Case Problem Analysis: Mental Incompetence

Heidi Bauer suffered a brain injury in a motorcycle accident. Two years later, Jordan Moore, who was in default on a loan and was denied further credit by the bank, asked Bauer to take out a loan from the bank to invest in his business and the investment failed. When the loan matured, Bauer sued the bank claiming in part that Bauer lacked mental capacity to enter into the loan.

During the trial, Bauer$$s attorney showed that Bauer was under court$-$appointed guardianship approximately one year before the loan transaction. Also, Bauer's testimony showed that she misunderstood the nature of the loan, believing that she was merely cosigning a loan for Moore and that Moore was responsible for paying it back. Finally, a medical expert testifying on Bauer$$s behalf stated that Bauer was "very deficient in her cognitive abilities, her abilities to remember and to read, write and spell $...$ she was very malleable, gullible, people could convince her of almost anything." The expert also said that she was "incompetent and $...$ unable to make reasoned decisions" on the date she made the loan.