where a person in good faith contracts with another, without notice of any such insanity as affects his capacity to contract, the ordinary presumption of sanity prevails, and the contract is valid, unless it appears that the consideration is grossly inadequate and unfair to the lunatic. This rule does not apply to contracts with a person who has been declared judicially to be of unsound mind and for whom a committee has been appointed to care for his interests; such contracts are invalid and cannot be enforced if disaffirmed or avoided.97 And conversely it has been frequently declared that if the insanity of a party to a contract is known, the contract is absolutely void.9

98

c. Contracts for necessaries.- Where a contract of an insane person was for necessaries supplied to him or his family, in good faith and suitable to their condition in life, it is valid and binding.99 The fact that a person dealing with the insane person had

179,

quiry by which he might, if reasonably lunacy or drunkenness, is not capable prudent, have learned that fact. Lin- of understanding its terms or forming coln v. Buckmaster, 32 Vt. 652. See a rational judgment of its effects on also Rhoades v. Fuller, 139 Mo. his interests, is not void, but only 40 S. W. 760. voidable at his option; and this only if his state is known to the other party."

96. Leake's Law of Contracts ed.), p. 501.

(3d

General rule. The general rule that controls all cases of this kind is, that the contract of a lunatic made before office found will not be set aside where it is entered into in good faith by the other party, without fraud or imposition, for a valuable consideration, without notice of the infirmity, and has been so far executed that the parties cannot be restored to their original position, or there has been restoration, or offer to restore, or a refusal to restore. Note to 71 Am. St. Rep. 428, citing More v. Calkins, 85 Cal. 177, 24 Pac. 729; Strodder v. So. Granite Co., 99 Ga. 595, 27 S. E. 174; Ronan v. Bluhm, 173 Ill. 277, 50 N. E. 694; McCormick v. Littler, 85 Ill. 62, 28 Am. Rep. 610; Abbott v. Creal, 56 Iowa, 175, 9 N. W. 115; Alexander v. Haskins, 68 Iowa, 73, 25 N. W. 935; Harrison v. Otley, 101 Iowa, 652, 70 N. W. 724; Youngs v. Stephens, 48 N. H. 133, 97 Am. Dec. 592; Bank v. Sneed, 97 Tenn. 120, 36 S. W. 716, 56 Am. St. Rep. 788. See also Knight v. Knight (Ala.), 21 South. 407.

Pollock, in his work on Contracts (p. 89). says: "The rule is now settled, however, that the contract of a lunatic or drunken man, who, by reason of

Restoration of consideration.-If the contract be fair and bona fide, and there is no element of fraud or imposition in it, and if the other party does not know of the insanity, and the parties cannot be placed in the position they occupied before the contract was executed by the same party, there is no reason why the lunatic should be allowed to retain what he has acquired under the contract, and at the same time be permitted to escape from all liability arising out of it. Flach v. Gottschalk Co., 88 Md. 368, 41 Atl. 908, 71 Am. St. Rep. 418. See also Morris v. Great Northern Ry. Co., 67 Minn. 74, 69 N. W. 628.

97. Hughes v. Jones, 116 N. Y. 67, 22 N. E. 446, 15 Am. St. Rep. 386; Rannels v. Gerner, 80 Mo. 474; Lamoreaux v. Crosby, 2 Paige (N. Y.), 422, 22 Am. Dec. 655; Fitzhugh v. Wilcox, 12 Barb. (N. Y.) 235; Wadsworth v. Sharpstein, 8 N. Y. 388, 59 Am. Dec. 499. But see Hosler v. Beard, 54 Ohio St. 398, 43 N. E. 1040, 56 Am. St. Rep. 720, 35 L. R. A. 161.

98. Helberg v. Schuman, 150 Ill. 12, 37 N. E. 99, 41 Am. St. Rep. 339; Fecel v. Guinault, 32 La. Ann. 91.

99. Fitzgerald v. Reed, 17 Miss. 94;

knowledge of his mental unsoundness, will not of itself vitiate a contract for necessaries, where it appears that they are furnished in good faith.1 It is now well established that the executed contract of a non compos mentis for necessaries bona fide supplied stands on the footing of an infant's contract for necessaries.2 But where a contract, even for necessaries, is unexecuted, it cannot be enforced because it wants the essential properties of a legal contract.3

d. Bills and notes by persons of unsound mind. A person of unsound mind, being incapable of contracting, or of doing any other valid and binding act, will be allowed to plead his disability in an action brought against him upon a promissory note. Textwriters have frequently declared that no matter though the transaction be free from all imputation of unfairness, an insane person cannot bind himself or his estate by a promissory note or bill of exchange. Thus, an insane man cannot make a valid pledge of a promissory note, even when the pledgee is ignorant of his infirmity, and practices no sort of management in obtaining the security. It has been frequently held that a note given for necessaries by an insane person is invalid, although in such a case the person who furnished the necessaries may recover therefor from the estate of the insane person." This is not by any means a

5

Richardson v. Strong, 35 N. C. 106, 55 Am. Dec. 430; Stannard v. Burn's Admr., 63 Vt. 244, 22 Atl. 460; Manghan v. Burn's Estate, 64 Vt. 316, 23 Atl. 583. See Reando v. Misplay, 90 Mo. 251, 2 S. W. 405, 59 Am. Rep. 13. The law implies a contract by an insane person to pay for necessaries furnished him in good faith. Sceva v. True, 33 N. H. 627; Borum v. Bell (Ala.), 31 South. 454.

1. Buswell on Insanity, § 279. 2. La Rue v. Gilkyson, 4 Pa.

375.

St.

3. Edwards on Bills and Promissory Notes, p. 63.

4. Mitchell v. Kingman, 5 Pick. (Mass.) 431.

5. Edwards on Bills and Promissory Notes, p. 63. See also Taylor v. Dudley, 35 Ky. 308; Schmidt v. Ittman, 46 La. Ann. 888, 15 So. 310. The mental incapacity of the maker of a note is, prima facie, a complete defense to an action on the note. Hosler v. Beard, 54 Ohio St. 398, 43 N. E. 1040, 56 Am. St. Rep. 720, 35 L. R. A.

161. In the case of McKee v. Ward, 18 Ky. L. Rep. 987, 38 S. W. 704, it was held that a note given by an insane person for services performed by an attorney in a proceeding for the appointment of a committee is not enforceable as a contract.

6. Seaver v. Phelps, 11 Pick. (Mass.) 304; Van Patten v. Beals, 46 Iowa, 62.

7. Davis v. Tarver, 65 Ala. 98. In this case the court said: "The note may have been invalid, because of the incapacity of the intestate to contract at the time of its execution; yet, if its consideration was necessaries furnished the intestate, a legal liability would rest on him to pay for them, which would be a debt chargeable to his estate." Citing Ex p. Northington, 37 Ala. 496; Westmoreland v. Davis, 1 Ala. 299; Harris v. Davis. 1 Ala. 259. And in the case of Milligan v. Pollard, 112 Ala. 465, 20 South. 620, it was held that a note in the hands of the payee, executed by an insane person, though given for necessaries, and without the payee's being aware of his

universal rule. Many cases may be cited upholding a contrary doctrine. Indeed at the present time the doctrine supported by the weight of authority would seem to be that the note or other contract of an insane person is valid and binding when the note was obtained or the contract entered into in good faith, in ignorance of the want of capacity of the insane person to contract, and for a full and adequate consideration of money paid, or property delivered to him."

e. Indorsement by insane person; rights of innocent holder.For the same reason and in recognition of the same rule as in the case of the making of a promissory note by an insane person, an

insanity, is not binding on his estate. See also McKee v. Purnell, 18 Ky. L. Rep. 879.

8. Note for necessaries held valid. -A person who had been adjudged insane, but over whom no conservator had been appointed, and who continued in the management of his business, with nothing in his appearance to indicate his mental unsoundness, purchased goods necessary and useful in his business, at a reasonable price, and executed his note therefor. The seller had no knowledge of his having been adjudged insane, or of his being a lunatic. It was held that the purchaser was liable on the note, and that payment of a judgment recovered therefor would not be enjoined. McCormick v. Littler, 85 Ill. 62, 28 Am. Rep. 610. See also Allen v. Berryhill, 27 Iowa, 534, in which the court says: "Justice and sound policy concur in requiring this court to hold, as it does, that where a contract has been entered into (under circumstances which would ordinarily make it binding) by a sane man with one who is insane, and that contract has been adopted, and is sought to be enforced by the representatives of the latter, it is no defense to the sane party to show that the other party was non compos mentis at the time the contract was made."

he was found to be a lunatic, and to have been a lunatic from a time anterior to the making of the note. The plaintiff had no notice of defendant's lunacy. It was held that the defendant's insanity was not a defense to an action on the note. But under a Georgia statute (Civ. Code, § 3652), which provides that an insane person cannot contract, it was held that a bank was liable in paying a check of a person who had been judicially declared to be insane, in another State, and which fact was unknown to the bank. American Trust & Banking Co. v. Boone, 102 Ga. 202, 29 S. E. 182, 40 L. R. A. 250.

Statement of rule. The general rule is that contracts with lunatics and insane persons are invalid, subject to the qualification that a contract made in good faith with a lunatic for a full consideration which has been executed without knowledge of the insanity, or such information as would lead a prudent person to the belief of the incapacity, will be sustained. Matthiesen v. McMahon, 38 N. J. L. 536. See also Yanger v. Skinner, 14 N. J. Eq. 389; Youngs v. Stevens, 48 N. H. 133.

As a general rule, the promissory note of a person non compos mentis is invalid; but the rule is subject to 9. Notice of insanity. In the case the qualification that, when such a of Lancaster County Bank v. Moore, note is given for necessaries or for 78 Pa. St. 407, 21 Am. Rep. 24, it ap- other adequate consideration of benefit, peared that the defendant, desiring to furnished to the maker in good faith, borrow money, gave S. his note, which without knowledge of his unsound S. procured to be discounted at plain- mental condition, it may be enforced tiff's bank, and the money deposited to the extent of the value of the conto the defendant's order. Afterward sideration so furnished. Hosler v. a petition de lunatico inquirendo was Beard, 54 Ohio St. 398, 43 N. E. 1040, presented against the defendant, and 56 Am. St. Rep. 720, 35 L. R. A. 161.

indorsement thereof by such a person is invalid and does not convey a legal title to the note. The principle applicable to commercial paper, that when in the hands of a bona fide holder for value, the consideration cannot be inquired into, does not apply to cases of commercial paper made by insane persons.10 An indorsement of a promissory note by the payee is a contract which an insane person cannot make, because he lacks the power to give that consent which the contract requires. It has been held, therefore, that the insanity of the indorser may be pleaded by the maker of a note in an action brought against him by the indorsee.12 But the doctrine has also been declared that the contract of indorsement by an insane person is voidable and not void, and such contract is binding upon all prior parties to the instrument who are of sound mind until it is avoided by the insane person or his guardian or legal representatives. 13 No action will lie on an ac

10. Moore v. Herschey, 90 Pa. St. 196; Hosler v. Beard, 54 Ohio St. 398, 42 N. E. 1040, 56 Am. St. Rep. 720, 35 L. R. A. 161.

11. Burke v. Allen, 29 N. H. 106, 61 Am. Dec. 642.

12. Defense of insanity of indorser. -The leading case in favor of the sufficiency of such a defense is Burke v. Allen, 29 N. H. 106, 61 Am. Dec. 642, in which the court says: "An insane person understands not the effect of indorsing the note, nor whether he is receiving a valuable consideration for the same or not. He may not even know that he is parting with his property; and an indorsee who should take a note under such circumstances would be guilty of fraud. If at the time the note is given the payee should be insane, and the maker should be aware of the fact, he would be bound in equity and good conscience not to pay it to an indorsee till he had ascertained that he was the rightful and legal holder. Or if when it is given he should not be aware of the existence of the insanity, or if after it should be given the payee should become insane, the reason is equally strong why he should not pay it without due inquiry, if he had notice of the insanity. And if, under such circumstances, he ought not to be protected in paying the note to the indorsee, then it would seem to follow as a legitimate consequence that he should be permitted to show the existence of insanity at the time of the indorsement,

.

So if the maker cannot show insanity in the indorser at the time of the transfer, in defense of a suit by the indorsee, then insanity cannot be shown by the indorser or his representatives as a reason why the note should be paid to him instead of the indorsee, and the act of indorsement would be made legal, and the non compos would be unprotected from the effects of his indorsement." See also Hannahs v. Sheldon, 20 Mich. 278, where it was held that evidence that the payee of a negotiable instrument, payable to order, was insane during all the time from the issuing of the paper until the death of the payee, is admissible to disprove the validity of the transfer. See also Jeneson v. Jeneson, 66 Ill. 259.

13. Carrier v. Sears, 4 Allen (Mass.), 336, 81 Am. Dec. 707, which was an action by an indorsee of a promissory note against the maker, and it was held that it was no defense to prove that the plaintiff procured the indorsement by undue influence from the payee, when he was of unsound mind and incapable of making a valid in

commodation indorsement of a promissory note by a lunatic, even in favor of an innocent holder.14

§ 24. Intoxicated persons.

a. Contracts generally.— A person who has deprived himself of reason by intoxication is in a condition, as regards the capacity of contracting, analogous to that of mental insanity, and the same rules may in general be applied; he is "non compos mentis by his own act." 15 If a person enter into an agreement with another, knowing him to be then so far intoxicated as to be incapable of understanding the matter of the agreement, the contract is voidable by the party so incapacitated.16 It must appear, however, in order to avoid a contract on the ground of intoxication, that it is such as deprives the party of his reason and understanding, or is brought about by the party seeking to take advantage of such intoxication, and for the purpose of so doing.17 Where a person has been judicially declared an habitual drunkard he cannot enter into a contract which will bind his estate,18 except for necessaries. 19

b. Promissory notes and bills of exchange.- A note or bill made or drawn by a person while so intoxicated as to be deprived of his understanding cannot be enforced as against him by the payee.20

dorsement, if the payee or his legal representatives have never disaffirmed it; or that the payee, for a valuable consideration, had agreed to give up the note at his death to the maker, reserving meanwhile the right to collect the interest thereon.

It is a general rule that the contract of an insane person is voidable only at the election of the insane person. Atwell v. Jenkins, 163 Mass. 362, 40 N. E. 178, 28 L. R. A. 694; Allen v. Berryhill, 27 Iowa, 534, 1 Am. Rep. 309; Warfield v. Warfield, 76 Iowa, 633, 41 N. W. 383; Arnous v. Lesassier, 10 La. 592, 29 Am. Dec. 470; Ingraham v. Baldwin, 9 N. Y. 45.

14. Wirebach v. Easton Bank, 97 Pa. St. 543, 39 Am. Rep. 821.

15. 4 Coke's Litt. 124b; Leake's Law of Contracts (3d ed.), p. 505.

18. Gore v. Gibson, 13 Mees. & W. (Eng.) 623; Butler v. Mulvihill, 1 Bligh (Eng.), 137; Pitt v. Smith, 3 Campb. (Eng.) 33; Hamilton v. Grainger, 5 H. & N. (Eng.) 40; Bowen v. Clark, Fed. Cas. No. 1,721; Cummings v. Henry, 10 Ind. 109; Joest v. Williams, 42 Ind. 565, 13 Am. Rep.

;

377; English v. Young, 49 Ky. 141 Broadwater v. Darne, 10 Mo. 277; Prentice v. Achorn, 2 Paige (N. Y.), 30; Hyman v. Moore, 48 N. C. 416; Bush v. Breining, 113 Pa. St. 310, 6 Atl. 86, 57 Am. Dec. 469.

17. Wilcox v. Jackson, 51 Iowa, 208, 1 N. W. 513; Jones v. Fritchy, 39 Md. 258; Curtis v. Hall, 4 N. J. L. 412; Burroughs v. Richman, 13 N. J. L. 233, 23 Am. Dec. 717; Birdsong v. Birdsong, 39 Tenn. 289. A drunkard is incompetent to contract only on proof that, at the time of making the contract, his understanding was clouded, or reason dethroned, by actual intoxication. Wright v. Fisher, 65 Mich. 275, 32 N. W. 605; Reynolds v. Dechaums, 24 Tex. 174.

18. Devin v. Scott, 34 Ind. 67; L'Amoureux v. Crosby, 2 Paige (N. Y.), 422, 22 Am. Dec. 655; Imhoff v. Witmer's Admr., 31 Pa. St. 243.

19. Darby v. Cabanne, 1 Mo. App. 126; Brockway v. Jewell, 52 Ohio St. 187, 39 N. E. 470.

20. Taylor v. Purcell, 60 Ark. 606; Reinskopf v. Rogge, 37 Ind. 207; Newell v. Fisher, 19 Miss. 431, 49 Am.