There may be circumstances when, although a party claiming incapacity has some, or sufficient, understanding of the nature and consequences of a transaction, a contract would still be voidable where, by reason of mental illness or defect, the person is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of his condition. This modern test--also described as an "affective" or "volitional" test--recognizes that competence can be lost, not only through cognitive disorders, but through affective disorders that encompass motivation or exercise of will.
Due to a dispute over ownership of what had been the family home, the first sister sued the second sister and her estranged husband. Prior to trial, the parties agreed to voluntary mediation. However, the second sister and her husband left the mediation before it was over because the second sister was crying uncontrollably.
May emotions cause incompetency, and may that incompetency end--allowing continuation of settlement negotiations--after the emotional litigant has regained composure?
The Supreme Judicial Court found, inter alia, that even if the second sister suffered from a "breakdown" as the trial judge concluded, she had some understanding of the nature of the transaction and was aware of its consequences. There was no evidence that the settlement agreement was unreasonable. There was also no evidence that the first sister was, or should have been, aware of the second sister's condition. Finally, there was no indication that the second sister was not represented by independent, competent counsel. Therefore, as the evidence did not support a conclusion that the second sister lacked the mental capacity to authorize settlement on the day of the mediation, it was error to deny the first sister's motion to enforce the agreement.