A man named Bob Smith believes that he is Santa Claus (who delivers presents to all the children around the world on Christmas Eve). In fact, he is not Santa, but he has believed this for many years. He signs his name “Santa.” He signs any contracts as “Santa,” and he refers to his wife as “Mrs. Claus” even though her name is actually Betty Smith. She puts up with it, because he really does believe he is Santa, and because she loves him and because his wages from his job at Hasbro toys pays the bills.
One day he enters a contract with your company to hire you to build him a gigantic workshop in his backyard so he can build his toys and stable his “eight tiny reindeer.” In return he will pay you $120,000 for the construction. When his wife learns of this deal, she tries to reject it because it is voidable due to his lack of contractual capacity.
Was this contract voidable, or valid and enforceable? Fully explain your answer.
Answer preview
Smith can argue that her husband is not mentally capable of carrying out such an agreement because he is under the delusion of being a fictional character and she would win in court. Before agreeing to the contract, my company should have read through the contract and reviewed its contents. This way, the different name could have been noticed and either corrected or declined completely. In addition to this, it was necessary for both parties to know if they are dealing with the person they say they are or a fraud and whether they are of sound mind.
