Brief Fact Summary. Defendants entered into a debt consolidation loan with Plaintiff, which included an arbitration clause in case of default. Because John Brown, one of the plaintiffs, was profoundly retarded, his mother brought suit on his behalf, due to lack of capacity to understand the agreement into which he had entered.
Synopsis of Rule of Law. This case stands for the proposition that mentally incapacitated individuals are not competent to contract because contracts require a meeting of the minds and without that mutual consent and understanding element, a contract cannot exist.
We review the district court's denial of a motion to compel arbitration de novo.View Full Point of Law
Issue. This case considers whether a mentally incompetent individual can be held to contractual terms which he could not have understood.
Held. The court held that the written agreement was unenforceable, due to John Brown’s mental incapacity. As such, he could not be forced to arbitrate the claim because he did not understand the terms of the agreement.
On appeal, this case is reversed to the extent that the Fifth Circuit found that the arbitrator should be allowed to determine the capacity of the Defendant, but the Court did not disagree with the law regarding enforceability.
Discussion. If a person is so incompetent that it can be proven they could not understand the terms of a contract, they should not be bound to those terms.