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Unformatted text preview: ances of the transaction. This does not necessarily mean they would understand every clause of legalese in a long, complicated written contract, but does require that they know basically what they are doing.
Example 5.10. Cassandra’s landlord comes to her door to ask if she intends to renew her lease for another year. Cassandra, a paranoid schizophrenic who is not taking her meds, is suffering from complex hallucinations and thinks he is an alien asking her to sign a peace treaty on behalf of Planet Earth. Not wanting to be responsible for a war with aliens, Cassandra signs the new lease. Cassandra lacks capacity and can void the contract when she realizes what she has done.
If Cassandra had already been declared mentally incompetent by a court, her contract would be void rather than voidable.
The relevant time period for capacity is when the contract is made. The law generally presumes both parties to have capacity unless there is something in evidence that puts it in question. Then the burden is on the party who wants the contract to stand to show that the other really did understan...
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