Home | Cases | Hart v O'Connor

 

Key information

Court
Privy Council

Issues
Capacity

AustraliaHart v O'Connor

[1985] 1 AC 1000

 

Facts

Vendor sold trust property (a farm) to Hart. Vendor was 83 and of unsound mind, but Hart did not know this and was fair in his negotiations with Vendor’s solicitors.  Hart occupied and improved the land.  When one of the Vendor’s brothers (O’Connor) took over as trustee of the estate he sought to set aside the contract. 

Lord Brightman for the Board

The Vendor clearly lacked contractual capacity. They accepted the principle that a contract made by a party of unsound mind – but who appears to be of sound mind – with another party (having no knowledge of the unsoundness) is valid.  There is no unfairness that can be imputed to the party having no knowledge of the other’s incapacity.

… in the opinion of their Lordships, the validity of a contract entered into by a lunatic who is ostensibly sane is to be judged by the same standards as a contract by a person of sound mind, and is not voidable by the lunatic or his representatives by reason of "unfairness" unless such unfairness amounts to equitable fraud which would have enabled the complaining party to avoid the contract even if he had been sane.

There was no equitable fraud here.  The Court also noted that if a person lacking mental capacity subsequently regains capacity (even temporarily) they may ratify a contract entered into when insane.

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