Last updated 16 August 2016
If a person does not have the required legal capacity to enter a contract, then any contract entered by that person will be voidable.
In deciding whether a person has legal capacity in relation to a particular transaction, particular attention is paid to the level of understanding of the person, the complexity of the transaction and the value of the property involved. The more complex the transaction and the higher the value of the property, the greater the understanding required.
Capacity has no effect on contracts for purchase of necessaries, providing a reasonable price has been paid. Necessaries are things a person needs to maintain a reasonable lifestyle (e.g. food, clothing, medical treatment and rent).
If a person who lacks legal capacity makes a gift, the gift may be able to be retrieved if it has not been given, sold or disposed of to someone else who is unaware of the donor’s incapacity. It is not necessary that the recipient of the gift ought to have realised that the disabled person did not have legal capacity.
If there has been a mistake by one or both of the parties about something that is crucial to the contract, the contract may be void ab initio (void from the very beginning) or voidable (able to be terminated by one or both parties).
For a full discussion about mistakes in contracts see the chapter on Consumers and Contracts.
Sometimes, a person with a disability will enter a contract because (or partly because) of a misleading statement. This is called misrepresentation.
Sometimes a misrepresentation is fraudulent (intentionally false or made without caring whether it is false). In this case, the person with a disability can normally avoid the contract and sue for damages to recover any loss suffered.
A court can also overturn transactions entered into following undue influence or unconscionable bargaining. Where a presumption of undue influence arises, it is up to the other party to prove that the person with a disability made an informed and independent decision to enter the transaction. This will be easier to prove if the person with the disability received independent advice before completing the transaction.
Consumer protection legislation
As well as the common law of contract outlined above, the Competition and Consumer Act 2010 (Cth) contains a schedule that is known as the Australian Consumer Law, which deals with disputes about contracts (see the chapter on Consumers and Contracts).
The legal rights outlined above are rights that a person has under the common law or legislation. There are different ways of enforcing these rights:
- Advocacy is the simplest way to resolve a complaint (e.g. go directly to the other party). It may be wise to have someone else present to act as an advocate.
- Complaints of breaches of consumer protection legislation can be made to the Australian Competition and Consumer Commission, the Queensland Office of Fair Trading or the relevant industry ombudsman (e.g. in banking, telecommunications or insurance). The Office of Fair Trading can also inform consumers about their rights, negotiate on a consumer’s behalf and investigate a consumer’s claims.
- Complaints can be made to the Queensland Civil and Administrative Tribunal. The maximum amount in dispute cannot be more than $25 000.