Chapter 8 – Capacity
8.4 Persons who are Intoxicated
People who are intoxicated at the time of entering a contract may have limited competency if the nature of their intoxication rendered the person unable to understand the nature and consequences of a contract. Intoxication could be the effect of alcohol, drugs, or other intoxicating substances, and could be voluntary or involuntary.
If a person is so drunk that he has little awareness of his acts, and if the other person knows this, any contract that results is voidable. Should the intoxicated person disaffirm the contract when regaining competency, he is obligated to refund the consideration to the other party unless he dissipated it during his drunkenness. If the other person is reasonably unaware of his intoxicated state, however, an offer or acceptance of fair terms would be upheld by most courts.
If a person is only partially inebriated and has some (but not a full) understanding of his actions, courts will review factors in determining whether the transaction would be voidable or valid, for example, whether the other party induced the drunkenness, the adequacy of the consideration exchanged, and whether the transaction is one which a reasonably competent person might have made.
A person who was intoxicated at the time he made the contract may nevertheless subsequently ratify it. Thus, where a party, several times involuntarily committed for alcoholism, executed a promissory note in an alcoholic stupor but later, while sober, paid the interest on the past-due note, he was denied the defense of intoxication; the court said he had ratified his contract. In any event, intoxication is a disfavored defense on public policy grounds.
Student Video on Capacity
“Capacity in Contract Law” created by Samantha Fiduk
Case 8.1
Cameron v. Power Co., 50 S.E. 695 (N.C. 1905)
WALKER, J.
This action was brought to recover damages for the breach of a contract whereby the plaintiff agreed to sell and the defendant to buy a Corliss engine. … The defendant in its
answer [to the complaint] admitted that its president had signed a contract, and pleaded specially that at the time of signing it he was so drunk that he did not have sufficient mental capacity to contract with the plaintiff for the engine. The court, without objection, submitted only one issue to the jury, which is as follows: “What damage, if any, is the plaintiff entitled to recover of the defendant?” The jury answered “Nothing.” Judgment was entered accordingly.
The question presented for our consideration arises upon an exception to the charge of the court regarding the drunkenness of the plaintiff’s agent and its sufficiency to avoid the contract.
…
We have examined the charge of the court with care and cannot find that his Honor said anything not in strict accordance with the law, as we now declare it to be. He charged the jury as follows: “The mere fact that the defendant’s president was drinking was not sufficient, but the jury must find that he was so intoxicated that he could not understand the nature and scope of what he was doing. If the jury find from the greater weight of the testimony that the agent was drinking, it would not be sufficient to invalidate the contract, but if the jury find that the defendant’s president, at the time he signed the contract or order for the engine, was so drunk as to be incapable of knowing the effect of what he was doing, then the contract or order would not be binding upon the defendant. Whether or not he was so intoxicated as to render him incompetent to contract is a question for the jury upon all the evidence.” We think this was a clear and sufficient exposition of the law applicable to the facts of the case. What the judge said in his reference to the nature of the transaction in which the agent was engaged and its importance or magnitude … was evidently intended to point what he had already said as to the true test of mental capacity, and to impress upon them, as an essential condition of the validity of the contract, that the agent of the defendant at the time he signed the paper must have been sober enough to understand the nature of the transaction and
the effect or consequence of his act, and not that he must have been able to act with wisdom or discretion.
No error.
Case Questions
- The Court notes that the question of competency in this case is one for the jury to consider based on the evidence in the case. What type of evidence would you expect to see in a case where capacity is being challenged?
- If the Court found that the Plaintiff’s agents were too intoxicated to understand the legal consequences of the transaction, what would happen to the underlying contract in the case? Would there be damages?
- In this case, the intoxication was voluntary. Do you think that the case would have turned out differently if the intoxication was involuntary? Why or why not?
Check Your Understanding
a determination by a court that a person has the capacity to manage some but not all of his activities
confirmation of an action which was not pre-approved and may not have been authorized
