Chapter 8 – Capacity
8.3 Persons Who Are Mentally Incapacitated
Mental incapacity can result from mental illness, physical illness, or deficiency, and may have the effect of causing full incompetence, limited competence, or have no impact on contractual capacity at all. As an initial determination, the impact of the illness or deficiency on the ability of the party to understand the legal consequences of entering into a contract should be reviewed. A person who has an illness or deficiency that does not impact the ability to understand the legal consequences of a contract would not qualify for mental incapacity, and therefore could enter a valid contract.
When a person is suffering from an illness or deficiency that prevents them from understanding the legal consequences of entering a contract, a contract entered during this time period is voidable due to limited competence. The time period to avoid the contract would be during the contract or when capacity is restored. For this limitation on competency, it is more likely that avoiding a contract will occur once the deficiency is lifted, restoring mental understanding. A disaffirmance may also take place by a guardian, if a court appoints a guardian and a voidable contract exists at that time of appointment.
When a person that is suffering from an illness or deficiency is adjudicated to be fully incompetent in a court proceeding, any further efforts of that person to enter a contract will result in a void contract. In this situation, a guardian will be appointed to proceed with contracting for the incompetent party in the future.
For example, suppose a seller diagnosed with a mental illness agrees to sell their property to a buyer. Even though the seller has a diagnosis, this contract will be valid unless the mental illness has impacted the seller’s ability to understand the legal consequences of the contract. If the seller, due to their mental illness, cannot understand the legal consequences of the contract, the contract may be considered voidable. The seller would be able to disaffirm the contract. Similarly, the buyer may not be able to enforce the contract and may have to return any money or property received from the seller. If the seller has been adjudicated incompetent in a Court proceeding, the contract would be void. This means that the guardian responsible for making decisions on the seller’s behalf could avoid the contract.
As in the situation with a minor, if the contract was for a necessity, the other party may have a valid claim against the estate of the one who is mentally incapacitated in order to prevent unjust enrichment. In any case, when a contract is disaffirmed, the mentally incapacitated person must return any property in their possession to the other contracting party. If the contract was fair and the other party had no knowledge of the mental illness, the court has the power to order other relief.
Activity 8B
Case Debate: Protection or Oppression? #FreeBritney
Britney Spears, a well-known pop singer, was placed under a conservatorship (or guardianship) in 2008. This is a legal arrangement where a guardian (conservator) is appointed to manage the personal and financial affairs of an individual (conservatee) who is deemed to lack the contractual capacity to make such decisions and enter contracts.
The conservatorship was established following a series of highly publicized personal and legal challenges in Britney Spears’ life. The conservatorship was implemented due to concerns about Britney Spears’ contractual capacity. It brought into question whether she had the legal capacity to enter into contracts and fully understand the implications and consequences of her agreements. Under the conservatorship, her father, Jamie Spears, initially served as the conservator, with control over her finances, career decisions, and personal life. A professional conservator, Jodi Montgomery, was later appointed as a temporary replacement for Jamie Spears to handle Britney’s personal affairs.
Despite being under a conservatorship, Britney Spears had a successful show in residency in Las Vegas from December 2013 to December 2017. Widely regarded as a successful venture for Britney Spears both artistically and commercially, Britney demonstrated her talent, professionalism, and ability to deliver captivating performances on stage.
The conservatorship remained in place for many years, even while Britney Spears sought review of the conservatorship expressing her desire to end the conservatorship and regain control over her life and finances. At various times while the conservatorship was in place, Britney Spears’ fans and the media questioned the conservatorship and its impact on her life. In 2019, the “#FreeBritney” movement gained momentum, with supporters advocating for an end to the conservatorship and greater transparency about Spears’ well-being.
In June 2021, Britney Spears made a statement during a court hearing, expressing her desire to terminate the conservatorship. She revealed details about the restrictive nature of the arrangement, claiming that she had been subjected to abuse, forced medication, and denial of personal freedoms. Eventually the conservatorship was dissolved and currently Britney Spears has regained full contractual capacity.
Question: Contractual capacity is intended to provide legal protections to those that do not understand the legal consequences of their contracts and to safeguard individuals from the consequences of contracting with unscrupulous adults. With such a safeguard available for those with limited capacity, why isn’t this enough protection for incompetent adults. In other words, what is the purpose of having a separate action where a Court could find a party incompetent and completely remove their right to contract and appoint a guardian?
Question: One of the justifications for continuing a guardianship is that the guardianship is working. When this is the perception, it can be very difficult for the party adjudicated incompetent to show that they can handle their own affairs. So, a guardianship that is working perpetuates the guardianship itself. When should a guardianship or conservatorship end? When should it have ended in the Britney Spears case?
Question: Should there be limits on guardianships as they pertain to contractual rights and obligations? What is the best way to balance the right to contract with the well-being of the individual subject to limitations imposed by a Court?
Debate the Case: Find and review two resources dealing with the #FreeBritney movement. Do you think that the Britney Spears conservatorship was a necessary safeguard or an infringement on the right to contract?
Check Your Understanding
an inability through mental illness or significant cognitive impairment to carry on the everyday affairs of life or to care for one's person or property with reasonable discretion
the condition of lacking the ability to handle one's affairs due to mental or physical incapacity
a determination by a court that a person has the capacity to manage some but not all of his activities
the legal ability of an individual or entity to enter into a binding contract and be held legally responsible for their actions and obligations under that contract
a contract that may become unenforceable by one party but can be enforced by the other
to take action to void a voidable contract
a person who has been appointed by a judge to take care of a minor child or incompetent adult (both called "ward") personally and/or manage that person's affairs
an agreement that is lacking one or more of the legal elements of a contract
