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Drunk in charge of a contract

Drunk in charge of a contract

Just occasionally you get a court case that reads better than a novel. Law is all about people and what they do. So you won’t be surprised to find that there is an ancient body of law dealing with people entering into contracts when they are drunk – and whether those contracts should be enforced when the party sobers up. A recent case concerned the sale of a block of land on the Coromandel Peninsula. The seller had lived there for about 30 years. He, his former partner, the real estate agent and the owner of his local pub all gave evidence that he had a serious, long-term alcohol problem.

The land had been on the estate-agent’s books for a while when in mid-2005, out of the blue, a prospective buyer expressed interest in the property. Various offers and counter-offers resulted and eventually the real estate agent had a sale and purchase offer prepared and ready for the seller to sign, when it would become legally binding.

The seller went to the real estate agent’s office to look at the contract, but said he was too drunk to deal with it – the real estate agent and his staff agreed with that. But the next day, after the estate agent contacted him at his local pub, the seller came into the office and signed the contract. That day, staff at the office and other witnesses said that he did not appear drunk and that he was in better shape than he had been the day before.

Of course, soon after he signed the agreement, the seller decided he didn’t really want to sell his land. He tried to get out of the contract and in the end, refused to complete the sale. The purchasers sued, saying that a binding contract had been breached and the seller should be ordered to complete the sale or else pay damages.

The seller defended the claim on the basis that he was so drunk when he signed the contract that he didn’t know what he was doing – he didn’t have the capacity to enter into the contract. There was evidence that he had been on a lengthy bender during the negotiation period. But his evidence was vague: the Judge pointed out “I have not been assisted in these areas by what I consider to be the genuine inability of the seller to remember much of the important detail of what occurred in November 2005.” Against this, there was a evidence from others that he did not appear to be drunk on the day he signed the contract. The court found he did understand what he was doing, and the contract was enforceable.

In any case about the sale and purchase of land, the court always has a choice about whether to order the seller complete the sale or just pay damages. Since Roman times at least, courts have seen land ownership as so special that they should think carefully before ordering land to be sold against the wishes of the owner. In this case, the court gave great weight to the long time that the seller had spent living on the land, and so did not order him to complete the sale. But he didn’t get away scot-free: he had to compensate the would-be purchasers for any losses that they may have suffered.

The moral of the story: don’t think that being drunk automatically gives you an excuse to get out of your obligations. You have to be so obviously drunk that you really don’t know what you are doing. And that’s not a good place to be.

This article is intended for general information, and should not be relied on as specific legal advice. You should consult a lawyer for advice relating to your own specific legal problems. Rae Nield can be contacted at raenield@marketinglaw.co.nz.


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