If a person enters into a transaction or executes a document at a time when they lack the capacity to understand the nature or effect of the document, the transaction entered into or document executed is not effective at law. Claims for compensatory damages or restitution not available against a person under incapacity if the claim would result in indirect enforcement of the contract.[1] Issues of capacity are distinct from a plea of non est factum but the two are not incompatible.[2]
Where a person is incapacitated, only a litigation guardian can start or defend court proceedings.[3] That rule is not affected by either the Powers of Attorney Act or Guardianship and Administration Act.[4] A person cannot be a litigation guardian if they an interest in the proceeding adverse to the interest of the person under a legal incapacity, but being an attorney or beneficiary of the principal’s will is not sufficient to allege any such adverse interest.[5]
(a) Minors
Minors lack capacity, though the age they attain capacity has differed. In 1881 in New South Wales a contract by “an infant under the age of 21 years” was held to be unenforceable, with a similar finding in Victoria soon after.[6] In Queensland, the age of majority is 18 years pursuant to section 17 of the Law Reform Act 1995 (Qld). Similarly, “adult” is defined in Schedule 1 to the Acts Interpretation Act as an individual who is 18 or more. The cases on capacity of minors generally relate to older children. At common law it has been doubted whether a very young child has the mental capacity to enter even those limited contracts which would otherwise be validated by statute.[7]
The general rule is that a contract entered by minor is voidable. Two exceptions apply. First, a contract is binding on both parties if it is for the supply of necessities and the terms are not harsh or oppressive. This exception is codified in Queensland in section 5 of the Sale of Goods Act 1896 (Qld) which imposes an obligation on a person lacking in capacity to pay a “reasonable price” when contracting for necessaries. Notably, in Sultman v Bond it was held that a contract to build a house for a minor about to be married was not a contract for necessaries.[8]
The second exception has been that a minor has been held to be bound by a training or employment contract that is for their benefit. As a matter of Queensland law the general rule is the children can start work from 13 years of age, and 11 years of age for delivery work, but working hours are restricted.[9] Children at work must be able to contact their parents. [10]
It is not unusual for documents purporting to be binding on child to be signed on their behalf by a parent or guardian, and certainly there is a general belief that parents and guardians can do so. Parental or guardian consent forms often seek to enliven the Civil Liability Act exclusions of liability for inherent or obvious risks for dangerous recreational activities.[11] The better view is that such waivers signed by a parent or guardian cannot be binding on a child in contract.[12] Beyond contract, whether a notice or warning of a risk given to a parent or guardian is sufficient to justify a finding that the risk was obvious to the injured child is doubtful.[13] However, in Sanders v Mount Isa Mines Limited obiter comments suggested that such a notice would be sufficient.[14] A non-contractual notice of risk also benefits from not being subject to statutory restrictions on contracting out of liability.
(b) Adults
All adults in Queensland are presumed to have decision-making capacity.[15] Determining capacity is not simply a matter of assessing the capability of the person to give evidence and answer questions and must be considered in the light of expert evidence.[16] An adult being an undischarged bankrupt does not lose capacity because of that fact and can succeed in obtaining specific performance even if their status as an undischarged bankrupt was not disclosed.[17]
Publication date: 5 January 2024. If referencing this page, please see our citation guide.
[1] Ford by his Tutor Beatrice Ann Watkinson v Perpetual Trustees Victoria Limited [2009] NSWCA 186, [131], citing R Leslie Ltd v Sheill [1914] UKLawRpKQB 92; (1914) 3 KB 607.
[2] Ford n 7, [71].
[3] Uniform Civil Procedure Rules 1999 (Qld), Rule 93.
[4] Powers of Attorney Act 1998 (Qld), s 109; Guardianship and Administration Act 2000 (Qld), s 239.
[5] Ibid, r. 94; Watkins v Christian [2009] QCA 101.
[6] Dillon v Wood (1881) 2 NSWR 298; Rubinovich v Emmett and Others [1901] VicLawRp 80; (1901) 27 VLR 265.
[7] HG Beale (ed), Chitty on Contracts, (Sweet & Maxwell, 30th Ed, 2008), Vol 1, 8-003.
[8] Sultman v Bond [1956] St R Qd 180 per Stanley J.
[9] Child Employment Regulation 2016 (Qld), reg. 4, 6-9.
[10] Child Employment Regulation, n 6, reg 14.
[11] Civil Liability Act 2003 (Qld), ss 16, 19.
[12] Natasha Schot, “Negligent Liability in Sport” (2005) Sports Law eJournal 1.
[13] Civil Liability Act 2003 (Qld), s 13(1).
[14] Sanders v Mount Isa Mines Limited & Ors [2023] QSC 188, [1311]-[1321] (Williams J).
[15] Guardianship and Administration Act 2000 (Qld), s 7
[16] Re Bridges [2001] 1 Qd R 574.
[17] Dyster v Randall & Sons [1926] 1 Ch 932, 939-940; Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571.