Question: In 1987, Hauer suffered a brain injury in a motorcycle accident. She was subsequently adjudicated to be incompetent, resulting in a guardian being appointed by the court. On September 20, 1988, Hauer's guardianship was terminated based upon a letter from her treating physician, who opined that Hauer had recovered to the point where she had ongoing memory, showed good judgment, was reasonable in her goals and plans, and could manage her own affairs. Her monthly income after the accident was $900, which consisted of Social Security disability and interest income from a mutual fund worth approximately $80,000. Around June of 1989, Hauer met Eilbes. Eilbes had been trying to raise sufficient funds for a new business venture. He had borrowed some money from Union State Bank but had been unable to borrowas much as he needed and had defaulted on the loan. Hauer's daughter told Eilbes about the existence of Hauer's mutual fund. Eilbes subsequently discussed his business with Hauer on several occasions and Hauer expressed an interest in becoming an investor in the business. Because Hauer could only sell her stocks at certain times, Eilbes suggested that she take out a short-term loan using the stocks as collateral. Eilbes told Hauer that if she loaned him money, he would give her a job, pay her interest on the loan, and pay the loan when it came due. Hauer agreed. Eilbes then contacted Schroeder, assistant vice president of Union State Bank, and told Schroeder that Hauer wanted to invest in his business but that she needed short-term financing and could provide adequate collateral. Eilbes told Schroeder that he would use the money invested by Hauer in part to either bring the payments current on his defaulted loan or pay the loan off in full. Schroeder then called Hauer's stockbroker and financial consultant, Landolt, in an effort to verify the existence of Hauer's fund. Landolt told Schroeder that Hauer needed the interest income to live on and that he wished the bank would not use it as collateral for a loan.

Schroeder also conceded that it was possible that Landolt told him that Hauer was suffering from brain damage, but did not specifically recall that part of their conversation. At some later date Eilbes met personally with Schroeder in order to further discuss the potential loan to Hauer, after which Schroeder indicated that the bank would be willing to loan Hauer $30,000. Schroeder gave Eilbes a loan application to give to Hauer to fill out. In October 1989, Hauer and Eilbes went to the Bank to meet with Schroeder and sign the necessary paperwork to borrow $30,000. Prior to this date, Schroeder had not spoken to or met with Hauer. During this meeting Schroeder explained the terms of the loan to Hauer: that she would sign a consumer single-payment note due in six months and give the bank a security interest in her mutual fund as collateral. Schroeder did not notice anything that would cause him to believe that Hauer did not understand the loan transaction. In April 1990, the date on which the loan matured, Hauer filed suit against the bank and Eilbes. Hauer's testimony indicated a complete lack of understanding of the nature and consequences of the transaction. Also, Hauer's psychological expert testified that when he treated her in 1987, Hauer was "very deficient in her cognitive abilities, her abilities to remember and to read, write and spell she was very malleable, gullible, people could convince her of almost anything." He further testified that because Hauer's condition had not changed in any significant way by 1990 when he next evaluated her, she was "incompetent and unable to make reasoned decisions" on the date she made the loan. Was the loan contract voidable?