In Kennedy v Locker  NSWDC 56 the plaintiff lent $300,000 to the defendant which was to be repaid with interest. The oral agreement was recorded in a document signed by the defendant. Following a failure to repay the full amount, the defendant argued that he lacked capacity to enter into the contract due to his habit of binge drinking. He stated he had no memory of signing the document, and that if he did sign it he must have been drunk at the time.
The Court held that for lack of capacity to arise, the defendant would need to have been so drunk that he lacked capacity both when the oral agreement was made and when the document was signed. Also, the drunken condition must have been known by the other party at the time. There was no evidence that the defendant was drunk at the time or that the plaintiff was aware of any drunkenness, especially since the defendant typed the document and the plaintiff regularly told him only to speak when he was sober. The defendant’s inability to recall signing the document was not evidence that he was drunk. He likely just had no memory of it due to his binge drinking. The Court ordered the defendant to pay the amount owing. Read full case.