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Blomley v Ryan

High Court of Australia [1956] HCA 81; (1956) 99 CLR 362 (28 March 1956)

Overview

This case considered the circumstances in which intoxication might preclude capacity to contract.

Man drinking

Facts

Blomley entered into a contract to purchase a farm (Worrah) from Ryan. Ryan was 78 and was suffering the effects of prolonged and excessive consumption of alcohol. When Ryan sought to resile from the sale Blomley sought specific performance – one issue was whether Ryan had the requisite capacity to contract.

Judgment (trial) (Justice Taylor)

Refused specific performance

In relation to the condition of the respondent (Ryan) at the time of signing the contract, Justice Taylor made the following observations:

[366] It was alleged on behalf of the defendant that for some days prior to and upon the day when he signed this agreement his condition was such, as the result of over-indulgence in alcoholic liquor, that he did not possess the requisite contractual capacity. Alternatively, it was said that even if he was not incapable in this sense his mind was, to the knowledge of the plaintiff, so affected by drink as to place him at a grave disadvantage in transacting the negotiations and sale that, taken with the other features of the case, the remedy of specific performance should be withheld. The other features relied upon are to be found in the allegations that the defendant quite obviously was an old man of failing intellect, that the sale was at a very substantial undervalue, that the terms of the agreement were unfair, that the transaction was concluded with undue haste and without adequate advice being available to the defendant and that the purchaser's agent himself had contributed to the defendant’s debilitated condition. This may also be taken as a short summary of the matters now relied upon to support the claim that the agreement should be set aside.

There is not the slightest doubt that the defendant is a man who for a number of years at least has engaged in drinking bouts extending over periods ranging from a few days to a week or more. Those witnesses called on behalf of the plaintiff who had an opportunity of observing the defendant from time to time were prepared to concede this sorry state of affairs and, indeed, frankly state that the bouts occurred at frequent intervals. I am satisfied that though the defendant's drinking habits may be so described with accuracy the statement of his habits in this brief fashion tends to under-rate his propensities and in no way indicates the condition to which his drinking bouts would reduce him or the degree to which the degeneration of his mental processes had been accelerated thereby. At the relevant time he had, I am quite sure, arrived at a [367] stage where a few drinks might quickly reduce him to a state of stupidity and, perhaps, even to total incapacity. The defendant's condition and habits were a matter of common knowledge in and around Goondiwindi and, even if Blomley senior was not fully aware of these matters, there is no doubt that Stemm [assistant manager of the branch of Dalgety & Co Ltd at Goondiwindi] had full knowledge of them. There is, I should think, no doubt that on many occasions during his bouts of drinking the defendant lost all capacity to transact even the simplest business matters though at other times during these periods he temporarily recovered from his excesses sufficiently to exercise those impaired faculties which were the legacy of his advanced years and habits. Between these two states there must, of course, have been many occasions when it was difficult or even impossible to determine the degree of understanding enjoyed by the defendant or, indeed, to say precisely when he commenced to emerge from a state of total incapacity.

There is good reason for thinking that the agreement of 21st April 1953 was executed by the defendant during the period over which one of these drinking bouts extended. Shearing operations commenced at "Worrah" on Monday, 20th April 1953, and continued for some ten or eleven days. ... There is evidence that shearing time generally coincided with some of the defendant’s heaviest bouts and this occasion seems to have proved no exception. There may have been some exaggeration on the part of some of the witnesses called on behalf of the defendant but I accept substantially their evidence as to the defendant’s drinking excesses which occurred at "Worrah" over this period and their description of the condition to which those excesses reduced him. ...

Judgment (High Court)

Judgment (Fullagar J)

Noted that the Courts approach with caution claims of intoxication as a ground for resiling from contractual obligations.

This is, I think, not so much because intoxication is a self-induced state and a reprehensible thing, but rather because it would be dangerous to lend any countenance to the view that a man could escape the obligation of a contract by simply proving that he was "in liquor" when it was made.

‘Mere’ drunkenness will not permit a person to get out of a contract. However, where one party was – to the knowledge of the other – ‘seriously affected by drink’, equity will refuse specific performance. In addition, if a court is satisfied a ‘contract disadvantageous to the party affected has been obtained by "drawing him in to drink", or that there has been real unfairness in taking advantage of his condition, the contract may be set aside.‘

Beer on table

Other factors that may induce equity to refuse relief include

‘poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary. The common characteristic seems to be that they have the effect of placing one party at a serious disadvantage vis-a-vis the other.’

Inadequacy of consideration will be relevant but not determinative. In cases like this where intoxication is the main disadvantage relied upon, the adequacy (or otherwise) of consideration is particularly important. In this case the sale price was significantly below market price – the only explanation for this was that Ryan was old and impaired by habitual drinking to excess and who contracted during a bout of heavy drinking rendering him ‘utterly incapable of forming a rational judgment about the terms of any business transaction.’ This was apparent to Blomley (through his agent) who took unfair advantage of that condition. Specific performance and damages were, therefore, denied.

McTiernan

Reached the same conclusion

Kitto J

Dissented