed modification agreement within 90 days. App. (Kersch v. Taber, 67 Cal. 2d 833] have denied rescission to persons entering into contracts while afflicted by psychoses of the manic- depressive type because this particular illness impairs judgment but not understanding. Axley Brynelson is pleased to provide articles, legal alerts, and videos for informational purposes, but we are not giving legal advice or creating an attorney/client relationship by providing this information. 2d 814, 817 [294 P.2d 500]; Philbrook v. Howard, 157 Cal. Whether sufficient evidence was introduced at trial to show Plaintiffs mental incompetence Haile testified that there was an initial meeting in his office on October 11, 1965, with Bratton, the Smalleys and Baker, and that Smalley appeared normal and competent. App. These contracts are voidable only by the infirm party. App. Accordingly, after preliminary negotiations, Baker, Smalley and Bratton entered into the following arrangement: on October 20, 1965, they executed and deposited into escrow with one Haile, a Santa Cruz attorney, three documents, and additionally Smalley deposited the sum of $10,000. Corporations Code section 15009 provides: "(1) Every partner is an agent of the partnership for the purpose of its business, and the act of every partner, including the execution in the partnership name of any instrument, for apparently carrying on in the usual way the business of the partnership of which he is a member binds the partnership, unless the partner so acting has in fact no authority to act for the partnership in the particular matter, and the person with whom he is dealing has knowledge of the fact that he has no such authority. Mrs. Smalley testified that the Smalleys moved to Santa Cruz in late June 1965, and that about three weeks thereafter Smalley became hyperactive, entered into many business transactions, and was hospitalized on a police hold for disturbing a place of business. Prudence in business and sexual morality are impaired. Plaintiff then brought suit against the Defendant Bank alleging, inter alia, that the Defendant knew or should have known about Plaintiffs mental incapacity and that the Bank breached a fiduciary duty owed to her. at 672, 10 So. Incapacity and Illegality. (See Drum v. Bummer, supra (1926) 77 Cal. Those whose affairs are under the control of the Court. an action for divorce on behalf of a person declared to be mentally ill. 13 10 Boberg's Law of Persons and the Family132 - 133 and the cases cited there. Fraud and financial abuse can take many forms. He argues, however, that the record discloses that as a matter of law Bratton and Smalley were either partners or joint venturers and that, accordingly, Smalley consented to the modification in that Bratton had authority to approve said modification on Smalley's behalf. An attorney-in-fact had also been appointed for Mrs. Rick, following her husband's death because her deteriorating mental condition was well known. App. This case concerned a family dispute over ownership of what had been the family home in Woburn. The resulting dementia can cause those with the condition to ask the same questions repeatedly, feel lost and unable to follow directions, become disoriented, and neglect personal safety and hygiene [2]. 2d 827]. not voidable, void What does it mean that the contract is void? (P. In this Article. The elderly in general are easier targets for fraud and financial abuse than younger people [3]. [9b] In this area, the determination is essentially a factual one, and the finding of the trial court will be affirmed if supported by substantial evidence. at p. Since Baker had already granted Pendleton exclusive sales rights on the device, a modification of the 1961 Baker-Pendleton agreement was a necessary prerequisite to a sales arrangement between Baker and other parties. Axley is committed to providing a website that is accessible to all. at 100 (emphasis added). 2d 517, 524 [322 P.2d 933] and Coronet Credit Corp. v. West Thrift Co., 244 Cal. at p. 357, fn. A contract has to be made up of several elements for it to be considered a legally-binding agreement. This case concerned a family dispute over ownership of what had been the family home in Woburn. The italicized phrase constitutes the portion which Smalley wished to delete, and which Bratton circled. 2d 511, 517 [325 P.2d 612]; Block v. D. W. Nickolson Corp., 77 Cal. This Section will briefly review the essential elements of a contract, $ $ the concepts of Sign up for our free summaries and get the latest delivered directly to you. Rptr. mental incompetence Can people who are adjudged mentally incompetent by the court ever enter into a valid contract? DONALD M. SMALLEY, Plaintiff and Respondent, v. THOMAS E. BAKER, Defendant, Cross-complainant and Appellant; DONALD R. HAILE, Defendant, Cross-defendant and Respondent. The contract provided that the deposit was to be paid to Baker only on condition that he obtain and deliver to Smalley and Bratton an executed copy of the modification of the Baker- Pendleton contract, and further provided that said modification was subject to the approval of Smalley and Bratton. Schroeder admits that the financial manager told not to use the mutual fund as collateral because Plaintiff used that income as the primary source of her income. If you have feedback or questions, please reach out to us here. 2d 839] consent to the modification, is supported by an inferred finding that there was no joint venture or partnership, which finding in turn is supported by the evidence. The 2016 ABA Criminal Justice Standards on Mental Health present a reasonable model for the management of insanity acquittees, including: limiting state jurisdiction to the possible sentence for the original criminal charge; providing humane and informed treatment programs and well-trained personnel; making it increasingly difficult over time to 6, if Smalley did not have the requisite mental capacity to enter into a contract at the time he executed the instant agreements, then under Civil Code section 39 he is entitled to rescission. In a display . Prior to joining the AMA, he was a staff attorney with the Legislative Reference Bureau in Springfield, where he drafted legislation for the Illinois General Assembly. App. Held. App. The viewpoints expressed in this article are those of the author(s) and do not necessarily reflect the views and policies of the AMA. 2d 830] talkative, and unrealistic while in the manic stage. (For discussion see Weihofen, supra, at p. 320; Note, supra, 39 N.Y.U.L.Rev. This language, as interpreted by the decisions, establishes the "understanding" or cognitive test as the prevailing standard of legal competency. A person may be judged incompetent by virtue of age or mental condition. 46, 69 [243 P. 657]; Drum v. Bummer, 77 Cal. In contract law a person who agrees to a transaction becomes liable for duties under the contract unless . Elements required for a contract business law legally set of enforceable promises elements required for contractagreement (offer and acceptance)there are three . In these cases, the patient doesn't have any power to enter into a contract for himself. Any conduct on the part of the person whose competency is being questioned may be relevant, in addition to lay and expert testimony, and prior and subsequent adjudication of incompetency. Today, the category has been expanded to include those suffering from degenerative diseases, like Alzheimer's, that may affect their cognitive abilities. If one of the parties is a minor, the contract may not be enforceable because minors are legally presumed to lack capacity for contracts, even if the particular minor has understood the terms.