## Facts

- Frances M. Sparrow sued her sister, Susan A. Demonico, and Susan’s husband, David D. Demonico, claiming a one-half equitable interest in their late mother’s Woburn, Massachusetts home under constructive and resulting trust theories.
- The Demonicos claimed sole ownership based on a recorded deed and their long-term residence in the home.
- The parties voluntarily mediated and executed a written settlement requiring the Demonicos to sell the property and pay Sparrow $100,000 from the sale proceeds.
- The Demonicos later asserted the settlement was not enforceable because Susan allegedly suffered a mental breakdown during mediation and lacked capacity to contract.
- Evidence of incapacity consisted only of lay testimony from Susan and David describing slurred speech, diminished coherence, and uncontrollable crying, and Susan’s testimony that she had stopped taking prescribed antidepressants.
- Susan acknowledged she understood the mediation concerned resolving the family-home dispute and that she participated to some extent and listened to counsel’s arguments.
- No medical records or expert psychiatric/psychological testimony was offered concerning Susan’s mental condition at the time of mediation.

## Issues

1. Whether a party may prove lack of contractual capacity without evidence of a medically diagnosed, long-standing mental illness or defect.
2. Whether lay testimony alone was sufficient to support a finding that Susan lacked capacity to authorize counsel to settle during mediation.

## Decision

- The Supreme Judicial Court held that contractual incapacity is not limited to medically diagnosed, long-standing mental illness; a temporary mental condition may render a contract voidable if it actually impairs understanding or reasonable action.
- The Court ruled the evidence here was insufficient because there was no medical or expert evidence linking Susan’s described condition to an inability to understand the settlement or act reasonably regarding it.
- The Court vacated the order denying enforcement and remanded for entry of an order enforcing the settlement agreement.

## Legal Principles

- Contractual incapacity is assessed functionally: whether a mental condition interfered with the party’s understanding of the transaction or ability to act reasonably in relation to it at the time of contracting.
- A mental condition need not be permanent, progressive, degenerative, or of significant duration to support an incapacity claim.
- In most cases, a finding of incapacity cannot rest on lay descriptions of distress or atypical behavior alone; medical evidence or expert testimony is ordinarily required to connect the condition to impaired understanding or unreasonable action regarding the transaction.
- Emotional upset or an “emotionally overwrought” state, without expert linkage to contract-disabling impairment, generally does not justify avoiding a mediated settlement.

## Conclusion

The Supreme Judicial Court required enforcement of the mediated settlement because the claimed incapacity was supported only by lay testimony and lacked medical or expert proof that the mental condition impaired understanding of the agreement or the ability to act reasonably in relation to it.


Sparrow v. Demonico, 461 Mass. 322, 960 N.E.2d 296 (Mass. 2012)