Instructor Kat Kadian-Baumeyer Show bio Kat has a Master of Science in Organizational Leadership and Management and teaches Business courses.
Cite this lessonMental incapacity refers to a person's inability to enter into a contract due to mental illness or intoxication. Learn how intoxication makes a contract voidable and what conditions must be met for a court to rule a contract void.
There are a few reasons a person would not have the capacity to enter into a contract. Minors, the mentally ill, and persons who are intoxicated or drug-addicted are generally excluded from entering into legal agreements. Mental incapacity simply means that a person does not have the competence to enter into a contract. In addition to intoxication, mental incapacity can result from mental illness, such as schizophrenia, senility, and even bipolar condition.
Most courts look at contracts with persons of mental incapacity as voidable contracts, or contracts that may be voided by the incapacitated party. But, a person cannot just make a claim of mental incapacity. There are two tests used to help to determine whether a party to a contract is incapable of fulfilling its promises: a cognitive or affective test, or a motivational test. The court will administer a cognitive or affective test to determine whether the person understands the contract language and consequences of entering into the contract.
Sometimes, the person understands the language and the consequences, so the court will test motivational reasons for entering into the contract. The test may indicate a condition like mania or delusional thinking as a motivator. In the case of an intoxicated person, the court looks at other things as well.
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When an intoxicated person enters into a contract, the contract can either be enforceable, meaning held to the fullest extent of the law, or voidable by the intoxicated person. The court will look at two criteria that need to be present in order to make the contract voidable:
A voidable contract, in this instance, is one in which the intoxicated party can end the agreement under certain terms. To expand on the criteria above, in order for the intoxicated person to void the contract, there needs to be adequate proof that one of the following occurred:
Alcohol or drugs cannot be provided to a party to a contract to entice or persuade them to enter into a contractual agreement. It should be noted that even if the intoxicated person is able to void the contract, once sober, the contract can be re-entered by the parties. Let's see what happens when a seemingly friendly night of drinking turns to a dispute over contractual capacity.
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Back in December of 1952, the Lucy's and Zehmer's enjoyed dinner and a few drinks when the conversation turned to the sale of the Ferguson Farm. Zehmer propositioned Lucy to purchase it for the sum of $50,000. Zehmer didn't really want to sell his farm. What he wanted was for Lucy to admit that he did not have the $50,000 needed to make the purchase. In other words, it was a one-sided joke, probably fueled by alcohol, on the part of Zehmer.
Lucy was all ears and continued the farm sale conversation with serious intent to purchase. After several cocktails, Zehmer and his wife drafted an agreement on the restaurant receipt, which loosely read, 'We agree to sell the Ferguson Farm to Lucy for $50,000', and signed this document in witness of the other parties. After reading the memorandum drafted by Zehmer, Lucy insisted on giving a deposit of $5 to secure the land. Zehmer actually refused the deposit, stating that the signed agreement made at the table was good enough for him.
After all, during a 45-minute conversation, Zehmer offered the land for sale at the price of $50,000. He drafted an agreement between the parties, and the parties both signed said agreement. Lucy, believing Zehmer's offer was made while in the right mind, approached his brother for half the cash needed to make the purchase. Zehmer, again, insisted that he had no intention of selling the farm to Lucy and that the deal was made during a night of heavy drinking. But Lucy refused to back down. Instead, he hired an attorney. Lucy's contention was that he had a right to the promise in the contract terms.
Under a Virginia Supreme Court ruling, Lucy won the case on the grounds that both parties agreed on the sale of the land in both actions and in writing. You see, regardless of whether Zehmer was drunk at the time, the court ruled that both parties agreed to the sale of the farm because Zehmer's outward behavior was sober enough for a reasonable person to believe he intended to sell it. In other words, enough evidence was not present to prove that Zehmer was intoxicated to the point where he was unaware of the consequences of signing an agreement. Zehmer was forced to sell the farm to Lucy.
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In sum, mental incapacity means that a person does not have the competence to enter into a contract. This can be a result of mental illness or intoxication. In many cases, courts will render a contract with a person who is mentally ill or intoxicated as voidable, meaning the contract may be voided by the incapacitated party.
It is not as simple as making a claim of intoxication; however, the intoxication must be proven severe enough that the person entering into the contract was incapacitated, and the other party must also have been aware of the intoxication at the time. The court will also look for evidence of whether the party was wooed or enticed into signing an agreement by serving him too many drinks.
Not every claim of intoxication in contract disputes wins. As we learned in Lucy v. Zehmer, the court did not see sufficient enough evidence that the two gentlemen were severely drunk at the time of the agreement.
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