International journal of law and psychiatry
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Int J Law Psychiatry · Mar 2011
Mortgages, seniors and the common law contractual doctrine of mental incapacity in Australia.
Seniors in Australia are being called upon to mortgage their most precious economic asset, the family home. They may be asked to guarantee the liabilities of other family members by providing a mortgage-based guarantee or they may decide to enter into a reverse mortgage to supplement financially their savings and pensions. As the family home is the single most valuable asset for most older Australians, the creation of any obligations in regard to it ought to be undertaken with care and vigilance. ⋯ Therefore, Australian litigators and courts alike have sought to deal with mental incapacity issues in the contractual context by using and modifying other doctrines (such as non est factum, undue influence and unconscionable dealing) in which the issue of capacity may be incorporated, but where mental incapacity need not be the sole or primary focus. While this had led to greater success for mortgagors, this has been at the expense of the common law doctrine. The article concludes by offering some suggestions as to how the doctrine may be modernized and mental capacity dealt with in a way both to empower competent seniors and protect those vulnerable seniors suffering cognitive impairment.