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District of Columbia affirms minority rule that incompetent individuals’ contracts are void
(July 2011) By Lindsey M. Brunk, Summer Associate
For more information, contact Paul
Farquharson.
718 Associates v. Banks,
Nos. 08-CV-1571 & 09-CV-744 (District of Columbia Court of Appeals, June 23, 2011) | View pdf
Recently, the District of Columbia Court of Appeals
declined to modify the law pertaining to contracts executed by mentally
incompetent individuals, and in doing so declined to follow the majority of
jurisdictions around the country. In 1892, the Supreme Court of the District of
Columbia in General Term, the judicial predecessor to the District of Columbia
Court of Appeals, determined that a contract executed by a mentally incompetent
individual was not merely voidable, but void. Sullivan v. Flynn, 20 D.C. (9
Mackey) 396, 401 (1892). Almost one century later, the District of Columbia
Court of Appeals followed the holding of Sullivan in Martin v. Martin, 270 A.2d
141, 143 (D.C. 1970). Other than that, the Court of Appeals did not have a
chance to consider the law until earlier this year.
Meanwhile, jurisdictions around the country have slowly
changed the once nearly-unanimous law that contracts executed by mentally
incompetent individuals are void, to allow for the contracts to be voidable at
the individual’s discretion. As the Court of Appeals explained, this evolution
of the law came about due to an evolution of the ways that society viewed those
who are mentally incompetent. Contracts executed by children were merely
voidable, because it was understood that the minors would come of age and be
able to understand the effects of their actions. On the other hand, society
viewed mentally incompetent adults as having a permanent incompetency, a
viewpoint which the Court of Appeals recognized was no longer valid. The Court
of Appeals noted that the rule in the District of Columbia was not as strong as
it had been in the past because the Court had distinguished marriage contracts
from the rule, holding in Martin v. Martin, 240 A.2d 363, 365 (D.C. 1968), that
the marriage of a mentally incompetent individual was voidable, but not void.
The Court recognized that the trial court had performed
a thorough analysis of contract law jurisprudence and that in similar
situations the laws of the District of Columbia were different before
explaining that it was bound to abide by its precedent. The only way that
the Court of Appeals could overturn binding precedent would be if the Court
were sitting en banc. Certainly, it was not the trial court’s position to
overturn the precedent. As such, the case was remanded for further
proceedings consistent with the decision.
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