Have you ever signed a contract while you were upset about something—angry, sad, depressed, or ill? In Massachusetts, a contracting party must be able to understand the nature and quality of the transaction or grasp its significance. A “mental breakdown” may be enough to avoid enforcement of a contract, but it will require medical evidence to demonstrate that the signor lacked the capacity to make a contract. A 2012 case, Sparrow v. Demonico & another, addressed this situation. 461 Mass. 322 (2012).
In Sparrow, Susan Demonico signed a mediation agreement settling a dispute with her sister, Frances Sparrow, over their family home. Susan later tried to avoid the enforcement of the agreement, claiming that she lacked capacity to contract because she had a “mental breakdown” during the mediation. She claimed that she “was out of control emotionally during the mediation” and “was not thinking rationally.” Id. at 326. Susan’s husband testified that she was “out of control,” incoherent, crying, and slurring her words.
Frances argued that the agreement should be enforced because Susan’s alleged breakdown (1) was not of a significant duration, and was neither progressive nor degenerative; and (2) Susan did not present any medical evidence to support her claim that she lacked capacity to contract.
The S.J.C. allowed that under the evolving modern understanding of the nature of mental illness, “a party could establish an incapacity to contract without proof of a mental condition that is permanent, degenerative, progressive, or long standing.” See id. at 331. “The inquiry as to the capacity to contract focuses on a party’s understanding or conduct only at the time of the disputed transaction.” Id. Based on Susan’s testimony, the court ruled that “even if she suffered from a transient mental defect, or ‘breakdown,’ … she had at least some understanding of the nature of the transaction and was aware of its consequence.” Id. at 334.
The S.J.C. also held that a determination of contractual incapacity requires medical evidence—not just lay testimony. Expert or medical testimony can “explain the effect of [a party’s] experiences or behavior on her ability to understand the agreement, to appreciate what was happening, or to comprehend the reasonableness of the settlement terms or the consequences to her of authorizing the settlement.” Id. at 334. The court found that the evidence of Susan’s “breakdown” was insufficient.
Mediations and other contract negotiations can be fraught with emotion. Be sure that you have legal counsel who can prepare, protect, advise, and represent you. If you have questions about a contract, mediation, or negotiation, call the attorneys at Hutchins Law, P.C.