Is a contract binding if you entered into it when you were drunk?

by | Dec 15, 2019 | Business Sellers & Purchasers, Commercial Clients, Franchisors, Start-Up & Expanding Businesses, Tradie Businesses

We all know that things can seem like great ideas when you have had a drink or two!

Imagine waking up, piecing the night before together and realising that you had signed away your business or your house. However, much like getting a Tattoo requires you to be sober, so too does entering into a valid and binding legal contract.

Being a regular drinker or drug taker does not mean does not mean that you cannot enter into contracts. But you should only do so when sober.


Example Scenarios

  1. If one party contracts with a second party whilst being so drunk that they simply do not know what they are doing, and the second party was aware of this, then the contract is voidable (can be declared void) by the first party.
  2. If both parties were in that same condition and a hypothetical ‘reasonable observer’ would conclude that they were not intending to enter into a binding contract, no contract would have been formed.
  3. If both parties themselves knew that the contract was reached after a lengthy drinking bout in which both participated, then as mentioned, it is reasonable for them to conclude that no contract has been created.

Beware however as drunken people can often cleverly conceal their drunkenness from each other. If neither was aware the other was drunk, there would be no basis on which a ‘reasonable observer’ could conclude that there was no intent to create legal relations.


What Can You Do Then?

Legal advice should be sought and action taken as soon as the party realises their mistake because it is taken that the “drunkard is liable if he ratifies the contract when he becomes sober”.

Be careful what you do next as, if the drunken party affirms the contract on sobering up, for example, does not immediately return the deposit paid to them the night before or tells the other party the contract is void, they will lose the right to avoid the contract and remain liable on it.

The Courts are usually not very sympathetic to people who claim they were intoxicated when they signed a contract. Generally, a Court will only allow the contract to be voided if the other party to the contract knew about the intoxication and took advantage of the person, or if the person was somehow involuntarily drugged.

All the more reason not to enter into contracts without your lawyer present!

Looking for a commercial law firm to ask more questions? Book a free call with the team at Rise Legal today!

Helen Kay - Managing Director

Helen Kay

If you require any assistance with your business legals or any other commercial legal issue, please do not hesitate to contact me.

Typical Legal Disclaimer!…

Unfortunately, there is never a ‘one size fits all’ formula to apply. Every situation is unique and it can be tricky to wrap your head around some areas of the law. To ensure you are setting yourself and your business up for success, it is always best to consult a legal professional with expertise in the field.

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