Whenever a principal becomes insane, the authority of the agent is at an end and a third person dealing with the agent with notice of the principal's insanity could not hold the principal's estate on the contract. Adjudication of insanity, by judicial action, will be regarded as notice, to all persons the same as if they had had express notice, of the fact given them. The insanity of the agent would disqualify him, and would ipso facto, terminate the agency.26

The authority of the agent comes from the principal, when the source of authority is no longer capable of giving forth the authority under which alone the agent binds the principal, the agent is without power to continue as agent, even for the accomplishment of a single transaction more, and this is true even though the agency has been in existence for a long period.27 The principal being insane could not bind himself by any act he might perform, and being incompetent and disqualified to act, the agent's act for him thereafter is not his act. The insanity, however, must be of such a kind as to incapacitate the principal from doing the act himself.28 A person may be considered of sound mind for certain purposes, and for other purposes, of unsound mind. Where the agent is insane, and the nature of his insanity is such that one could not easily perceive the same, and where a third person deals with the agent in good faith, and through no fault of his own, and cannot be placed in statu quo, the contract will be upheld.

24 Schlater vs.Winpenny,75Pa.,321. 25 Motley vs. Head, 43 Vt., 633.

26 Davis vs. Lane, 10 N. H., 158. 27 Motley vs. Head, 43 Vt., 633.