One of the requirements to enter into a contract is mental
competency. In the case of Faber v.
Sweet Style Mfg. Corp. (40 Misc.2d 212, 242 N.Y.S.2d 763 (N.Y.Sup.
1963)), Mr. Faber was manic-depressive. He made a major contract to purchase
land while in his manic state. He then sought to void the contract while he was
in his depressive state (and had been institutionalized). Although
manic-depressives do suffer from psychosis, they are capable of living in the
real world and can usually pass the cognitive test which is generally used to determine if a person is mentally
incompetent enough to lose the capacity to
make contracts (aka the doctrine of capacity).
Faber went off his meds, and
decided to build a drugstore. So in only a day, he bought the land (even
bargaining over the price), did the title search, applied for a mortgage,
put up a sign saying a drug store was coming, hired contractors, sought a
building license, and did a bunch of other stuff. Then he hit his
depressed phase and was institutionalized.
While in his manic phase,
Faber clearly would have understood what he was doing and therefore would
have passed the cognitive test. However, the Court held that
there was a second test that needed to be applied. Faber was acting out
of compulsion from a mental disorder.
"Incompetence of a
contract also exists when a contract is entered into under the compulsion
of a mental disease or disorder for which the contract would not have been
Courts are divided as to
whether the compulsion test held in
this case should count, of if they should stick with the older cognitive
What protection does the
seller have if a person acting in a completely rational manner shows up
trying to contract with you?
In criminal law, most courts
follow the cognitive test only.
So if you shoplift because you think the item belongs to you, you can be
found not-guilty by reason of insanity. But if you shoplift because you
are a kleptomaniac and can't help it, you are going to jail.