Farnum v. Silvano
27 Mass. App. Ct. 536, 540 N.E.2d 202 (1989)
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Rule of Law:
Competence to enter into a contract requires more than a transient lucid interval; it requires the capacity to understand the nature of the transaction and its consequences and to act in a reasonable manner in relation to the transaction. A contract is voidable if the other party has reason to know of the person's mental defect and inability to act reasonably.
Facts:
- Viola Farnum, a ninety-year-old woman, began to experience serious mental decline in 1983, manifesting in aberrant conduct such as forgetting her sisters were dead and frequently locking herself out of her house.
- In May 1985, a brain scan confirmed that Farnum suffered from organic brain disease.
- Joseph Silvano, III, Farnum's 24-year-old landscaper in whom she had trust and confidence, offered to buy her house.
- Farnum's nephew, Harry Gove, warned Silvano not to proceed with the transaction, advising him of Farnum's mental condition and the inadequacy of the price.
- On July 14, 1986, Farnum sold her house, valued at $115,000, to Silvano for $64,900.
- The lawyer who represented Farnum in the transaction was selected and paid for by Silvano.
- After the sale, Farnum continued to insist to her family that she still owned the property.
Procedural Posture:
- Harry Gove, as guardian for Viola Farnum, filed an action in Probate Court seeking to rescind the sale of Farnum's real estate to Joseph Silvano, III.
- The Probate Court judge found that Farnum experienced a lucid interval during the conveyance and, therefore, had the requisite capacity to execute the deed, entering judgment for Silvano.
- Farnum's guardian, Gove, appealed the judgment to the Appeals Court of Massachusetts.
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Issue:
Does a person who is suffering from a mental defect possess the requisite contractual capacity to convey real estate for less than half its value, simply because they experienced a lucid interval at the moment of the transaction, when the other party was aware of their impairment?
Opinions:
Majority - Kass, J.
No. A contract is voidable if a person, due to mental illness, is unable to act in a reasonable manner in relation to the transaction and the other party has reason to know of the condition. The court distinguished the standard for contractual capacity from the lesser standard of testamentary capacity, which may be satisfied during a lucid interval. Contractual capacity requires not only comprehension of the transaction but also an ability to understand its consequences and act reasonably. The court adopted the two-part test from the Restatement (Second) of Contracts § 15(1), which provides that a contract is voidable if a person is (a) unable to understand the nature and consequences of the transaction, or (b) unable to act reasonably in relation to it and the other party has reason to know of the condition. Here, Farnum's sale of a major asset for half its value when she faced increasing expenses for her own care was not a rational act. The decisive factor was that Silvano knew or had reason to know of her impairment, the inadequacy of the price, and had been explicitly warned by her nephew, making the conveyance voidable.
Analysis:
This decision formally adopts the modern, two-part test for contractual capacity from the Restatement (Second) of Contracts § 15 into Massachusetts law, moving beyond a purely cognitive standard. By incorporating a volitional component—the ability to act reasonably—the court provides greater protection for mentally impaired individuals in contractual dealings. This precedent makes it more difficult for a party to enforce a contract against a mentally incompetent person, especially when the transaction is substantively unfair and the competent party was aware of the other's condition. The ruling clarifies that a 'lucid interval' is insufficient to establish contractual capacity if the person's underlying condition prevents them from making a reasonable judgment about the transaction's consequences.
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