Blomley v Ryan
(1956) 99 CLR 362
Blomley entered into a contract to purchase a farm 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 (this case will also crop up later in the unit) was whether Ryan had the requisite capacity to contract.
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.‘
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 J reached the same conclusion; Kitto J dissented.]