Also known as: mentally incapacitated · mental incapacities · mental incompetence · incapacity
Written by attorneys — see sources below.
A condition in which a person lacks sufficient mental ability to understand the nature and consequences of a transaction or to form valid consent.
Marcus Mitchell mails an offer to sell equipment to Monica Morgan. Before Monica accepts, Marcus suffers a stroke that leaves him unable to manage his affairs. Monica attempts to accept the offer the next day. The power of acceptance terminates because Marcus's mental incapacity has the same effect as death under the governing rule.
Michael Miller appoints Megan Moore as his agent to negotiate sales contracts. Michael later develops advanced dementia and a court appoints a conservator. Megan continues to sign agreements on Michael's behalf. Her authority terminates because the principal's loss of capacity has the same effect as death.
Madison Meyers executes a power of attorney authorizing Malcolm McKinley to manage her investments. The document states it is durable. Madison later suffers severe cognitive decline from Alzheimer's disease. Malcolm continues to act under the power because durability prevents termination by the principal's incapacity.
Marcus Mitchell, who has been diagnosed with severe dementia, signs a release allowing a neighbor to enter his property. The neighbor later enters and removes equipment. Marcus's conservator sues for trespass. The release provides no defense because mental incapacity prevents valid consent to the intentional invasion.
Monica Morgan grants Michael Miller an option to purchase her warehouse, supported by consideration. Michael later becomes mentally incapacitated. Monica attempts to revoke the option. The power of acceptance under the option contract continues because death or incapacity of the offeror does not terminate it.
Magnolia Foods contracts with Marcus Mitchell to perform as lead singer at a series of promotional events. Marcus suffers a traumatic brain injury that leaves him unable to perform. Magnolia Foods claims breach. Marcus's duty is discharged because his supervening incapacity makes performance impracticable.
A person lacks capacity if unable to understand in a reasonable manner the nature and consequences of the transaction. Courts may also consider whether the transaction is one a reasonably competent person might have made, especially when mental illness affects judgment even if basic understanding exists.
No. The contract is voidable at the election of the incapacitated party or a later-appointed representative. The party may also affirm the contract during a lucid interval or upon recovery.
A non-durable power of attorney terminates when the principal becomes incapacitated. The termination is not effective against third parties who act in good faith without actual knowledge of the incapacity.
Courts require credible psychiatric or expert medical testimony combined with corroborating lay observations of behavior at the time of the transaction. Later adjudication of incompetence or general feebleness alone does not establish incapacity at the earlier moment of contracting.
Yes. The power of acceptance under an option contract is not terminated by the offeror's death or incapacity unless the requirements for discharge of a contractual duty are met.
…law a spendthrift was not considered incapable of contracting. Taylor v. Koenigstein , 128 Neb 809, 260 NW 544, 546 (1935). Incapacity of a spendthrift to contract is a disability created by the legislature. California has no such legislation. In addition, the Civil Code of California provides that all persons are capable…