Can a Person With Alzheimer's Enter a Legal Binding Contract?

As a business owner, you never want to turn away a customer or keep him from signing a contract with your company. If that customer suffers from Alzheimer’s disease, closing a deal might be a lot more complicated than merely getting him to sign on the dotted line, because contract law requires anyone who signs a legally binding contract to be legally competent. If the customer’s condition is severe, the courts may determine he was unable to enter a contract.

Although some types of legal incompetence are easy to define -- minors and intoxicated parties can’t be held to contracts they enter -- others, including that of an Alzheimer's patient, are a legal gray area. For a person to be competent to enter a contract, she must be fully capable of understanding the agreement and comprehending its meanings and ramifications. Because of this, a patient in the early stages of Alzheimer’s, who is largely able to function independently, may be deemed competent.

In some cases, an Alzheimer’s patient has already been deemed legally incompetent and ceded power of attorney to a guardian, such as a child or an attorney. In these cases, the patient doesn’t have any power to enter into a contract for himself. Don’t assume that a customer who suffers from Alzheimer’s is automatically legally competent. If a court decides a patient is incompetent, any contracts he signed after her abilities diminished are automatically voided.

Determining the competency of Alzheimer’s patients must be done on a case-by-case basis, usually by a medical professional. The World Health Organization states that a diagnosis of Alzheimer’s disease must also be accompanied by a professional determination of the progression of the disorder, as early-stage patients often retain the capacity for informed decision making. This capacity diminishes as the disease progresses, however, so determinations should be ongoing to pinpoint the stage at which a patient is no longer legally competent.

Because a patient’s competency to enter into a legally binding contract is a matter left up to family members and medical and legal professionals, handling contractual agreements with Alzheimer's patients can be difficult for businesses. In many cases, a failure to understand finances and credit is one of the earliest signs of Alzheimer’s disease, according to the "New York Times." While it can be difficult for a business owner to identify incompetent customers, those who don’t carefully approach a contractual agreement with an Alzheimer's patient risk the contract being declared void in the future.