Capacity to enter into contracts of employment

Authored by Nicholas Ellery, Partner and Alannah Hogan, Lawyer, Corrs Chambers Westgarth. Updated by the LexisNexis Legal Writer team.

Parties wishing to enter into a contract of employment must have the legal capacity to do so.

There is a common law presumption that a person has the capacity to enter into a contract. Issues concerning the capacity to contract rarely arise in employment. When they do, they usually concern employees who are minors, or have a mental disability, or are intoxicated.

It should also be remembered that under the common law, a person cannot contract with himself or herself. So a partner cannot be engaged as an employee by a partnership of which he is a member, and a person as an employee cannot contract with himself or herself in his or her capacity as a trustee. On partnerships, see Momentum Productions Pty Ltd v Lewarne. On trustees, see Minister Administering National Parks & Wildlife Act 1974 v Halloran.

Corporations within the meaning of the Corporations Act 2001 (Cth) are also unlikely to encounter any difficulties in entering into contracts of employment. However the situation may be more complicated in relation to some other entities (such as the Crown).

Adults

Adult natural persons have full capacity to enter into contracts of employment (as employer or employee), subject only to the rules relating to mental capacity that are discussed below. See Mental incapacity of individuals.