Danny Boy
I am not an instructor I recently had a situation where a non flying owner wanted to get a licence and I was very unsure of his aptitude to ever accomplish the licences he would require to fly his aircraft.
Firstly you have to be sure in your own mind that his/her bad flying is not a relationship problem with the instructor. Ie he cannot fly with you but may perform well with someone else. There maybe some other external reason for the bad performance like family or work problems.
In my own case above I asked an Instructor/ Examiner friend to do an evaluation flight with him. If he came to the same conclusion then a tactful steering away from that desire was probably the best way forward.
If he was still insistant then its his money going down the drain.
Pace