Can a Drunk Person Enter Into a Contract?

• Publication year: 2017
• Author: Posted on August 18, 2017 by Julie Brook, Esq.

Can a Drunk Person Enter Into a Contract?

Posted on August 18, 2017 by Julie Brook, Esq.

Julie Brook, Esq. has been with CEB since 1995. Before that, she practiced civil litigation with Landels, Ripley & Diamond in San Francisco. She is a volunteer arbitrator with San Francisco's Department of Human Services.

This material is excerpted from the CEBblog™

Copyright 2017 by the Regents of the University of California. Reproduced with permission of Continuing Education of the Bar - California. (For information about CEB publications, telephone toll free 1-800-CEB-3444 or visit our Web site, CEB.com).

People who are intoxicated often make bad decisions, including signing contracts they may regret when the hangover kicks in. Can they simply claim intoxication and get out of the deal? The short answer: maybe.

One of the four essential elements to the existence of a contract is the capacity of all parties to enter into the contract. Under California law, a "person entirely without understanding" has no capacity to contract. See CC §§38-41. A contract entered into by someone entirely without understanding is void, not merely voidable. Gibson v Westoby (1953) 115 CA2d 273, 276. By contrast, a contract entered into by someone "of unsound mind, but not entirely without understanding" before being adjudged an incompetent is voidable and subject to rescission and return of consideration. CC §39.

Intoxication resulting from the use of alcohol or drugs is a special form of mental incapacity. Historically, courts haven't looked favorably on claims of intoxication as a defense to contract enforcement, viewing this conduct as a form of voluntary disablement by the affected party that carries with it an assumption of the risk. See Swan v Talbot (1907) 152 C 142, 145.

But courts may refuse to enforce contracts entered into by intoxicated persons as a matter of equity when the consideration given by the other party is grossly inadequate, or may hold that contracts made by intoxicated persons are voidable...