When Is A Person Mentally Capable Of Entering A Contract?

There is currently, and rightly, much focus on mental health problems and illnesses such as Alzheimer's disease and other cognitive disorders.

The English High Court, in the case of Fehily v Atkinson [2016] EWHC 3069 (Ch), has provided a useful reminder of the test to apply in determining whether a person has mental capacity to enter a transaction.

If a contract is entered into for consideration by a person without the mental capacity to understand the transaction, it is not void. It is valid and binding unless the other contracting party was aware of the incapacity (or ought to have been aware), in which case the contract is voidable and the incapacitated person has the right to rescind the contract. (In the case of a voluntary disposition, such as a gift or a will, or a power of attorney, the same will be void if the person entering into it lacks the mental capacity).