American Military University Law Problem 13.3 Discussion

Answer Problem 13.3

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

swing sharply between almost manic enthusiasm and bouts of deep depression. 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

calls the club president, who puts him in touch with the real estate broker who is

representing the property. He meets with the broker a few hours later, gets a few

more details. On the spot he agrees to buy the property. He tells the broker that he

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258 CHAPTER V: CONTRACT DEFENSES

will 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 and determines that Sherman is exactly who he says he

is. She finds him to be loud and overbearing and thinks he laughs too much—

sometimes for no apparent reason—but 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.

Right about the same time, though, Sherman tries to kill himself with a

kitchen knife, slashing his wrists in the bathtub. He is not successful. Discovered by

his housekeeper, he is rushed to the hospital for treatment. He is examined

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.

Sherman wants to get out of the golf course deal, saying that he was in the

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, above) or the approach of the

Ortelere dissent applied, rather than the New York law stated by the Ortelere

majority?