A man named Bob Smith believes that he is Santa Claus (who delivers
presents to all the children around the world on Christmas Eve).
In fact, he is not Santa, but he has believed this for many years.
He signs his name "Santa." He signs many contracts as "Santa,"
and he refers to his wife as "Mrs. Claus" even though her name is
actually Betty Smith. She puts up with it, because he really does believe
he is Santa, and because she loves him and because his wages from
his job at Hasbro toys pays the bills.
One day he enters a contract with your company to hire you to build
him a gigantic workshop in his backyard so he can build his toys and
stable his "eight tiny reindeer." In return he will pay you $120,000 for
the construction. When his wife learns of this deal, she tries to reject
it because it is voidable due to his lack of contractual capacity.
Was this contract voidable, or valid and enforceable?
We know it is not void because the facts do not indicate Bob has
previously been judged insane.
But, is it voidable?
In order to make a contract voidable using mental incapacity as
a ground, the court looks at a few things:
Did the person understand the nature and consequence of the contract?
Was the weight of the consequences of entering into a contract considered?
Did the other party (or parties) to the contract know of, or at least have
an idea, that the party was mentally ill?
Looking at these factors, we do not have a solid answer.
However, I would say that it is enforceable weighing all of the factors
and this is why. Bob does work for Hasbro toys, so he may understand
the nature of the contract. Whether he weighed the consequences is
uncertain. I would say the contractor may not realize that Bob is
mentally ill (if he is). Remember, a court may find that he is competent.
The fact that he signed as Santa has no effect.
In week 10, we will continue to explore contracts.
Email if you have any questions..