Setting aside of employment settlement agreements for incapacity

The Court of Appeal has confirmed an Employment Court decision that a Settlement Agreement entered into by an employee suffering from an incapacity could be set aside by the Court.  If an employee lacked the mental capacity to enter into an agreement because they were suffering from a mental illness then it could be set aside. There would be no agreement because the employee would lack the capacity to enter into an agreement.

However, in this case both the Employment Court and the Court of Appeal held that to be able to set aside a settlement for incapacity the other party must know of the incapacity. In this case the employer did not know of the incapacity and had no reason to suspect it.  Therefore the agreement was binding on both parties.

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