Explain in brief the standards concerning contracts of mentally incompetent persons.
What will be an ideal response?
The law protects people suffering from substantial mental incapacity from enforcement of contracts against them because such persons may not understand the consequences of their actions in entering into a contract. The law has developed two standards concerning contracts of mentally incompetent persons: (1) adjudged insane and (2) insane but not adjudged insane.
In certain cases, a relative, a loved one, or another interested party may institute a legal action to have someone declared legally (i.e., adjudged) insane. If, after evidence is presented at a formal judicial or administrative hearing, the person is adjudged insane, the court will make that person a ward of the court and appoint a guardian to act on that person's behalf. Any contract entered into by a person who has been adjudged insane is void. That is, no contract exists. The court-appointed guardian is the only one who has the legal authority to enter into contracts on behalf of the person who has been adjudged insane.
If no formal ruling has been made about a person's sanity but the person suffers from a mental impairment that makes him or her legally insane-that is, the person is insane but not adjudged insane-any contract entered into by this person is voidable by the insane person. Unless the other party does not have contractual capacity, he or she does not have the option to void the contract. A person who has dealt with an insane person must place that insane person in status quo if the contract is either void or voided by the insane person.
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