Problem 13.3

Sherman is a money manager in New York. He is brilliant and successful, but he has always suffered from bipolar disorder, which means that his mood will often swingsharplybetweenalmostmanicenthusiasmandboutsofdeepdepression.In recent years the disorder has become more severe. He has prescription medication to deal with it, but he is not good about taking the medication regularly.One day, while playing golf at a private course where he was taken by a friend, he starts chatting with the clubhouse manager. The manager mentions that the club has not been profitable lately and that the property is for sale, perhaps to a developer who will convert it into another use. Sherman is intensely interested. He immediately callstheclubpresident,whoputshimintouchwiththerealestatebrokerwhois representingtheproperty.Hemeetswiththebrokerafewhourslater,getsafew more details. On the spot he agrees to buy the property. He tells the broker that hewill pay the full listed price of $3.2 million provided they can get the deal done that evening, saying that he does not want anyone else to have a chance at it.The broker is surprised by the speed of his decision. Sherman waves a hand, gives her a business card, and explains what he does. As a high-level money manager, he is used to making quick decisions, he says, and this is, for him, a relatively small-potatoes deal. When you wait around, he says, you lose the chance for a great deal. He who hesitates is lost. A couple of hundred thousand on the purchase price, he says (waving a hand airily)will not make much of a difference in the success of the project he has in mind. He does not say exactly what the project is he has in mind.The broker, excusing herself for a few minutes, ostensibly to go to the restroom, does a quick Internet check anddetermines that Sherman is exactly who he says he is.Shefindshimtobeloudandoverbearingandthinkshelaughstoomuchsometimes for no apparent reasonbut his credit is good. She quickly prepares a brief memorandum which they both sign. Sherman hands her a personal check for $50,000 as earnest money. The next day she deposits the check and it clears without difficulty.Rightaboutthesametime,though,Shermantriestokillhimselfwitha kitchen knife, slashing his wrists in the bathtub. He is not successful. Discovered by hishousekeeper,heisrushedtothehospitalfortreatment.Heisexamined thoroughly. Physicians from the hospital will testify he had previously tried to kill himself and had stopped taking his medication. On the night of the golf course deal, they will testify, Sherman was under the influence of his disorder and unable to make fully rational decisions. Shermanwantstogetoutofthegolfcoursedeal,sayingthathewasinthe manic stage of his disorder and should not be held to the deal. The golf course owners want to hold him to it. Can Sherman void the deal on grounds of incapacity? How would this problem come out if Pennsylvania law (see Review Question 5, below) or the approach of the Ortelere dissentapplied,rather thantheNewYorklawstatedbythe Ortelere majority?

Review Question 5. In McGovern v. Commonwealth, 512 Pa. 377, 517 A.2d 523 (1986), a case with nearly identical facts, the Pennsylvania Supreme Court rejected Ortelere,andrefusedtoadopttheRestatement15test.Thecourtreiteratedthe traditional test: Under Pennsylvania law, it is presumed thatan adult is competent to enterintoanagreement,andasigneddocumentgivesrisetothe presumption that it accurately expresses the state of mind of the signing party."Merementalweakness,ifitdoesnotamounttoinabilityto comprehendthecontract,andisunaccompaniedbyevidenceof impositionorundueinfluence,isinsufficienttosetasideacontract. Finally,apresumptionofmentalincapacitydoesnotarisemerely because of an unreasonable or unnatural disposition of property. Both Ortelereand McGovernare 4-2 decisions with strong dissents. Which one is the better approach and why?