This section is from the book "A Commentary On The Law Of Contracts", by Francis Wharton. Also available from Amazon: A Commentary On The Law Of Contracts.
Whether parties dealing with a lunatic have notice of his lunacy is to be inferred from the circumstances of the case. The mere fact that the bargain he makes is adventurous is no such notice. "A merchant," said Chief Justice Gibson,2 " may be mad without showing it; and when such a man goes into the market, makes strange purchases, and anticipates extravagant profits, what are those who deal with him to think? To treat him as a madman would exclude every speculator from the transactions of commerce." But when the conduct of the party in question is such as would create, in the minds of reasonable men, doubts as to his sanity, this is enough to put parties dealing with him on inquiry.1-That an inquisition of lunacy is prima facie proof of insanity will be hereafter seen.2
Notice to be inferred from facts.
1 Niell v. Morley, 9 Ves. 478 ; Stock-ley v. Stockley, 1 Ves. & B. 23 ; Sen-tance v. Poole, 3 C. & P. 1; Conant v. Jackson, 16 Vt. 335 ; Somes v. Skinner, 16 Mass. 348; Caulking v. Fry, 35 Conn. 170; Johnson v. Johnson, 10 Ind. 387 ; Wray v. Wray, 32 Ind. 126 ; Jeneson v. Jeneson, 66 111. 259 ; Jacox v. Jacox, 40 Mich. 478; Neely v. Anderson, 2 Strob. Eq. 262; Hale v. Brown, 11 Ala. 87; Jones v. Perkins, 5 B. Mon. 222 ; Wilson v. Oldham, 12 B. Mon. 55 ; McFadden v. Vincent, 21. Tex. 47. The subject of undue influence is hereafter distinctively considered. Infra, sec 157 et seq. 2 Beals v. See, 10 Barr, 60.
A contract made with a lunatic in good faith, and in ignorance of his incapacity, cannot, after the property obtained has been enjoyed by the lunatic, be set aside or defeated by the latter or his representatives, unless the parties can be put in statu quo.3 Hence where a lunatic paid a deposit on a purchase of real estate from vendors who had no knowledge or notice of his lunacy, the contract being fair, he was held not entitled to recover back the sum so paid.4 Even where a house taken on lease by a lunatic was unnecessary for his use, it was held that his lunacy was no defence to an action for use and occupation, it not appearing that the plaintiff wascognizant of the lunacy and took advantage of it.5 And when by a fair bargain goods are sold to and enjoyed by one apparently sane, his lunacy cannot be set up in bar of payment of their price.6 Nor does the mere fact that the contract is improvident, so far as concerns the lunatic, vitiate it, if there was no fraud, or notice of his lunacy to the other side.7
Contracts bind when fair and beneficial.
1 Lincoln v. Buckmaster, 32 Vt. 652.
2 Infra, sec 123.
3 Beavan v. McDonnell, 9 Ex. 309 ; Molton v. Camroux, 2 Exch. 487 ; Moss v. Tribe, 3 F. & F. 297 ; McCrillis v. Bartlett, 8 N. H. 569 ; Young v. Stevens, 48 N. H. 133 ; Kendall v. May, 10 Allen, 59 ; Arnold v. Iron Works, 1 Gray, 434; Barnes v. Hathaway, 66 Barb. 452 ; Beals v. See, 10 Barr, 56 ; Lancaster Bk. v. Moore, 78 Penn. St. 407 ; Loomis v. Spencer, 2 Paige, 158; Behrens v. McKenzie, 23 Iowa, 333; Carr v. Holliday, 1 Dev. & B. 344; Carr v. Holliday, Ired. Eq. 167; Sims v. McLure, 8 Rich. Eq. 386 ; Northing-ton ex parte, 37 Ala. 496 ; Beller v. Jones, 22 Ark. 92. That such contracts may be ratified, see infra, sec 117 a.
4 Beavan v. McDonnell, 9 Exch. 309. 5 Dane p. Kirkwall, 8 C. & P. 679. 6 See Baxter v. Portsmouth, 2 C. & P. 178; 7D. & R. 617.
7 La Rue v. Gilkyson, 4 Barr, 375 ; Beals v. See, 10 Barr, 60. As tending to sustain the position in the text, see Dane v. Kirkwall, 8 C. & P. 679 ; Nelson v. Duncombe, 9 Beav. 211; Sawyer v. Lufkin, 56 Me. 308; Hallett v. Oakes, 1 Cush. 296 ; Seaver v. Phelps, 11 Pick. 304; Fitzhugh v. Wilcox, 12 Barb. 235; Riggs v. Tract Soc, 19 Hun, 481; Mutual Life Ins. Co. v. Hunt, 79 N. Y. 541; S. C. 14 Hun 169 ; Wilder v. Weakley, 34 Ind. 181; Simms v. McClure, 8 Rich. Eq. 286; Marmon v. Marmon, 40 Mich. 478; Henry v. Fine, 23 Ark. 417; Encking v. Simmons, 28 Wis. 272; Henderson v. McGregor, 30 Wis. 78 ; Fitzgerald v. Reed, 9 Sm. & M. 97. As to ratification, see infra, sec 117 a.
In Kendall v. May, 10 Allen, 59, the lunatic, who had been placed under guardianship, but whose guardian had been removed, and who had an income sec 107. It was once said in England, however, that lunacy is always a defence to an action on a specialty, no matter how fair may have been the conduct of the other party, or how beneficial the transaction to the lunatic;1 and though this is no longer the law, even as to deeds of real estate,2 it is still (1882) held, in several states in this country, that a deed by a lunatic of real estate is void even as to innocent third parties for a full consideration.3 But it is difficult to see on what this distinction rests. A person who is sane enough to make a contract without a seal is sane enough to make a contract with a seal.4 If a party dealing bona fide with a person whose insanity is latent is entitled to protection, there is no reason why he should be stripped of this protection in cases in which a seal happens to be attached to the instrument of indebtedness. If a party is sufficiently sane to bind himself by simple contracts, justice to parties dealing innocently with him as well as to himself requires that he should be regarded as sane enough to bind himself by specialties.5 And unless we hold that latent insanity, of of ten thousand dollars a year, boarded with the plaintiff. The suit was brought in part to meet the expenses of a journey which the plaintiff took with the lunatic at the latter's request. This was allowed. "If without harm," said Chapman, C. J., " he could enjoy luxuries and gratify his tastes and fancies, he ought to be indulged in such enjoyments to a reasonable extent. If he enjoyed journeys, it was proper that he should be indulged in them." And the following was adopted from Persse in re, 3 Molloy, 94: "The maintenance of a lunatic is not limited as an infant's is, within the bounds of income. It is not limited except by the fullest comforts of the lunatic. Fancied enjoyments and even harmless caprice are to be indulged up to the limits of income, and, for solid enjoyments and substantial comforts, the court will, if necessary, go beyond the limits of income."
Exception as to deeds.
1 See Baxter v. Portsmouth, 5 B. & C. 170; though see Faulder v. Silk, 3 Camp. 126.
2 Elliott v. Ince, 7 De Gr. M. & G. 485 ; aliter as to voluntary deeds, e. g., disentailing deeds.
3 Hovey v. Hobson, 53 Me. 451; Gibson v. Soper, 6 Gray, 279 ; Seaver v. Phelps, 11 Pick. 304; Van Deu-sen v. Sweet, 51 N. Y. 378; Desilver's Est., 5 Rawle, 111; Rogers v. Walker, 6 Barr, 371; Crawford v. Scovell, S. Ct. Penn. 1881 ; Fitzgerald v. Reed, 9 Sm. & M. 94 ; Farley v. Parker, 6 Oreg. 105. That deeds of insane persons are only voidable in Maryland, see Turner v. Rusk, 53 Md. 65 ; and so in New Jersey, Blakeley v. Blakeley, 33 N. J. Eq. 502.
4 Beavan v. McDonnell, 9 Exch. 309.
5 It is agreed, even by those who hold that a lunatic has no capacity to execute deeds for real estate, that such deeds may be ratified by the grantor which the other contracting party had no suspicion, does not avoid a deed, there are few titles to real estate that can be regarded as secure.1 If there be fraud (and without fraud we cannot conceive of a deed being executed by a person obviously and unquestionably insane), this, coupled with the insanity, vitiates the deed. But if a person apparently sane transacts business and executes deeds bona fide, and on a fair contract, then he must bear the loss, though a commission of lunacy, when duly perfected, may prima facie avoid subsequent deeds.2-What has been said in reference to sealed contracts by infants applies to sealed contracts by persons of impaired mind.3 A party who is competent to make an unsealed contract is competent to make a sealed contract. There is nothing in a seal which requires for its imposition any greater power or maturity of intellect than is required for the signing of a name. Nor is there anything in sealed contracts which, as a rule, requires any such increased power or maturity. As things now stand, unsealed contracts (e. g., negotiable paper and brokers' memoranda) affect the rights of parties at least as seriously as do sealed contracts. The distinction, in the present relation, is so unreasonable that it cannot be expected to linger much longer in our reports. The true rule is that "A voidable deed is capable of ratification, and if a grantor, when insane, makes a deed, and should afterwards in a lucid interval, well understanding the nature of the instrument, ratify and adopt it as his deed, as by receiving the purchase-money due under it, this would give effect to it and render it valid in the hands of the grantee."4 And in respect when of sound mind, or during a lucid interval. Allis v. Billings, 6 Met. 415 ; Arnold v. Iron Works, 1 Gray, 434; Gibson v. Soper, 6 Gray, 279 ; Howe v. Howe, 99 Mass. 88; Trnnkey, J., Crawford v. Scovell, ut supra; Key v. Davis, 1 Md. 82; Chew v. Bank, 14 Md. 229.
1 See Campbell v. Hooper, 3 Sm. & G. 153 ; Matthews v. Baxter, L. R. 8 Ex. 132 ; Allis v. Billings, 6 Mete. 415 ; Ingraham v. Baldwin, 5 Selden, 45 ; Desilver's Est., 5 Rawle, 111; Bensell v. Chancellor, 5 Whart. 371; Miller v. Craig, 36 111. 109; Somers v. Pum-phrey, 24 Ind. 231. That mental debility does not avoid deed, see Dennett v. Dennett, 44 N. H. 531.
2 Eaton v. Eaton, 37 N. J. L. 108 ; Rusk v. Fenton, 14 Bush, 490 ; Scan-Ian v. Cobb, 85 111. 296; Nichol v. Thomas, 53 Ind. 42 ; Freed v. Brown, 55 Ind. 310 ; infra, sec 123.
3 Supra, sec 38.
4 Allis v. Billings, 6 Met. 415; adopted in Blakeley v. Blakeley, 33 to persons whose insanity is latent, and who possess at the time of the transaction a contracting mind, contracts by specialty should be placed under the same rule as parol contracts.1 When advantage has been taken of mental incapacity, they should be set aside. When no such advantage has been taken, but the transaction was fair and reasonable, it should be sustained.2.
 
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