Blomley v Ryan (1956): A Case Summary

Case name & citation: Blomley v Ryan (1956) 99 CLR 362; [1956] HCA 81

The concerned Court: High Court of Australia
Decided on: 28 Mar 1956
The bench of judges: McTiernan and Fullagar JJ; Kitto J dissenting
Area of law: Unconscionable bargain; Capacity to contract

Blomley v Ryan (1956) is a contract law case concerning a sale transaction of land. Here, a contract was signed under the influence of alcohol. The question was whether it could be set aside for incapacity to contract.

Table of Contents

Facts of Blomley v Ryan

In 1952, Blomley’s father approached Ryan to buy his grazing property “Woorah” in New South Wales. Ryan declined to sell the property to Blomley. On several occasions, he responded that he would not be interested in selling the property soon.

Nevertheless, on 21 April 1953, Ryan signed a contract to sell his property and some chattels to Blomley for £25,000. The price was highly undervalued as compared to the prevailing market price. At the time of signing, Ryan who was 78 years old was suffering from prolonged and excessive consumption of alcohol. He had been on a drinking binge for several days. The persons present to effect the agreement (Blomley’s father, an agent, etc.) knew that he was intoxicated but still proceeded.

Later Ryan sought legal advice and decided not to complete the sale.

Blomley commenced legal proceedings against Ryan and sought specific performance of the contract in the Supreme Court of New South Wales.

The trial judge decided in favour of Ryan and Blomley appealed to the High Court.

Issue that arose

Could the contract of sale be set aside as Ryan was intoxicated at the time and did not have the mental capacity to understand the terms of the contract?

Judgment of the Court in Blomley v Ryan

The majority of the High Court upheld the trial judge’s decision in favour of Ryan.

Though Ryan was not permanently lacking in contractual capacity due to his old age and drinking habits, at the time of the agreement, he was not in a position to make a rational decision.

The Court held that since Ryan was intoxicated and significantly influenced by alcohol at the time of signing, he couldn’t understand the contract’s nature or effect and Blomley and others were aware of this. They took advantage of Ryan’s condition to obtain his consent. Hence, the contract was invalidated on account of unconscionable conduct and was not enforceable.

Ryan was not required to fulfill his obligations under the contract. He did not have the capacity to understand the contract and Blomley took advantage of his condition.

Quote

“The circumstances adversely affecting a party, which may induce a court of equity either to refuse its aid or to set a transaction aside, are of great variety and can hardly be satisfactorily classified. Among them are poverty or need of any kind, sickness, age, sex, infirmity of body or mind, drunkenness, illiteracy or lack of education, lack of assistance or explanation where assistance or explanation is necessary.”

(Fullagar J at 405)

Significance

This case established that to void a contract due to intoxication, one must prove that the person was not capable of understanding the contract’s nature at the time of signing, and the other party was or should have been aware of this incapacity.

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