Fingerhut v. Kralyn Enters., Inc.

71 Misc. 2d 846, 337 N.Y.S.2d 394 (Sup. Ct. 1971)



The ailment manic-depressive psychosis is legally recognized where the afflicted one is aware of what he is doing but cannot help himself against the compulsion which controls his actions and impairs rational judgment. Incompetency to contract may exist, despite the presence of cognition, when a contract is made under the compulsion of manic depressive psychosis. Whether a manic will be held incompetent to enter into a particular contract will depend upon an evaluation of (1) testimony of the claimed incompetent, (2) testimony of psychiatrists, and (3) the behavior of the claimed incompetent as detailed in the testimony of others, including whether by usual business standards the transaction is normal or fair. Of course, nothing less serious than medically classified psychosis should suffice or else few contracts would be invulnerable to some kind of psychological attack. 


Plaintiff buyer sought recission of the contract and return of the down payment for defendant seller's countryclub. It was stipulated that the parties who dealt with the buyer were unaware of his manic-depressive condition at the time that the contract was entered into. The purchase price was fair. The court evaluated evidence of the buyer's state of mind, which involved the personality of the buyer, the nature of the deal, the circumstances and manner in which the contract was entered into, and some aspects of the buyer's life outside the making of the contract, including medical history and evaluations of his mental condition by psychiatric experts. The buyer's and seller's psychiatric experts reached different conclusions as to the buyer's mental condition. Defendant filed a motion to dismiss, which the court granted.


Is the contract unenforceable due to plaintiff's manic phase when the contract was executed?




The court held that the evidence presented did not indicate that the buyer was not rational at the time of the deal or that his condition was adequate to render him legally incompetent to make a contract. The contract was valid because, regardless of the buyer's mental state at the time, he later ratified it through his conscious actions. Plaintiff's treating doctor diagnosed him to be free of psychosis on November 5. The letter thereafter executed on  November 8  represents confirmation and indicates a purpose, on plaintiff's part, to proceed with the contract and effect the closing. The letter bears heavily on the defense that plaintiff, by acts of recognition and reliance, ratified the contract at a time he was competent to do so, if, indeed, he had not been at the time of its making.

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