The High Court has recently had to consider the correct test to be applied in order to decide whether a person had the necessary mental capacity to enter into a contract or to be a party to a court case.
The Judge concluded that there were five guiding principles in assessing a person’s mental capacity to enter into a contract or transaction:-
- A person needs the mental capacity to recognise the issues that must be considered, to obtain, receive, understand and retain relevant information, and to weigh the information in the balance in reaching a decision;
- A person may have capacity for one type of decision but not another;
- Capacity may vary over time and should be assessed at the specific time when the decision was made;
- The key issue is whether the person has the ability to understand the transaction, not whether he actually understood it;
- Although help might be needed to understand the transaction, this does not prevent the person having the capacity to understand it. The person needs the insight and understanding to realise that advice is needed, the ability to find and instruct an appropriate adviser, and capacity to understand and make decisions based on that advice.
It is clear therefore that although it is not necessary for a person to understand every detail of a proposed transaction, they should be able to understand the key features when explained in simple language and the alternatives to it.
The question of capacity to be involved in a court case is issue and situation specific. The test to be applied is whether a party to legal proceedings is capable of understanding, with the assistance of explanation from legal advisers and experts, the issues on which his consent or decision is likely to be necessary in the course of those proceedings.
The whole area of mental capacity is fraught with difficulty. If you have a problem that relates to capacity in any given situation, then contact Nick Lambert of Wake Smith Solicitors by email on [email protected].
