Apr 15, 2025
Lack of Competence in Norwegian Contract Law: On Incapacity and Mental Disorders as Grounds for Invalidity
In Norwegian contract law, the starting point is that any person with legal capacity can enter into binding agreements. However, the legal system has developed rules that protect individuals who do not have sufficient ability to safeguard their interests when entering into agreements. These rules are referred to as incapacity defects and constitute significant grounds for invalidity in contract law. This article addresses the two main categories: minority and mental disorder as grounds for invalidity.
Minority as a Ground for Invalidity
Who is Under Guardianship?
Under the Guardianship Act of 2010, the term "persons under guardianship" includes both:
Minors (persons under 18 years of age)
Adults who are placed under guardianship
For minors, the guardian is the person(s) with parental responsibility according to the Child Act. For adults under guardianship, a guardian is appointed in accordance with Chapter 4 of the Guardianship Act.
Legal Capacity and the Scope of Guardianship
The basic premise in the Guardianship Act is that an adult placed under guardianship retains their legal capacity. However, guardianship can, if the strict conditions of the law are met, entail a complete or partial removal of that legal capacity.
For an adult to be placed under guardianship with the removal of legal capacity, the following conditions must be met:
The person is unable to safeguard their own interests
The cause must be mental disorder, dementia, severe gambling addiction, or severely impaired health
There must be a need for guardianship
Division of Responsibilities Between Guardian and County Governor
It is the guardian and the county governor (local guardianship authority) who have the competence to enter into agreements on behalf of the person under guardianship. The main points are:
The county governor manages capital
The guardian is responsible for entering into agreements related to daily life
Minority as a Strong Ground for Invalidity
The main rule is that a person under guardianship cannot bind themselves to agreements or dispose of their assets. This is stipulated by Section 9 of the Guardianship Act for minors and Section 23 for adults who have been deprived of legal capacity.
Minority is a strong ground for invalidity. This means that the good faith of the contracting party does not protect against invalidity – the agreement becomes invalid even if the contracting party neither knew nor ought to have known of the minority.
An important exception to the main rule of strong invalidity is that the minor is considered authorized to dispose of cash they have in their possession. The condition for the contracting party to acquire rights in such cases is that there is no basis for criticism against them.
Exceptions to the Main Rule of Minority
The Guardianship Act contains several important exceptions from the principle that minors cannot enter into agreements on their own:
Self-acquisition: A minor may generally dispose of assets earned through their own work after reaching the age of 15 or assets given for their own use.
Employment Contracts: A minor over 15 years of age can enter into employment contracts themselves. The guardian cannot enter into employment contracts on behalf of the minor.
Own Household: A minor with their own household can make arrangements common in a household, except for entering into a lease agreement for housing.
Business Activity: A minor who is 15 years of age can, with the guardian's and county governor's permission, conduct certain business activities independently.
Similar rules apply to adults who have been deprived of legal capacity.
Legal Effects of Invalidity and Approval
For an invalid agreement, the following rules apply:
Both the minor and the contracting party have an unconditional obligation to return what they have received
Upon destruction of received performance, the contracting party is fully liable for compensation
The minor is only obliged to compensate to the extent that the performance has benefited them
This settlement is more favorable for the minor and less favorable for the contracting party compared to other invalidity rules.
A disposition that is initially invalid can be approved (ratified) by the guardian, the county governor, or the minor themselves when they become an adult. An approved disposition is effective from the time it was made.
The right to unilateral approval does not apply to a contracting party who was reasonably in good faith at the time of entering into the agreement. The contracting party can declare themselves unbound in such cases unless the agreement has already been fulfilled with binding effect for the minor.
Mental Disorder as a Ground for Invalidity
The Main Rule and Its Justification
It is an unwritten principle in Norwegian law that a person with a severe mental disorder or profound intellectual disability is not bound by their legal acts if these are motivated by the mental disorder.
A person with a mental disorder is not automatically considered a minor or under guardianship. The rules on mental disorder as a ground for invalidity, therefore, primarily apply when the person is not under guardianship but can also complement the rules on minority.
Today, the rule is justified by the need to protect individuals with severe mental disorders or profound intellectual disabilities from themselves.
The Causal Principle
A disposition is not automatically invalid because it is made by a person with a mental disorder. Case law has established that invalidity requires that the mental defect motivated the disposition - the so-called causal principle (cf. several Supreme Court decisions, most recently Rt 2005 p. 878).
This means that a comprehensive evaluation must be conducted of:
The nature of the disorder
The circumstances surrounding the agreement
The content of the disposition
Subsequent conditions
If the mental disorder is deemed significant after such an evaluation, the disposition becomes invalid regardless of whether the contracting party knew or should have understood that the disposition was influenced by the mental disorder.
The Fundamental Requirement of Mental Impairment
For the rule to apply, there must be:
Mental disorder (psychosis), where the person's perception of reality is disturbed, or
Profound intellectual disability (IQ under 50-55, corresponding to the developmental stage of an eight-year-old)
It is debated whether other mental states such as unconsciousness, severe neurotic states, or intoxication are covered by the rule. The Supreme Court has, by implication, assumed that a state of dementia can, in certain cases, be so severe that it must be equated with a severe mental disorder.
Legal Effects of Invalidity
For invalidity resulting from mental disorder, the main rule is that the parties are obliged to restore what was received or compensate the value. It is debated whether the obligation of the mentally ill to restore should be limited to the enrichment in accordance with the principle in Section 15, first paragraph of the Guardianship Act.
A good solution could be to apply the principle in the Guardianship Act analogically when circumstances warrant it, especially in cases where the mentally ill would otherwise end up in the same economic position as if the agreement were valid.
Summary
Incapacity defects in the form of minority and mental disorder represent significant limitations in contract law. Both are strong grounds for invalidity that can be invoked even against a good-faith contracting party. While minority as a ground for invalidity is regulated by the Guardianship Act, mental disorder as a ground for invalidity has been developed through case law.
The rules illustrate that freedom of contract in Norwegian law is conditioned upon a certain capacity for judgment by the person who is to be committed. At the same time, the various exceptions and nuances in the legal framework demonstrate that considerations of autonomy and freedom of action are also valued, even for individuals with reduced ability to safeguard their own interests.
