E-Alert Case Updates

District of Columbia Affirms Minority Rule That Incompetent Individuals’ Contracts are Void

718 Associates v. Banks
Nos. 08-CV-1571 & 09-CV-744 (D.C. 2011)
by Lindsey M. Brunk, Summer Associate
Semmes, Bowen & Semmes (www.semmes.com)

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mentally incompetent adults as having a permanent incompetency, a viewpoint which the Court of Appeals recognized was no longer valid.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.