MBE Rules · Contracts
Mental incapacity
The rule
A contract is voidable by a person who, at the time of contracting, lacked the ability to understand the nature and consequences of the transaction (cognitive test) OR could not act in a reasonable manner in relation to the transaction and the other party had reason to know (volitional test, Restatement §15).
In plain English
If someone can't understand what they're agreeing to or can't act reasonably, they might be able to cancel the contract.
Worked example
The buyer, who has a severe cognitive disability, signs a contract to buy a car. Later, it's clear he didn't understand the deal. He can void the contract.
Memory hook
Mind Muddle = Voidable Contract. If cognitive or volitional capacity is lacking, the deal's on shaky ground.
The trap
Students think: only cognitive incapacity matters. Wrong, because volitional incapacity also voids contracts if known. The actual test is either cognitive or volitional incapacity with the other's knowledge.
How examiners test it
The MBE loves: elderly or mentally ill party signs a contract. Question: valid? Trap: students overlook volitional incapacity. Look for clues the other party knew of the incapacity.
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