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Heights Realty, Ltd. v. Phillips

    Brief Fact Summary. The Plaintiff, Heights Realty, Ltd. (Plaintiff), entered into an exclusive listing contract with Johnye Mary Gholson (“Mrs. Gholson”), who was 84 years old when she signed the contract. Later, it became evident that the Defendant was mentally incapable to handle her affairs. Plaintiff brought suit against Phillips, the Conservator of Mrs. Gholson’s estate, to enforce its commission.

    Synopsis of Rule of Law. Mental incapacity serves to nullify a contract.

    Facts. The Plaintiff, Heights Realty, Ltd. (Plaintiff), entered into an exclusive listing contract with the Defendant, Philips (Defendant), the Conservator of the estate of Johnye Mary Gholson (“Mrs. Gholson”), who was 84 years old when she signed the contract. Later, it became evident that the Defendant was mentally incapable to handle her affairs. Plaintiff brought suit to enforce its commission. At a bench trail of this matter, the Court found that Mrs. Gholson lacked the mental capacity to have entered into the contract. Plaintiff appealed, on the grounds that the conservator of Mrs. Gholson’s estate, the Defendant, could not overcome a presumption of competency.

    Issue. The issue presented by this case is whether an 84 year old woman, who was later adjudicated incompetent, had the capacity to contract.

    Held. Affirmed.
    The Court focused on the test of mental competency, which is whether a person is capable of understanding the nature and effect of the act in which they are intending to engage. In this case, the test is whether Mrs. Gholson was able to comprehend the effect of her actions when she entered into the exclusive listing agreement with Plaintiff.
    In determining whether a party lacks competency, both expert and personal witness information is used, along with evidence of prior and subsequent condition. The Defendant, the son-in-law of Mrs. Gholson, along with her granddaughter and a psychiatrist were all able to testify that Mrs. Gholson did not have the capacity to contract and that it ought to be rescinded on the grounds of mental incapacity.

    Discussion. When someone is mentally incapable of entering into a contract, any agreement made with that person is null. Mental capacity can be determined by a variety of factors, including personal and expert witnesses, along with information about the person’s mental state before and after the period of incompetency.


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