Mental Capacity To Knowingly Enter Into Contract With Arbitration Clause Is A Question For The Trial Court
The Plaintiffs Walker Bark and Debra Yahquo were parties to two contracts with Lake Country Chevrolet for the purchase of automobiles. The Plaintiffs then brought a lawsuit which sought to have the contracts rescinded (or set aside) and to recover damages for fraud on the part of the car dealer. The car dealership filed a motion to compel arbitration arguing that the contracts signed by the Plaintiffs included an agreement to resolve any disputes through arbitration, not a lawsuit.
In response, the Plaintiffs asserted that Mr. Bark suffered from a service-related disability and cognitive impairment and because of this, he did not knowingly agree to any of the terms of the contract including the arbitration clause. As an alternative, the Plaintiffs requested the court hold a hearing where it could hear evidence on the issue of whether cognitive impairment existed and the affect, if any, it had on the Plaintiffs ability to comprehend the contract. The trial court refused to hold a hearing or hear evidence and instead denied the dealership’s motion and allowed the lawsuit to proceed.
The dealership appealed the decision. The appellate court reversed the ruling of the trial court and remanded the case back to the trial court with instructions that it conduct an evidentiary hearing. As part of this hearing the trial court was instructed to make a determination as to the existence of the Plaintiffs’ mental capacity and ability to knowingly enter into a contract and agree to arbitration.