Business contract law holds that persons that have been declared mentally incompetent in a court of law may find a contract they enter into declared void, voidable, or enforceable.
Mental incompetence as it applies to the law of contract is only in effect if the individual in question has been declared mentally incompetent by a court of law, and that the incompetence has been declared so severe as to require the individual be assigned a guardian.
The guardian is the only person who can enter into a contract on the incompetent person's behalf. If a person who has been adjudicated to be mentally incompetent attempts to enter into a contract on their own part, the contract will be declared void.
A contract entered into by a person that has been found to be mentally incompetent may be determined under business contract law to be voidable if the individual formed the contract before they were judged to be suffering from some form of mental incompetence.
The law of contract may rule that a contract involving a person suffering from a deficit of mental competency is voidable if the individual was not aware of the fact that they were entering into a contract, or if they were incapable of comprehending the contract's nature, consequence, or purpose. The possibility to avoid the contract lies with the party that is does not have full control of their mental capacities.
Business contract law recognizes that it is possible for a person who has been previously declared mentally incompetent to have moments of lucidity. If a contract is entered into during a moment of lucidity by an otherwise utterly incompetent person, as long as at the moment the contract was formed the individual was cognizant of the nature, consequence, and purpose for which the contract was created, then they may be fully liable for the execution of the contract.
The law of contract recognizes that though an individual may not have the mental capacity in relation to any other legal arena, the individual may have the requisite mental capacity to commence a contract.