Incapacity - Persons of Unsound Mind

8 important questions on Incapacity - Persons of Unsound Mind

Contracts made with people of unsound mind will be voidable...

During period of incapacity

Two Requirements for Voidability (with authorities)


(i) The person must have been incapable of understanding the general nature of what he/she was agreeing to at the time of the contract.
Scott v Wise.
(ii) The other party must have known of or have had the greatest reason to believe that the person was of unsound mind.
Hart v O’ Connor

Principles from Archer v Cutler (McMullin J)

Contract with P.U.M voidable if:
- Other person knew of unsoundness
- Whether the contract is unfair
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Principle for O'Connor v Hart

Persons being 'ostensibly sane' can be bound if a court deems terms to be fair applicable to a person of sound mind

Principles from Scott v Wise

Whether the party concerned can understand the general nature as opposed to specific details when explained to them

Degree of knowledge of a lack of understanding

Contracts:
must show that the party of full capacity knows of the lack of capacity on part of the other party

Gifts:
only need to show a lack of capacity

Principle from Dark v Boock

Gifts or voluntary transactions made by a person who lack mental capacity are void at the instance of the person or his/her representative.

S 124(2) CCL Act 2017 (Contract of Necessaries)

Contracts of Necessaries are binding on people of unsound mind

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