Faber was a businessman who was diagnosed with “manic-depressive disorder”

or what we would now call bipolar disorder. Before he was diagnosed, he had purchased some commercial property during a manic phase. After his diagnosis, he sought to back out of the deal. In support of his argument that he lacked the capacity to make this deal, he testified that although he was ordinarily a frugal and cautious person, he purchased three expensive cars for himself, his son, and his daughter and that he began to drive at high speeds, take his wife out to expensive dinners, and discuss his sexual prowess with others.

CASE QUESTIONS

1. How should the court in this case determine whether Faber lacked the capacity to purchase the commercial property: by focusing on whether the terms of the deal were unreasonable under the objective standard, or by focusing on Faber’s state of mind at the time he made the deal?

2. Unlike minors, a person with a psychological disorder can enter and exit his impaired state. How should courts determine whether individuals with mental disorders are mentally capable of entering into a contract?