Published On: Thu, Jun 23rd, 2016

Capacity to contract: Transactions of lunatics

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Clara is a young lady who resides with her family in the same estate as D-Line Pharmacy & Stores in Port Harcourt.  Being a community pharmacy, the members of Clara’s family are regular customers of Pharmacist Donald and his staff.  It is well known that Clara has suffered from a psychiatric condition and has been admitted to a hospital for this cause in the past.

Early one morning, Clara walks into the pharmacy and requests for some antimalarial medication.  She meets Pharmacist Donald on duty and informs him that she has a fever.  She also complains of intense fatigue.  After selecting the antimalarial drug of her choice and two bottles of orange juice, she pays for them.  Pharmacist Donald adds a can of energy drink, as a gift, to help with the fatigue.

Later that afternoon, Clara returns to D-Line Pharmacy with the goods she had purchased in the morning.  This time, she claims that she is not suffering from a fever and proceeds to demand for a refund of the payment she has made.  Pharmacist Donald is shocked at this development and refuses to refund the money paid.  Instead, he insists that she will now have to pay for the energy drink he gave her, which apparently she did not return with.

Considering the subject of capacity to contract, what would be the legal position of these two parties?

As previously stated, a contract is an agreement which is binding at law.  However, even when all the ingredients of a valid contract are present, it may not be enforceable against certain categories of people like infants, lunatics, drunkards and the illiterate.

The issues to be considered in this case are:

  1. The meaning of lunacy or mental disorder.
  2. The legal position of contracts made by lunatics.
  3. The intention of the seller to enter into legal relations.


First of all, it is important to properly define a lunatic or mentally disordered person, according to the law.  In the Mental Health Act, U.K. 1959, the term “mental disorder” is very loosely expressed.  Under the Act, mental disorder is defined as “any disorder or disability of mind.”

The concept of mental disorder, as defined by the Act, does not necessarily correspond to medical categories.  However, mental disorder is thought by most psychiatrists to cover schizophrenia, anorexia nervosa, major depression, bipolar disorder and other similar illnesses, learning disability and personality disorders.

Concerning business transactions, contracts involving a lunatic or a person with mental disorder can be divided into two types: contracts for necessaries and contracts for other things.  In the case of contracts for necessaries, the person with mental disorder is bound like everyone else.  Section 2 of the Sale of Goods Act 1893 provides that where necessaries are sold and delivered to a person “who by reason of mental incapacity or drunkenness is incompetent to contract, he must pay a reasonable price therefore.” The case of Chapple v. Cooper has helped to define necessaries as “those without which an individual cannot reasonably exist.”

For cases involving contracts for other things, the guiding rules were laid down in the case of Brown v. Jodrell and further established by Melton v. Camrout.  Where goods are not necessary goods, the mentally disordered person is also bound by his contracts, unless he can show that: 1) owing to his mental condition, he did not understand what he was doing; and 2) the other party was aware of his incapacity.

In the case of Clara and D-Line Pharmacy & Stores, three separate sets of items were received by the buyer proceeding from the transaction.  The first is the antimalarial medication.  The second consists of the bottles of orange juice.  The third is a can of energy drink offered by the seller.

The first set, by definition, would be classified as necessaries, being medication required for the existence of the individual involved.  Going by the provisions of the Sale of Goods Act, necessary goods sold are to be paid for (as long as the price is reasonable) regardless of the incapacitation of the buyer.

The second set of goods, however, would be governed by different rules.  The transaction for the bottles of juice, not being necessaries, would not be as strict.  In this case, the buyer, a mentally disordered person, can be released from her obligation to pay for the goods if she can prove that: 1) she did not know what she was doing at the time of purchase; and 2) the seller was aware of her medical condition.

The third category of goods consists of the energy drink which was freely given by Pharmacist Donald on conclusion of the sales.  This introduces the issue of the intention of the seller to enter into legal relations.  In the Rhodes Case of 1889, it was declared that the obligation of the buyer (mentally incapacitated) would not arise unless it was the intention of the person supplying the goods that he should be repaid.  In other words, he must not have intended to play the role of benefactor but that of creditor.

In the light of the foregoing, Clara is bound by her contract for the purchase of antimalarial drugs (being necessaries).  The contract for the sale of orange juice is valid but voidable at her option, if she can satisfy the required conditions.  And she is under no obligation to pay for the energy drink, being a gift freely received.


Principles and cases are from Sagay: Nigerian Law of Contract.

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Capacity to contract: Transactions of lunatics