In Glasgow City Council v Dahhan [2016] UKEAT 0024_15_1105, the EAT has confirmed that it has jurisdiction to consider an argument that a settlement agreement should be set aside on the basis that the claimant lacked the mental capacity to enter into it. Although a Scots case (the law relating to contractual capacity being different in Scotland), as Lady Wise noted: 

20. […] Once it is accepted that the analysis of Silber J in Industrious Ltd is correct to the extent that the obligation on the Tribunal when presented with a proposed settlement agreement is to consider whether it is valid, there is no sound basis for drawing a distinction between invalidity on the ground of, say, misrepresentation on the one hand and invalidity on the ground of lack of capacity to contract on the other. Both sides were agreed that the distinction between Scots and English law rendering contracts entered into through lack of capacity void in the former but voidable in the latter were not material to determination of this issue. It is of course the case that none of the decided cases have required to address the particular question of whether the Employment Tribunal has jurisdiction to set aside an agreement said to have been entered into where one party to the contract lacked legal capacity. However, I agree with the submission made by counsel for the respondent that it would be a strange, even illogical result if a Tribunal was required to decline to give effect to the contract entered into through misrepresentation that was otherwise valid but could not refuse to enforce a contract that was a nullity (at least in Scots law) from the outset