Basic Principles of Contract | Contract Law

Imperial Loan Co. Ltd. v. Stone

Imperial Loan Co. Ltd. v. Stone

[1892] 1 Q.B. 599

(competence of parties, mental capacity)

FACTS:

Defendant when lunatic signed a promissory note as surety upon which plaintiff brought an action and defendant took the defence of insanity

ISSUE: Whether defendant can successfully claim insanity as a defence?

HELD:

To successfully take the defence of insanity as breach of contract, defendant must show not only that he was so insane at the time of executing the deed such that he was incapable of understanding the implications of the agreement; but also that at the time of the contract his insanity was known to the plaintiff. The burden of proof must lie on the defendant. Since the jury didn’t find on the second question, hence there must be new trial.

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