Opinion ID: 2614994
Heading Depth: 1
Heading Rank: 3

Heading: c: restitution

Text: In general, a party who contracts with an incompetent person in good faith, without actual or constructive knowledge of his condition, is entitled to restitution. [4] See Metter Banking Co. v. Millen Lumber & Supply Co., Inc., 191 Ga. App. 634, 382 S.E.2d 624, 628 (1989); Pennsylvania Co. for Banking & Trusts v. Philadelphia Title Ins. Co., 372 Pa. 259, 93 A.2d 687, 690 (1953). This rule is founded on the equitable principle that it is fundamentally unfair to allow a person to repudiate a contract without returning the benefits received thereunder. See Pennsylvania Co., 93 A.2d at 690. Thus a party's right to void a contract due to incompetency may be defeated if he cannot restore the other party to his original position. The Restatement (Second) of Contracts clearly lays out the factors a trial court should take into account when faced with this type of situation. If the contract is made on fair terms and the other party has no reason to know of the incompetency, performance in whole or in part may so change the situation that the parties cannot be restored to their previous positions or may otherwise render avoidance inequitable. The contract then ceases to be voidable. Where the other party, though acting in good faith, had reason to know of the incompetency at the time of contracting or performance, or where the equities can be partially adjusted by the decree, the court may grant or deny relief as the situation requires. Factors to be taken into account in such cases include not only benefits conferred and received on both sides but also the extent to which avoidance will benefit the incompetent and the extent to which others who will benefit from avoidance had opportunities to prevent the situation from arising. Restatement (Second) of Contracts § 15, comment f (1981); see also Davis v. Colorado Kenworth Corp., 156 Colo. 98, 396 P.2d 958, 961-62 (1964) (where the contract is made on fair terms and the other party is without knowledge of the incompetency, the power to void the contract terminates to the extent that the contract has been performed). Since we conclude that the Papperts could not reasonably be expected to know of Mr. Sargent's condition, they are entitled to restitution. [5] In this case the passage of time makes a return to the status quo in 1981 impossible  the parties agree that the mobile home has significantly depreciated in value. In its oral findings, the trial court recognized the unfairness of rescinding the transaction at this late date, but declined to order any further restitution, commenting that the Papperts had had an opportunity to resolve this dispute at an earlier time but had failed to do so. On our review of the record, this result is clearly inequitable. Mrs. Sargent filed this action in 1983 but was unable to proceed further because she had neglected to obtain formal guardianship of Mr. Sargent. She only reinitiated the action in 1988, two years after Mr. Sargent's death. Since we conclude that the Papperts should not be charged with knowledge of Mr. Sargent's condition, they are entitled to some form of restitution. Thus we remand this case to the trial court to determine the proper measure of restitution. If, after a hearing, the court determines that meaningful restitution is not possible, it should decline to void the transaction. See Sprinkle v. Wellborn, 140 N.C. 163, 52 S.E. 666 (1905) (contract voidable on grounds of incompetency should not be set aside where other party had no notice of incompetency and derived no inequitable advantage from the contract and the parties cannot be returned to their original positions); Davis, 396 P.2d at 961-62.